Although the latest IEG/Performance Research Sponsorship Decision-makers Survey shows that 65 percent of corporations use sponsorship for corporate hospitality, industry experts say most event marketers don’t take full advantage of client entertainment opportunities.

Instead, the majority of hospitality programs have room for improvement in one or more key areas: planning and inviting; on-site execution; and, perhaps most importantly, tracking incremental business that was generated as a result.

“Companies need to have a strategic perspective when they’re building hospitality programs and develop metrics that don’t just measure whether or not someone had a good time and if they learned something about the company, but how they will treat the company after the event,” said Keith Bruce, CMO of SportsMark Management Group, an agency that specializes in hospitality.

Sarbanes-Oxley Prompts Changes
In the U.S., the Sarbanes-Oxley Act of 2002 has prompted the need for companies to develop hospitality programs that offer more than just tickets, an open bar and celebrity meet-and-greets, Bruce said.

The federal law–enacted to tighten accounting requirements for publicly traded companies in the wake of scandals at Enron Corp., Tyco Int’l Ltd. and other corporations–has caused many companies to become more restrictive in what they classify as business expenses, whether they are acting as host or guest.

“The regulatory environment has caused a number of companies to put a lot more scrutiny on sending executives on hospitality trips,” Bruce said. “The days of just holding parties are starting to disappear.”

Thus far, internal corporate scrutiny has largely focused on high-profile international events such as FIFA World Cup, the Olympics and other properties around which hundreds of thousands of dollars are spent on transportation, lodging, tickets and other related expenses, Bruce said.

But that level of concern is quickly trickling down to other hospitality-rich events such as NASCAR races, PGA Tour stops, and pro and college sports championships.

The takeaway for sponsors, Bruce said, is to build business-oriented events within and/or around hospitality programs. “They need to put together an agenda that allows customers to justify the hospitality as a true business trip and not just a boondoggle to the Super Bowl.”

For example, SportsMark client and IOC TOP sponsor Visa Int’l leveraged its sponsorship of the Turin Olympic Winter Games with a one-day seminar in Milan where it demonstrated a new payment technology to merchants.

Below, IEG SR highlights best practices in three key areas for maximizing customer hospitality:

Best Practices: Planning And Invitations
The first step in a successful hospitality program is securing the participation of clients and prospects, which is far from automatic, especially when the guests are from the C-suite and regularly have the opportunity to attend top-tier events.

Among steps to take that can improve the chance of a positive response:

Consider family-friendly platforms. It often is difficult for busy executives to take time away from families, especially for weekend events.

Even if the sponsored event is not one typically geared to children, sponsors can build in programs aimed at kids–such as sports instruction clinics and other interactive activities–to make it more desirable.

To attract attendance to otherwise problematic events–those that occur on holidays, for example–some sponsors have made special accommodations to make it easier for guests who want to include their families.

For example, knowing that it would have a difficult time recruiting guests for an event on Father’s Day, Sprint Nextel Corp. relaxed its rules prohibiting those under the age of 18 from attending hospitality events around the 3M Performance 400 NASCAR Nextel Cup race at Michigan Int’l Speedway, said Rae Kauder, account director-customer hosting with Octagon, the company’s sponsorship agency.

Charge business units for tickets and other assets. Instead of simply doling out hospitality opportunities, some sponsors charge business units for sponsorship inventory.

Proponents of this tactic say it helps ensure that the sales force values the assets and increases the likelihood they will use them to entertain top customers and prospects.

Provide support to frontline guest contacts. Salespeople and others within the company who have responsibility for inviting guests, hosting them on site, etc., should be given tools to make the most of the opportunity, as well as monitored to make sure they are inviting the right quality of guest and properly following up.

Some companies deliver information on how to host guests, along with specific event information that can be passed along to invitees, through Intranets or other dedicated Web pages.

Make invitations stand out to gain notice. Only hard-to-ignore invitations will capture the attention of people with crowded email in-boxes and overloaded voice mail systems.

Tony Schiller, executive vice president of Paragon Marketing Group, recommends that companies “creatively integrate” the event into the invitation process. That can include sending a jersey with the guest’s name on it or having celebrities involved in the event phone guests to invite them, he said.

Be diligent in following-up. Marketers who send out invitations and simply wait for RSVPs to return often find themselves with vacant seats.

Henry Rischitelli, president and CEO of Next Marketing, suggests that companies use multiple forms of communication–email, letters, phone calls, etc.–to follow-up invitations. “In the past, we used to hit them through one or two touchpoints. Now we’ve begun to use a CRM model with multiple points of entry.”

Best Practices: On-site Implementation
Taking full advantage of the hospitality opportunity involves:

Offering one-of-a-kind experiences. Unlike companies that merely buy tickets or rent a skybox, most sponsors have access to unique perks such as behind-the-scenes tours and appearances by coaches, players and entertainers that can make the occasion unforgettable.

