Dec 3, 2008

Business -Corporate hospitality runs the risk of a backlash during austere times

Ed Kemp

Last week, RBS was hauled over the coals by the press following its ill-advised decision to proceed with an elaborate staff party . The Sun railed
against the bank, whose bosses enjoyed ‘a secret 150,000 pounds junket at a five-star hotel’ following its 15 million pounds taxpayer-funded bail-out.

The counter-argument put forward by an RBS spokeswoman, that the event was to ‘bring together our international team’ , fell on deaf ears. Days later, The Sun took a further swipe, claiming RBS was spending 1 million pounds on Christmas parties for the rest of its staff.

That this would be good for morale was, of course, overlooked by the paper. “Financial institutions haven’t got a chance, whatever they do at the moment. It’s all put in the worst possible light,” argues Susan Sexton of marketing services agency, P&MM Events & Communications. “As individual life gets tougher, if a company can offer its staff something, it should go for it. But the message must be put out as to why it is being done.”

Now is not the time to be seen to be overindulging, particularly in regards to brands involved with sponsorship. Corporate hospitality is a grey but very lucrative area of sports marketing. While it is extremely hard to put an exact figure on the value of corporate entertaining, countless deals and relationships have been struck up as a result of the practice over the years.

Brands are understandably nervous of the perception of such entertaining by the general public and the media — especially in the cases of publicly listed companies answerable to shareholders. Nigel Currie, director of sponsorship agency brandRapport , says: “It’s an extremely sensitive area and, following the events of recent weeks in the financial markets, many financial institutions need to be extremely careful about their public perception.”
Sponsorship deals normally result in a brand being tied in for several years. Moreover, if the brand decides against activating its sponsorship through corporate hospitality deals, it hands the advantage to rivals.

Industry insiders agree that for every 1 pound spent buying a sponsorship, another 2-3 pounds needs to be invested in its activation. If a company has already committed to a sponsorship deal, then it simply makes business sense to continue to invest in corporate hospitality for the duration of the sponsorship deal - even as budgets are trimmed back. If RBS decides not to activate its Formula One deal next year, one can be sure that a banking rival, such as Santander, will.

The way in which that hospitality is managed, however, is another matter. “Hospitality is a key part of the business world but it is definitely not a time for companies to be seen enjoying what the media will portray as excessive corporate indulgence ,” says Currie.

“If you had a box at the cricket at Lord’s with the name of your company across the front for example, you might want to think about taking the sign down.”

The Olympic Games provides a prime example of the importance of corporate hospitality. The event offers very limited brand opportunities for sponsors — at least during the televised coverage — so its partners need to activate their association in other ways.

One part of that will be internal marketing aimed at lowering staff churn rates, and boosting morale and motivation. But a bigger part of the sponsorship activation budget will be invested in corporate entertaining.

The worst of the downturn is projected to have passed by 2012 when London hosts the Olympics. If it hasn’t , it will be interesting to see how Britain’s leading brands choose to exploit their links to the world’s greatest sporting event. For now, weighing the business benefits against the potential PR risk is something brands will need to consider carefully.

No comments: