MARKET FOCUS MINNEAPOLIS: Two’s a crowd in Twin Cities - Heated competition from advertising agencies and two PR giants plus the presence of renegade governor Jesse Ventura make Minneapolis an energetic market. John Frank reports

Ad agencies long ago realized they could grab extra fee income by starting PR operations that would serve their ad customers. But in the Minneapolis/St. Paul market, several local ad agencies have taken such combinations one step further - creating PR operations that vigorously compete for non ad-client PR business.

Ad agencies long ago realized they could grab extra fee income by starting PR operations that would serve their ad customers. But in the Minneapolis/St. Paul market, several local ad agencies have taken such combinations one step further - creating PR operations that vigorously compete for non ad-client PR business.

Ad agencies long ago realized they could grab extra fee income by

starting PR operations that would serve their ad customers. But in the

Minneapolis/St. Paul market, several local ad agencies have taken such

combinations one step further - creating PR operations that vigorously

compete for non ad-client PR business.



The presence of such aggressive ad-owned PR shops has turned up the

competitive heat for the area’s stand-alone PR firms, forcing them to

improve their presentation skills and results-measurement techniques,

industry pros contend.



Add to that the presence of two major international PR powerhouses,

Shandwick and Fleishman-Hillard, and you get some idea of how

competitive the Twin Cities’ PR market has become. It’s a far cry from

the early 1980s, when major corporations did most of their PR in-house

and one or two local PR firms dominated the landscape.



Downsizing



Today, many area corporations have shrunk their in-house PR departments

and shifted project work to outside agencies, several of which were

started by refugees from the downsizing trend.



Still, despite the heightened competition, PR pros in Minneapolis - the

business capital of the Upper Midwest - agree that business is good.

Area firms in PRWeek’s Top 200 saw a combined 20% growth last year,

roughly in line with the overall Top 200’s growth rate of 24%. Not bad

for a market that’s lost several major corporate residents, such as

Norwest Bank, US Satellite Broadcasting and, most recently, Honeywell,

due to mergers.



Area PR firms have reacted to take-overs, and to their desire to grow

their businesses, by stepping outside their home base to find new

clients.



Many report major chunks of their income now come from beyond their

Midwest base.



While takeovers have impacted Minneapolis’s corporate landscape, the

area’s PR market is still seeing growth from local food and agricultural

companies, such as General Mills, Pillsbury and commodities giant

Cargill; retailers such as Dayton Hudson and Best Buy; and a growing

medical and med-tech community anchored by the University of Minnesota’s

hospital and the Minnesota-based Mayo Clinic. A strong economy has also

given rise to a host of start-ups.



The Minneapolis/St. Paul unemployment rate stands below 2%, one of the

lowest in the nation and a sure sign of a robust local economy.



’While the large corporate environment has shrunk a little bit, the

overall corporate environment has grown,’ notes Warren Vollmar,

president of the local PRSA chapter and communications manager with 3M

Industrial Markets, a division of 3M, another major area employer.



And - if nothing else - flamboyant governor Jesse Ventura has brought a

lot of attention to the state.



Sitting atop the Twin Cities PR landscape is the local Shandwick office,

which with more than dollars 16 million in PR fees last year accounted

for 18% of the agency’s total US income and is its largest office in the

world, according to Dave Mona, chairman of Shandwick Minneapolis. The

agency bought Mona’s locally based firm in 1988, gaining instant

credibility in the market. Not only was Mona’s firm well known, but he

is a local personality, doing a weekly sports radio show and providing

color commentary for University of Minnesota football games. One of his

former partners, Scott Meyer, is now CEO of Shandwick America.



Mona expects his 224-person office to do more than dollars 20 million in

PR business this year. Roughly half of his office’s billings come from

outside the Twin Cities area, a trend not uncommon for the area’s major

firms.



’There are no boundaries on who different offices go after,’ notes

Sandra Hart, president of The Hart Group, a local media relations

firm.



Fleishman is the other major international PR firm making a mark in

Minneapolis.



It too decided local talent was the way to go. It hired Ann Barkelew,

who in 1994 had retired from PR work with Dayton Hudson, to open its

Twin Cities office in 1996. ’We started with one huge client (Imation, a

3M technology spin-off) and four or five others,’ she recalls. The

Fleishman office ended that first year with roughly dollars 500,000 in

PR fees and was still relatively small at dollars 3.1 million in ’98,

but expects to do more than dollars 4 million in billings this year,

Barkelew says.



Barkelew has seen the changing shape of Minnesota’s PR marketplace.

’When I was at Dayton Hudson, almost every company had a fully staffed

PR department and there wasn’t a lot of outside work,’ she recalls.

Today, outsourcing is a given for much PR project work.



While the international firms have made their presence felt, several

strong local firms have also seen dramatic growth and remain among the

area’s largest. Tunheim Santrizos reported dollars 4.8 million in fees

last year and this year has demonstrated that it plans to make a major

push for national public affairs business by taking on as a consultant

Hubert ’Skip’ Humphrey, a former Minnesota attorney general and a leader

in state government battles with the tobacco industry. Tunheim Santrizos

also hired a number of Humphrey’s former staff from the AG’s office. ’It

has been important for us to think of ourselves as a firm with expertise

that has no regional bias,’ says president Kathy Tunheim. Roughly 50% of

her company’s PR fees come from outside the Twin Cities, although 75% of

its clients are local. She expects her fee income will reach dollars 5.5

million this year.



