HOSPITALITY AND CUSTOMER
ENTERTAINMENT
Application; Communication, Sales, Relationship Marketing
The Concept
This is the use of social entertainment for commercial advantage. It ranges from large customized events, through packages bought at public events (such as the Ryder Cup or Wimbledon) to smaller, more intimate occasions with like-minded groups of customers, and right down to individual customer entertainment (like taking an individual to dinner or lunch). There is evidence of different hospitality habits in different industries. The legal sector, for instance, tends to wine and dine its clients, while pharmaceutical companies tend to go for team building events.
There are several reasons why this technique helps marketing and sales:
(i) The informal situation can help create a relationship with customers, which will encourage further business. A well managed and customized event can certainly help two people to understand each other better – a major feature of relationship marketing. It is especially effective if part of a wider communications programme and should be planned as an aspect of either relationship marketing or marketing communications.
(ii) It helps to build trust and undermine wrong impressions. Whether in a consumer or business-to-business situation, a setting which helps people to get to know a company and its executives destroys wrong perceptions and encourages positive impressions which help sales.
(iii) An important principle of human relationships and, particularly, business-to-business marketing is reciprocity. It is the mutual giving of one professional to another and it occurs in relationships with buyers and fellow suppliers. In all professions, for instance, reciprocity generates work. Some psychologists have identified it as an important ingredient in human relations and their work has, in turn, seeped into behavioural economics; a field of work which is beginning to affect marketing thinking. Professor Leonard Berry (one of the world’s leading specialists in services marketing; see Berry, L.L., 1995) said, after years of study into successful service companies, that a prime ingredient in their success was “generosity”; his word for reciprocity. Relationships cannot progress unless there is mutual investment in the professional relationship.
There can, though, be a number of significant problems with hospitality marketing activities. They include:
(i) The Wrong Attendees at Any Related Event
It is a fact of life that real decision makers are normally very busy and focused on their work. Most achievers in line jobs, including specialties like purchasing directors, don’t have time to spare for optional, pleasant events. Sensible senior people allow themselves just one or two a year, particularly if it is to further relationships with one of their trusted suppliers. Other than that, they normally prefer to spend their scarce free time with their family and friends. Attendees from customers can therefore be “stand ins”, perhaps using a reward from their boss, or persistent hospitality takers with no real authority. Worse, the recipients of hospitality can be the suppliers own employees, filling numbers at the last moment. As a result it can have no real effect on actual buying decisions.
(ii) Regulatory Restrictions
Some people, particularly public sector organizations, cannot accept hospitality.
(iii) Legislation
Modern legislation, such as recent moves in the UK to control bribery, can interfere with this method of marketing.
(iv) Alignment with Marketing Objectives
It may not be appropriate to the marketing objectives of the organization. According to one specialist (see Robert, J., 2009) tracking of satisfaction scores with a thousand hospitality packages in Britain showed that only 60% were relevant to the needs of the brands which they were intended to promote.
(v) Vulnerability to Cost Control and Volatility
It is easily cut and very sensitive to recession. In 2009, for example, The Times reported that hospitality plummeted by 25%; even for blue ribbon events like Wimbledon and Formula One.
(vi) Culpability for Poor Behaviour
It is an unpleasant fact of life that some customers can behave badly at hospitality events as alcohol flows freely. In these situations, though, it is normally the host that is culpable if, say, there is an accusation of sexual harassment from employees or subcontracted waiting staff at the venue.
(vii) Reputation Risk
Some events and some hospitality practices risk damaging the reputation of the firm, and so future revenues. The international marketing leader of one blue chip firm was horrified to find, for instance, that its representatives in one Asian country were routinely spending hospitality budgets on trips to prostitutes with customers.
(viii) Over Lavish Provision
There can be a lot of waste and indulgence simply because it is designed for customers. This can be a particular problem in a recession. Although elite buyers in some cultures will still expect five-star treatment, others can be perturbed by excess and waste during times of austerity.