“We try to connect the affinity our guests have for a particular event and immerse them in that experience, such as going on field to receive instructions from players or coaches, having a private music lesson with classical musicians, or touring a venue like Carnegie Hall and spending time with an archivist,” said Schiller.

FedEx Corp. leverages its NBA sponsorship in part by hosting clients and prospects at the league’s All-Star Game. Taking advantage of the international makeup of the league, the company uses the event to build business for its overseas shipping services by pairing up players with representatives of companies who do significant business in the players’ home countries.

“They have the opportunity to meet the athletes, participate in basketball clinics and go out for dinner,” said Mark Tatum, the NBA’s senior vice president of marketing partnerships.

Finding opportunities to demonstrate products and services in action. Technology companies and a growing number of other categories look to use events to showcase their offerings.

For example, technology products retailer CDW Corp. leverages its primary sponsorship of a team in the Bridgestone presents the Champ Car World Series powered by Ford to demonstrate how products it supplies help the team compete.

“All of the guests who come to a race are given a tour of the paddock and one of the engineers addresses what we have done to incorporate technology into the car,” said Bruce Delahorne, the company’s senior manager of national advertising.

Similarly, IBM Corp. leverages its sponsorship of tennis’s U.S. Open, PGA Tour, Wimbledon and other high-profile sports properties to demonstrate products and services ranging from servers to software to IT solutions.

“It’s a thrill for (guests) to walk into the bowels of a stadium and pass athletes and people with the media. We then engage them in a discussion of how the event’s business needs relate to their needs,” said Rick Singer, IBM’s director of worldwide sponsorship marketing.

IBM tries to engage clients and prospects on their “pain points,” using the property’s pain as an example, Singer said. At the U.S. Open, for instance, IBM and U.S. Tennis Assn. reps spoke about the need for the event to reduce costs while facing a growing infrastructure, and how IBM was able to provide virtualization technology that helped reduce the number of servers it needed from sixty to nine.

Ensuring that your senior executives attend. Inviting senior managers of other companies and not having their peers from your organization show up conveys a negative message.

Even if your guests are mid-level managers, the presence of your top people is a way to demonstrate your company’s commitment to its customers.

Best Practices: Measuring Results
How can a company determine whether its hospitality programs influenced sales or other desired behavior? The critical steps in determining hospitality return on investment are:

Formalize reporting metrics. Rather than relying on anecdotal evidence to track incremental revenue, sponsors should develop reporting systems to properly assess ROI.

Sponsors should start with a database to track who was invited; what and when they attended; who from the company hosted or met with them; whether or not they were an existing client; and their purchase/behavior history after attending the event.

To collect all of the necessary data, sponsors should develop pre- and post-event forms for salespeople and others involved in the client hospitality program.

Pre-event forms should require information on each prospect to be invited. For existing clients, the form should include total business over the last three years and sales projections for the upcoming year.

For prospects, the form should indicate where in the sales pipeline they are. The document also should include short- and long-term revenue projections if the prospect becomes a client.

In addition to being the first step in tracking return, the form also can be used as a screener to ensure that the best prospects are invited to the program. The forms should be mandatory: No invitations will be sent nor tickets released until a completed form is received.

Post-event surveys help salespeople record immediate informal feedback from guests, such as what they thought of the event and the quality of the hospitality. The forms also can be used to track no-shows, including reasons why and the name and title of any substitutes.

To encourage guests at its Hogan’s Alley PGA Tour event hospitality program to fill out on-site surveys, Bank of America Corp. offered a putter and other rewards. “That turned the form from a ‘don’t have to’ to a ‘want to,’ ” said David Jessey, who managed the program while at Bank of America and who now serves as vice president of sales and marketing with Evernham Motorsports. The incentive paid off: 90 percent of attendees filled out the form, up from 20 percent before the bank instituted the giveaway, he said.

Establish post-event tracking mechanism. Because the impact of hospitality on guests’ behavior is not likely to be immediate, the sponsor must ensure that measurement is appropriate to the sales cycle.

As a result, sponsors should require their salespeople to submit forms at regular intervals updating where a prospect is in the sales process.

Reasonably estimate responsibility of hospitality for new or incremental business. A company’s decision to buy a product or service is based on a number of factors such as price, the quality of the product, the skill of the sales rep and the impact of hospitality efforts. In order to calculate the cost-benefit factor of sponsorship-related hospitality, the sponsor must make a realistic assessment of what percentage of a sale can be attributed to the buyer having been entertained.

According to IEG Advisory Services models, the highest percentage attributable to hospitality–and applied only to sales that would not have happened without the entertainment component–is 70 percent. On the other end of the spectrum, for incremental sales to clients with whom the company already has a strong relationship, the percentage drops to 20 percent or less.

To calculate return on investment, the sponsor can then multiply the revenue from the sale by the percentage attributable to hospitality and subtract the costs of entertainment and the portion of the sponsorship rights fee that can be allocated to hospitality benefits (see box).