09 June 2005
For purchasers entering the complex market for events and meetings, the starting point is clear: find out how much they cost. From there, it's about winning suppliers and specialists over, as Linda Wain explains
However you think about it, $100 billion sounds like a lot of money. It is a lot of money. According to some estimates, it's the size of Bill Gates' wealth. It is also about what the US has spent on the war in Iraq. And according to Meeting Professionals International (MPI), which represents staff in this area, it is also the amount spent globally each year on business events. Mind-blowing, but true.
These events can range from product launches to charity balls, awards ceremonies to team-building exercises, but about half of this spend is estimated to be on corporate meetings and conferences.
But because nobody knows exactly how much is spent, or where, procurement is becoming increasingly involved and working with event planners, agencies and subcontractors to structure spend and create more fruitful relationships.
Martin Sirk, chief executive of the International Congress & Convention Association trade group, is keen on closer ties: "Both the ICCA and MPI encourage greater partnership between procurement specialists and events experts so that clients can be more certain of meeting their strategic objectives."
One problem with spending on events services today, says Ray Thackeray, a director of MPI and founder of the Travent meetings agency, is that companies may not have any idea of how much they spend on functions.
As an example, he cites a multinational pharmaceutical company with a £50 billion turnover spending around £1 billion on training for reps and presentations to doctors, dealers and distributors. But it doesn't know for sure exactly how much.
Peter Rand, chairman of events management company Rand, says procurement's involvement started with buying travel and only later moved into meetings and conferences. But this has been a tougher challenge as budgets are harder to track.
"Often the expenditure doesn't end up in a single pot - events spend might end up, for example, in marketing budgets, training, sales or HR. Even in one event, cost doesn't end up in one budget if spend is charged to an individual expense account."
Balancing quality and quantity is another headache. "You can set up a deal with a top-quality hotel, but it could simply not have any rooms available on the day you need."
Also, constituent costs for events have not historically been broken down far enough, says Jayne Stephens, global lead buyer for conference agencies at pharmaceuticals company AstraZeneca.
"Spend on food and beverages, fees and accommodation have typically been grouped together."
AstraZeneca, which arranges many types of meetings from small doctor-rep meetings to international congresses, has already given procurement a lead role.
"We are working through a business process called category management, which is about managing the spend in a much more structured way and defining the way we will buy for each," she adds.
Thresholds are in place to ensure conference spend is specified and commercial terms agreed, Stephens explains. The company also works largely with preferred suppliers. There is a focus not just on cost but value, she says, although its work is still in the early stages. Managing suppliers
Rand says the first step for procurement professionals who want to get involved is to identify who is spending what and with which suppliers. The next step is to set up preferred supplier lists and longer contracts.
He says: "The benefit of procurement working with events organisers is to obtain better value and lower costs. Initially, they can do this by helping an organisation to cut the number of suppliers it uses to organise events."
But although preferred suppliers enjoy widespread support, companies need to keep an eye on maverick buying. Research by MPI, in association with events management company MCI, into the role of procurement in the events industry found that nearly all purchasers, 83 per cent of events planners and 73 per cent of events agencies said that preferred supplier lists made their jobs easier.
But when they were asked to recall occasions when suppliers not on the list had been used, 89 per cent of purchasers, 67 per cent of events planners and 93 per cent of events agencies could do so.
That said, creating a supplier list enables an organisation to set up longer-term contracts instead of getting a supplier to pitch for each new job, which, importantly for purchasing, removes a cost, as well as providing continuity for both sides.
Thackeray says: "Many companies seek bids for every event, which is crackers because it means agencies are spending 25 per cent of their total margin on pitching, and that goes on the bills."
Rand adds: "One benefit of creating a contract will be continuity from one event to another - when something works, why not make the most of it?"
Andrew Latta, head of event management at insurance company Norwich Union, is starting to build such contracts with its agencies, booking agencies and venues for events. By working with the central service purchasing team, he is building closer relationships with these suppliers.
It helps in two ways. First, its purchasers know how to make the most of Norwich Union's spending power, but they also "help us to build contracts with our existing roster of agencies.
"By doing so, we can create official preferred suppliers on longer-term contracts. The contract will then form the base and create a commitment, so we can get beyond the financials to start building an experience."
And it is this aspect of events management that Latta believes is crucial. He says his team, which looks after the creation, planning and evaluation of company events, has a fruitful relationship with purchasers because they have come to understand the aims of the events team.
"The main challenge of working with procurement is that you can't commoditise an event. Procurement is traditionally associated with buying commodities, but an event is not a commodity - you are buying an experience."
Rand agrees: "While events organisers must not fear procurement and understand its qualities in budget control and negotiation, procurement must not try to get everything as cheaply as possible and must bear in mind the overall success of an event in terms of motivating people."
But this is a difficult thing to quantify. Many purchasing departments fail to grasp the complexities of events services because there are so many facets to consider, as Sirk warns: "There is a danger that, in trying to 'commoditise' the purchase of events with the objective of reducing costs, some purchasing departments can damage the effectiveness of meetings because it is the creativity that counts." The agency angle
To ensure the success of an event, many companies are employing third parties. Charles Robinson, executive director of the Incentive Travel and Meetings Association (ITMA), which represents events providers all over the world, explains: "Any event involves a degree of complexity, so decisions have to be taken as to at what point it ceases to be practical to manage in-house".
The ITMA's 36 member agencies and about 180 subcontractors handle around £1 billion a year.
