The value of corporate hospitality
Saturday, 15th September 2007 by Anne Petrie
At any key sporting event, a decent percentage of those attending will be senior staff, important clients and journalists enjoying themselves at the expense of a company .
Although the days of the out-and-out jolly are not exactly numbered, there is no doubt that FDs and marketing departments are increasingly analysing their corporate hospitality activities and their budgets as they focus more on ensuring a return on investment (ROI) from such events.
Nigel Cooper, director of performance improvement firm P&MM, says: “There is still room for a jolly and we still see lots of them – just look at any football match and the number of dinner events on any night of the week.
But the culture for them is less than it was in the 1980s and events have to be justified.”
As an example, there is now a much greater interest in corporate hospitality from procurement departments as they try to ensure that the best value is achieved.
“The finance department is saying it won’t pay £500,000 for an event, only £300,000, so the marketing manager is therefore reducing the budgets on events,” he adds.
Cooper suggests that the biggest waste of a marketing budget is a corporate hospitality event that does not have any objectives attached to it. This makes it impossible to measure its ROI.
If the event is to raise awareness of a company or a product then he says it is essential that measurements are taken before and after the event.
“You should be measuring the impact of this component of your marketing mix, just as you would if it was a direct mail,” he says.
However, this is often thrown out the window as an event is pushed through because the managing director is an Arsenal fan or likes horse racing and the company and their invited guests have to fit in around this.
“Sadly, most corporate hospitality is down to what the host likes and they just invite people to reinforce relationships, but you can’t measure any ROI on this.
This could be to the detriment of some other marketing activity,” suggests Cooper.
Simon Gillespie, managing director of Cavendish Hospitality, agrees that a company needs to define exactly why they are entertaining, and what they want to achieve from it: “Are they looking to get new business from a new client, reward an existing client and improve the business relationship, or something else?”
It is only by setting clear objectives that a company can ensure that it maximises the return from entertaining. Once the objectives of the event have been agreed, it makes it easier to actually target who should be invited.
“It is amazing how many companies simply issue a blanket invitation without really identifying why they want to invite them,” he says.
Only when this has been decided can a company properly identify what type of event will work best for their guests.
“Should it be a top, A-list event that will ensure a high take-up but that may carry a high cost, such as the Wimbledon tennis championships? This may be appropriate for entertaining your top clients but not for an internal staff incentive,” says Gillespie.
For people who regularly receive hospitality, invites to major sporting and cultural events will always be top of the list.
Those with cachet, including iconic events such as Wimbledon, Royal Ascot and the British Grand Prix, will always prove popular.
Although Gillespie says there is little doubt that such spectator activities, and particularly sporting events, are by far the most popular numerically – and will continue to remain so in the future – he acknowledges that there is a growing demand for new and innovative events.
Matilda Velevitch, head of marketing at events firm Pall Mall, reckons that an increasing number of companies are moving away from ticketed events as they see better value in creating activities that allow them to spend more face-to-face time with their invited guests.
She calculates that around 50 per cent of corporate hospitality events now involve sport, compared with nearer 80 per cent five or six years ago.
“Sport is one type of activity, but the market is moving to events that are tailored and involve more time with clients and guests. So if 20 people like fashion then hold a catwalk event with food and drink around it,” she says.
Velevitch accepts that it is difficult to avoid football events from September to May but since lots more women are business people nowadays, many events are being designed to suit both sexes, which will probably mean less sport.
“This had been completely overlooked in the past and it tended to be just spa days. But who wants to be in a hot tub with your clients?” she asks. A very reasonable question.
Sandra Greer of the consultancy division of Sports Marketing Surveys – a company that evaluates all types of corporate sponsorship – believes many men in the financial services sector are not that interested in sport and says this is widening corporate hospitality to encompass things like sponsorship of the arts.
“A lot of companies are getting involved in this because they want to give a new experience,” she says. “It allows them to say that they support the arts, but since they also get hospitality it’s really more commercial than philanthropic.”
Although Greer believes a crucial aspect of sponsorship is the evaluation stage, she says many companies only do qualitative research when they should also be undertaking some analytical study into how well an event went, based on their initial objectives.
Cooper agrees that despite the massive amounts of money spent on sponsorship there is very little pre- and post-event analysis. “Even though we recommend it, they often don’t do it as it’s seen as a cost,” he says.
“I question the value of many sponsorship decisions because they are based on what a company likes, rather than on any sound business rationale.”
He says Barclays’ sponsorship of the football Premier League and airline Emirates’ sponsorship of Arsenal’s stadium are unquestionably expensive but of questionable value to the sponsors.
Picture source
