Survey Shows PR Budgets Growing, Both Internally and Externally

Many corporations today are relying on outsourcing as much as in-house expertise for their PR efforts, with more than one-fifth of companies operating on external and internal budgets that are $250,000-$500,000, according to a recent survey.

The survey, just released by Highland, Ill.-based Thomas L. Harris & Co., is based on anonymous responses from about 2,000 executives (about 4,000 were sent questionnaires) of client companies for the top U.S. PR agencies: Burson-Marsteller, Shandwick, Hill & Knowlton, Porter Novelli, Edelman, Fleishman-Hillard, Ketchum, GCI, Ogilvy Adams & Rinehart, Manning, Selvage & Lee, Bozell Sawyer Miller, Ruder Finn, Cohn & Wolfe, and Golin Harris.

The fifth such annual study - from which PR NEWS reported last week revealed that internal PR budgets grew by 10 percent and internal budgets by 44% when compared to last year - shows that 29 percent of 1997 respondents said that their internal budgets come in at under $100,000, and 27 percent said their external budgets are under $100,000.

Only 4 percent reported that their internal budgets are over $5 million, again a number that's extremely close to what's budgeted for outsourced PR. Five percent of company execs said their external PR budgets are over $5 million.

"This study verifies the trend that's been reported that more companies are allotting more resources and higher budgets for the communications process," says John Graham, CEO of Fleishman-Hillard, the St. Louis-based PR monolith just acquired by Omnicom, the holding company that also owns Ketchum and Porter Novelli and several European-based firms.

Moreover, Graham sees the increasing financial solvency of the company he chairs as proof that the survey is on target. According to Graham, FH had 725 clients last year but that number has already jumped by more than 100 this year:

FH projections are that the company will have 970 clients by the close of this year as well as bring in about $136 million in revenue, a 20 percent leap over last year's fees.

Graham said he believes part of what's spurring the increase in PR budgets is that more companies are relying on PR specialists for crisis management (undoubtedly one of the hot-button communications issues today); to handle healthcare and similar public affairs-angled communications; and to harness technology in the global marketplace. These are all corporate issues cemented in, or based on, strategy - not one-time projects or event planning.

In fact, Graham's view is borne out in the survey, which shows that among the work assigned to agencies, strategic counsel ranked No. 1 out of 24.

However, in terms of PR handled in- house, strategic counsel ranked 9 out of 24. No. 1 on the list was internal communications.

The two other leaders in PR undertakings being handled by corporate staffs and internal PR divisions were corporate reputation management, No. 2 out of 24; and crisis management, No. 3 out of 24.

In-house PR services that claimed the least internal priority, in this order, were media training; labor relations; international programming; sports/entertainment marketing; and ethnic marketing, which was last on the list.

But these facts point to more than surfacing trends, and also are more than job justifiers. They show how diverse the responsibilities are that now fall under the PR umbrella, everything from managing a company's relationships in the financial sector and re-emerging after a crisis to readying company execs for the limelight.

Even though media training (a new category in this year's survey) isn't a top priority within corporations, it's one of the leading specialities corporations are turning to consultants to handle: it claimed the No. 2 spot in the kind of work that's being assigned to agencies.

Rounding out the list were media relations (No.3 out of 24); measurement of results (No. 7 out of 24); investor/financial relations (No. 12 out of 24); and community and government relations (No. 17 and No. 18, respectively).

"Clients are calling us for day-to-day advice on strategies and bringing us in as true partners," Graham says.

Makeup of the Survey

Other than revealing the increasing trend for companies to grow their PR budgets, the Harris survey is unique in another way.

It is commissioned, or sponsored, by the 14 leading agencies (mentioned above). Thomas wouldn't disclose how much the firms are paying for the study, compiled by Impulse Research.

But he said each of the companies is given an approximately 100-page, in-depth report that shows where they rank among their peers. Competitors' names aren't listed, however.

Bob Novick, who heads Impulse Research, said that when the study began six years ago, they had one client, MS&L.

Since then, the list has continued to grow because PR firms have very little industry data that reflects how their clients perceive their services and/or delineate why companies choose to use (or drop) them.

In next week's issue, PR NEWS will run the criteria - also culled from the survey - corporations consider when selecting new agencies. (Thomas L. Harris, 847/266-1020; FH, 314/982-1700; Bob Novick, 310/559-6892)