Robinson cites product launches as one task that companies give to the experts. "They have to be particularly sophisticated, including what we call 'industrial theatre' - involving scene changes and special effects such as lasers and dry ice."
For example, ITMA member P&MM provided the worldwide launch of the Land Rover Discovery 3. The two-day event in Stockholm, for 2,360 Land Rover dealers, involved high-tech presentations in eight studios and the opportunity to drive the vehicles on- and off-road.
Events management specialists, he says, are skilled at gaining delegates' maximum concentration. Workshops are popular, with interactive keyboards so teams can project their findings on a central screen. When gatherings have a social element, this also needs to be carefully tailored - particularly when employees seldom meet overseas colleagues. Agencies will suggest ways to break the ice among attendees - in Dubai, for instance, breakfast in a Bedouin tent, he says, gets people talking to one another.
Sometimes bonding is the sole purpose. One agency recently took a team to build a pathway through an ecological site to prevent soil erosion and protect wildlife.
As Robinson explains: "Twenty years or so ago, they might have been taken to a luxury resort but now it is thought people bond better when gaining a sense of achievement."
Post-event procedures to evaluate their success are decided beforehand, but there is usually an "inquest" between purchasers and suppliers, at which questionnaires -distributed at the event - are analysed.
Appointing an agency not only delivers a polished production - it can also reveal savings, according to Travent's Ray Thackeray. Substantial savings can be available in hotel costs alone, by choosing holiday resorts out of season and, for smaller meetings, by negotiating for function rooms and equipment to be included in accommodation costs.
For example, by using booking specialists to purchase accommodation and function rooms - a major spend for events - purchasers can make big savings. Des McLaughlin, managing director of Hotel Brokers, places around £25 million a year on behalf of major City firms, earning commission from hotel groups.
"They average 8 per cent, so clients needn't fear we are influenced by those offering highest commissions," he explains. "We can save companies around 30 per cent, which is considerable if they are spending several millions of pounds a year."
Because most of the meetings are held in different countries, much of the saving comes from choosing a host country that makes sense economically, he says, but it must also be accessible.
Another consideration is how senior the guests are: "If it is to be a partner meeting, then luxury is the main criteria but, for training sessions, we generally choose well-equipped training centres."
One of Hotel Brokers' clients is PricewaterhouseCoopers. Iain Palfreman, category manager, says the consultancy decides whether agencies need to be involved depending on the size of the event.
"Principally they are internal group meetings involving up to 5,000 people from various parts of the world. Then we often use outside agencies to provide, for example, hospitality, equipment and general support.
"But we make presentations to prospective clients ourselves as that is part of what we do - selling our brand and our people."In-house events purchasing
Another possibility is to form an in-house team to smooth the relationship between purchasing and events specialists. This is what T-Mobile did last year, when it formed a dedicated events and incentives sourcing team with one purchasing professional and two events specialists.
The team is responsible for the planning, sourcing and delivery of a range of events, from conferences, incentive programmes and product launches to off-site team building and exhibitions.
Chris Birdsall, UK general procurement manager, says the approach has several benefits: "Previously, departments organised their own supply bases but now they work through us, to a greater or lesser degree, depending on the size and complexity of the event and their own expertise."
He explains T-Mobile can now manage the supply base more effectively, particularly by being able to source more appropriately. "For instance, there is a saving in creating company exhibition stands, instead of departments producing their own."
The team differs from an events agency because it is not there on the day, but it does attend the post-event evaluation meeting between end-users and agencies to assess how it went.
T-Mobile keeps a list of some 25 preferred suppliers for different areas. Birdsall says that, while this is not an exclusive list, it is hard to get on because potential suppliers must pass stringent tests. The depth of the investigation depends on the projected value of the project.
The company sets events budgets, and he is proud of the amount of detail provided to bidders. But Birdsall agrees it is ultimately looking for that "wow" factor so will give preference to those with proven skills for creativity.
As he says, a successful event is not merely about value for money. It is about sending delegates away inspired, particularly when trying to persuade T-Mobile's partners (such as wholesalers, contracted corporate suppliers and retailers) to push new products: "We do need to impress at least as much as, if not more than, our competitors. And, of course, it is also important to impress the media."
So what for the future? Specifically in the pharmaceuticals industry, AstraZeneca's Jayne Stephens thinks tighter regulations could affect attendance by medical professionals at events, as well as where they are held.
Another development, which could apply in all sectors, is the company's evaluation of how videoconferencing can support or even replace face-to-face meetings, and when it would be appropriate. But given that 82 per cent of MPI members believe the greatest return on investment for marketing came from meeting people, the potential for friction across the industry is clear.
For now, the recent MPI/MCI research describes a "fragile peace" between events professionals and purchasers, but will it hold? Despite an acknowledgment that purchasing is here to say, both foresee harder times ahead.
One procurement professional in the survey predicted that, as margins get lower, relationships will become tougher.
There are also e-auctions to contend with. "We have already seen some clients stop online auctions," said an events planner. "You can do it with commodities but not with events."
Ultimately, it seems accommodating both sides will require a certain amount of movement - and a concerted effort to value each others' contribution.Linda Wain is a freelance business journalist. For more information on events management, you can visit the websites of the following organisations: International Congress & Convention Association (www.iccaworld.com); Meeting Professionals International (www.mpiweb.org); Incentive Travel and Meetings Association (www.itma-online.org)