The Mighty Have Fallen? Recession-Proof Agency-Client Relations


This time last year, as the U.S. economy rapidly approached the symbolic cliff's edge from which it would fall, the public relations industry seemed to be standing strong. A 2008 survey of PR agencies conducted by StevensGouldPincus revealed good fortune relative to that of other industries, many of which had already begun to fall like dominos. Among the statistics that implied a hopeful forecast were the following: 83% of surveyed agencies reported that client budgets increased for 2008, while only 7% reported decreases and 10% reported no change; 75% predicted their revenues would increase in 2008, and only 7% anticipated declines; and, Only 18% said that economic conditions would have a negative effect on their bottom line. Fast-forward to last week, when the merger and management consultancy released the 2009 findings in a report aptly titled "Economic Uncertainty 2009." "This is what they call a predictable surprise," says Rick Gould, managing partner of StevensGouldPincus, citing a complete departure from the strong numbers reported last year. "We all knew it was going on, but the statistics are still staggering. It's shocking how consistent the downturn was at every level." Indeed, the 2009 findings are almost an inverse of last year's (for a more results, see chart on page 2): Only 5% of the 237 surveyed agencies said that client budgets increased for 2009; 65% said client budgets decreased; 26% predicted that revenues would increase this year; 46% said revenues would decrease; 64% said that economic conditions would have a negative effect; and, Only 6% said there would be a bottom-line positive effect. Negative sentiments were reported in almost every breakdown--size, region and specialty--with the most drastic change being felt by the $25-plus million fee group, which saw major negative attrition in revenues and the bottom line. Of course, no matter the size of your agency (or your agency of record), surely you are feeling the crunch of the recession. Communications executives on both sides of the fence have been required to revise their approaches to doing business. Execs on the client side have smaller budgets, in some cases requiring them to reduce the services of an external firm. Agency professionals, meanwhile, find themselves reducing their fees and--gasp--actually negotiating to avoid losing the big accounts they need to stay alive. More For Less, Or The Same Across the board, one thing is clear from a client perspective: They are expecting the customer-service quotient to skyrocket. As agencies' portfolios shrink, the remaining clients want to be the No. 1 priority. "Uniformly, clients are expecting more from a service standpoint," Gould says. "Now they are expecting more quality for the same fees--more for less, or more for the same." The Glass Is Not Entirely Empty According to Gould, the resounding message for all communications professionals is to stay optimistic. "With every recession, public relations firms come back strong," he says. "If firms can hang in there, they'll bounce back." Gould also points to the handful of specialties that experienced comparatively minor setbacks: crisis, public affairs and economic development, which showed the largest growth in revenue (30%, 33% and 30%, respectively). Economic development and public affairs show the least negative impact on the bottom line (45% and 53%, respectively), and the former specialty had the least percent decrease in client budgets (57%). Another potential boon for PR agencies has just a touch of schadenfreude: the drop in advertising. Death is too strong a word, but it is impossible to overlook the decline of this once-golden goose of media and communications. Just last week, the heads of big ad conglomerates like Omnicom, WPP and Publicis Groupe confirmed the grim ad outlook for 2009, with all three predicting declining or flat ad revenues. But, for the PR agencies within these groups--Omnicom's Fleishman-Hillard, WPP's Ogilvy, Burson-Marsteller and Hill & Knowlton, and Publicis' MS&L, just to name a few-- this could very well be an opportunity to shine as organizations put more dollars toward protecting and enhancing their brands and reputations. "Hopefully public relations will be picking up some of that budget," Gould says. "I think a lot of people value PR more than advertising in a recession. PR adds more value." That same sentiment was echoed last fall at the Council of PR Firms' October 2008 Critical Issues Forum by keynote speaker David D'Alessandro, former CEO of John Hancock Financial Services. "Not only will PR firms survive, I believe the entire profession today is looking at the biggest opportunity to grow both their influence and size since Ivy Lee and Edward Bernays founded modern public relations nearly 100 years ago," D'Alessandro said. "But PR professionals must adapt quickly to new media and tactics, and they must understand business from the CEO/CFO perspective to succeed. If you want to run with the pack, learn to howl like a wolf." PRN CONTACTS: Rick Gould, rgould@stevensgouldpincus.com; Steve Cody, scody@peppercom.com Best Practices For Streamlining Agency-Side Communications During The Downturn For agencies, the current environment is mimicking social Darwinism. It's survival of the fittest, and the qualifications for "fittest" are constantly being redefined. In that vein, consider the following internal and external actions that can be taken by agency executives to keep their firms afloat--and their clients coming back. Don't forget about promoting yourself. "Now is the time when those agencies that have been committing to their own brand-building need to continue to do so, if not step it up even more," says Steve Cody, co-founder and managing partner of Peppercom. "Yanking your agency's own marketing budget is the wrong thing to do. Don't cut PR for yourself." Have an internal account review. Cody recommends having employees within your agency that don't work on an account gather in the conference room, and then asking those employees who do represent the account to present it to this audience. This will bring in some outside perspective, and it may help revitalize strategies that were beginning to stagnate. Go on sales calls. "Volunteer your time to attend client sales calls," Cody says. "Go out with their sales forces to find out what's new and different in their customers' and prospects' worlds. Then feed those details back into your own PR reports." Get inside clients' heads. "It's all about finding the clients' own pain points," Cody says. "Corporate communications executives are worried about their own jobs. Knowing that, how can you work with them to help them look more like a hero or a star to their managers? You can't be so myopic that all you think about is media relations. You need to look at the human factors. The most basic human factor is fear." Communications Best Practices For Streamlining Client-Side Organizations During A Downturn Agencies and clients alike must operate leaner-than-normal operations during a recession, and communications executives within both types of organizations must do their part to facilitate that. For execs on the client side, though, the following best practices can help in making this happen, as recommended by the findings of the Council of PR Firms/USC Annenberg School for Communication fifth Public Relations/Communications Generally Accepted Practices (GAP) Study: 1. Maintain a higher-than-average ratio of PR budget to gross revenue. 2. Report directly and exclusively to the C-suite. 3. Optimize the C-suite's understanding of PR's current and potential contributions to the success of the organization as a whole. 4. Establish an effective social responsibility strategy for your organization. 5. Establish an effective digital-media strategy for your organization. 6. Establish an effective issues-management strategy for your organization. 7. Optimize integration and coordination of PR/communications, both within the PR/communications function, and with other organizational functions. 8. Encourage highly ethical practices across the organization, beginning with communication. 9. Encourage the organization-wide adoption of a long-term strategic point of view, beginning with communication. 10. Encourage the organization-wide adoption of a proactive and flexible mind-set, beginning with communication. 11. Optimize the integration of PR and reputational considerations into top-level organizational strategies. 12. Measurably contribute to organizational success.

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