Looking after the twenty percent

There's no doubt about it, corporate entertainment is big business. In Japan, for example, where relationship-building is a fundamental part of business life, a staggering £40 billion of marketing expenditure goes on corporate entertainment annually. That's roughly equivalent to Romania's GDP or Venezuela's total foreign debt. The infamous Recruit Group, which has been the subject of repeated scandals in Japan, once paid $15,500 for a single meal for a dozen executives at a favourite restaurant. So it's easy to see how the money the Japanese spend in a year on wining and dining important clients could add up to the cost of 365 brand-new jumbo jets!

Tо some, corporate entertainment is merely an expensive and perhaps unnecessary luxury. To those who take a dimmer view, it's nothing short of bribery. But the truly corrupt corporate entertainer is relatively rare. Famous fraudsters, the Bank of Credit and Commerce International, did indeed specialise in “sweetening” their most valued clients - frequently international terrorists, drug barons and Third World dictators -with shopping sprees in London and endless lines of credit at Las Vegas casinos. But this is a million miles away from an everyday business breakfast at the Hilton or a power lunch at the Savoy. For most successful business people would agree that goodwill is a crucial part of clinching lucrative deals and these days goodwill costs more than a smile.

A few years ago, the Ritz Hotel, recognising the major contribution made by executive diners to its restaurant turnover, invented the award of Business Luncher of the Year to honour, in their words, "the executive who does most to help the recovery of the economy by lunching out". Only those who spent in excess of £5,000 a year stood a chance of winning, but there was no shortage of candidates willing to compete.

What the Ritz was acknowledging is that business lunches are an important part of corporate culture, whether to consolidate professional relationships between colleagues and charge it to expenses or to manipulate over-cautious clients into an immediate agreement. After all, it's rather difficult to reject your host's proposal (however unspeakable) when you have just eaten a hundred dollars' worth of their entertainment budget!

How cost-effective it really is for Fiat to own an art gallery so it can take customers on special conducted tours or for the German Neckermann company to have a whole department organising weekends in the Mediterranean for important clients is, of course, open to question. Certainly in Austria, where corporate entertaining is tax-free, offering Mozart festivals to music-lovers and Klosters to corporate skiers seems to promise a good return on an initial investment. But can it legitimately be considered part of a company's overall marketing effort?

It can. What more and more companies are realising is that across-the-board marketing doesn't work. Marketing in the future will have to be more clearly focused. And it may turn out that big above-the-line marketing campaigns prove less effective in moving goods than simpler strategies for getting the client on your side. Of course, in times of recession, corporate hospitality looks extravagant and doesn't make for good public relations. But it still makes sense to target your best clients. For if the so-called Pareto Principle is true and eighty per cent of your business really does come from twenty per cent of your customers, then shouldn't you be looking after the twenty per cent?