History, Context, Criticism, and Development
This method of marketing has been used by marketers and sales people for many, many years. In 1799, for instance, Matthew Boulton, a market-orientated British businessman, was trying to persuade the Russian ambassador to use his machines for the Russian mint. Historian Jenny Uglow describes this as “corporate hospitality on a lavish scale” (Uglow, J., 2003). During one visit they saw Hamlet and a farce, had elegant dinners, musical evenings, daytime tours, and a customized hospitality event. The latter was a “secret expedition”. A specially upholstered barge took the ambassador to see the manufacturing capability, led by another barge crammed with musicians. On the return journey they went through the Dudley tunnel into the huge limestone caverns under Dudley Castle which were suddenly lit by a hundred torches, accompanied by a fanfare from the musicians’ boat.
Since then, customer hospitality has routinely been used by marketers, sales people, and business leaders to help cement relationships and sales success. It has been used in a range of industries from banking and the professions to luxury goods and media. In more recent times, marketers have developed organizational competence in this field. Many large firms have dedicated teams that are expert in choosing the appropriate hospitality mechanism to suit strategic objectives and handling the range of administrative details needed to make it successful. They work with an array of specialized agencies that operate in this field, using their expertise in the same way that marketers might use an advertising (or any other) agency.
Over recent years, with increasing experience and sophistication in hospitality and the plethora of options open to customers from competing suppliers, hospitality programmes have changed shape. “One size fits all” packages have been replaced by bespoke experiences for customers. Modern events can, for example, be either “issue-led”, bringing customers with similar questions together to share knowledge and approaches, or they are events that customers themselves cannot buy. Several companies have taken advantage of the popularity of the Harry Potter films, for example, offering advanced screenings to customers and their families before the latest film goes on general release. When BT used this approach, it even hired actors in costume to make the event more memorable for important customers and their families.
Voices and Further Reading
- “Hospitality involves taking care of the customer. It finds its full expression in face-to-face encounters with the customer. The enterprise should show pleasure at meeting new customers and recognizing existing ones when they return. It may include elements such as offer of transport to and from the service site, availability of drinks, and other amenities, customer recognition systems etc. Here there is a need to adopt the Disney philosophy and treat all customers as guests.” Payne, A., Handbook of CRM. Butterworth-Heinemann, 2006.
- “Companies may take care of customers by offering them gifts, free entertainment or corporate hospitality. Freebies such as a calendar or a fountain pen carrying the supplier’s logo are usually accepted by clients without a second thought. A nice dinner merely to build client relations or to keep in touch with a valued customer rarely raises an eyebrow. Corporate entertaining or hospitality is an expected part of business life … In the absence of clear corporate or standard guidelines, how would managers decide whether a gift, meal or trip is acceptable or sleazy?” Kotler, P., 2005.
Things You Might Like to Consider
(i) It is probably too obvious to say (and therefore worth saying) that hospitality needs to be well planned, with the objectives, suitability, and intended audience carefully thought through. There is nothing worse than letting customers down by holding a shoddy, poorly planned event. Even a simple lunch with one customer ought to be thought about. What is the most suitable venue in which to hold it and does the intended style of occasion suit the objectives of the discussion? Can the diary allow the main participants time to get there promptly and lavish enough attention on their guests? (More than one customer has been treated to events, by surprisingly large and sophisticated companies, where their hosts were distracted by matters outside the room. Can leaders, for instance, switch their mobiles off while with their guests?)
(ii) This is a marketing technique which is so common and so obvious that it is rarely mentioned in standard marketing theory books and, in practice, is rarely examined to mesh with fundamental objectives or to develop new approaches based on the principles behind it. Most simply use hospitality, within fixed budgets, because it has been done for years and there is a sense that it helps sales. Few step back and consider why. Companies in many sectors frequently pay for their customers to be wined, dined, and entertained in some way, in the hope that they will buy.
(iii) Some companies are small or decentralized. As a result, individuals (partners in professional service firms, for instance) try to arrange this themselves. It may look like just administration but in an event of any size there are complexities and professional processes. As with other aspects of marketing there is sophistication and professional technique behind this approach.
(iv) It is fascinating that, even with the modern emphasis on the value of relationship development, there is so little academic work on the affect of hospitality or entertainment on customers’ propensity to buy or repurchase. Marketers and sales people have spent millions on all aspects of hospitality, for many decades, because it feels intuitively right that it eases the marketing process and encourages sales. It would be useful to have sound, systematic, academic concepts and research around this subject in order to help direct this investment more effectively. If there is, for example, a profound, deep, and respected relationship between two professional organizations, which is mutually beneficial, is customer hospitality really needed?
RATING: Practical and powerful