Vigorous climate



Another major PR firm, second-place Padilla Speer Beardsley, saw only a

9% jump in fees last year. But chairman John Beardsley notes that the

small rise came after the loss of its second-largest client, US

Satellite Broadcasting, due to its merger with DirecTV. Growth this year

should be in the 19% range, Beardsley predicts. ’The Twin Cities market

is a remarkably vigorous business climate,’ he says.



It’s also a vigorous market for ad agencies to start and build PR

operations. Doug Spong, now with Carmichael Lynch Spong, has done just

that for Carmichael after doing it for his previous employer Colle &

McVoy. Spong says Minneapolis ad agencies realized that they needed PR

functions. ’Those agencies look at how they can ignite and sustain brand

identity for their clients,’ he says, and PR is a part of that picture.

Spong joined Carmichael in 1990 after nine years with Colle & McVoy.

Last year, Carmichael Lynch was fourth among Minneapolis firms on the

PRWeek Top 200 but saw only 4% fee growth.



’Last year was the year to catch up on our work,’ Spong says. The

company had trouble finding new staff because of the tight local job

market, which led it to curtail new business activity. It has since

hired a staffing manager to better identify, attract and retain people.

The company ended 1998 by buying another local PR firm, McGrath Buckley

Consulting Group, a move that adds dollars 700,000 to its annual PR

fees, Spong says.



Surviving the merger wave



Spong’s firm has lived through the merger wave hitting corporate

Minneapolis and survived relatively unscathed. It had done work for

Norwest, a major bank that is now part of Wells Fargo. It continues to

work with the bank after the merger, doing in the six-figure range.



Even companies that aren’t being bought are trimming the number of firms

they work with, a national trend mentioned in the recent Harris/Impulse

survey. Beth LaBreche of LaBreche Murray notes her firm recently

survived a culling of outside agencies done by 3M.



Other local firms with ad connections include Miller Meester Public

Relations, with fees around dollars 3 million in its last fiscal year,

and Karwoski & Courage, owned by ad agency Martin/Williams, with PR fees

in the dollars 2.6 million range.



’We were integrated before people started using integration,’ jokes

Douglas Kline, Miller Meester VP, discussing the integrated marketing

approach his firm and others have taken.



Roughly 65% of Karwoski’s PR business is with clients not using its

advertising parent, says Glenn Karwoski, senior vice president. ’From a

marketing communications standpoint, this is a very sophisticated

market,’ he says.



’PR has evolved more and learned the language of marketing’ because of

the competition from ad-owned firms, he contends.



Mona admits such competition has caused Fleishman to ’sharpen our

proposals,’ adding some of the panache and flair usually reserved for ad

pitches. It’s also put more emphasis on measuring results, something ad

agencies have been doing longer and in more detail than many PR

firms.



But not everyone in the PR community thinks advertising and PR fit under

one roof. Robert Goff, of Goff & Howard, a St. Paul firm that does

public policy work in the state capital, had once worked for an ad

agency but bought out his operation about seven years ago. ’Ad agencies

generally are people who aren’t very comfortable when the message isn’t

carefully controlled,’ he contends. ’PR and advertising are two distinct

approaches to message development.’



While the wisdom of combining advertising and PR under one roof sparks

debate, one thing everyone in Minneapolis agrees on is the tightness of

the PR job market. New PR grads - fed to the business from the

University of St. Thomas, the University of Minnesota and the University

of Wisconsin’s nearby northern campuses - can command in the high

dollars 20,000 range. Account executives get in the dollars 40,000

range, with account supervisors earnings in the dollars 60,000 to

dollars 70,000 range. A recent survey done for PRSA by a team of

University of Minnesota researchers found average salaries ranging from

dollars 61,703 for agency PR people to dollars 41,463 for government and

nonprofit PR pros.



People with five to eight years experience are so hard to find that ’if

you have them, you have to lock them in,’ says Miller Meester’s

Kline.



Another point of agreement among local PR pros: Gov. Jesse Ventura is

garnering widespread media attention without using an army of PR

pros.



’Ventura just shreds the book when it comes to PR basics,’ says Tony

Harris, executive vice president with Nemer, Fieger & Associates, who

worked on PR for the inauguration. Gerri Drewry and his Drewry

Communications won a local PRSA public affairs award this January for

its 1998 PR work on the Ventura campaign. But since taking office, it’s

been largely Ventura carving out his own image.



And that’s fine with local pros. The more attention Ventura focuses on

Minnesota, the easier it is for them to explain where they come from

when pitching for new business outside their home state.



TWIN TOWERS: THE TOP SIX MINNEAPOLIS-ST. PAUL PR AGENCIES

 Rank  Company                Income              Change

98 97                           1998        1997       %

1   1  Shandwick

       Minneapolis        16,165,000  12,569,000      29

2   2  Padilla Speer

       Beardsley*          7,334,781   6,702,759       9

3   3  Tuneheim

       Santrizos*          4,800,000   4,100,000      17

4   4  Carmichael Lynch

       Sponge*             3,424,000   3,300,000       4

5   5  Fleishman-Hillard   3,171,000   2,191,000      45

6   6  Goff & Howard*      2,014,100   1,786,534      13

       Total              36,908,881  30,649,293      20

                                      Twin               Twin

                                     Cities            Cities

 Rank  Company             US income     %    US income     %     Location

98 97                           1998  1998         1997  1997

1   1  Shandwick

       Minneapolis        91,485,000    18   80,292,000    16  Minneapolis

2   2  Padilla Speer

       Beardsley*          7,334,781   100    6,702,759   100  Minneapolis

3   3  Tuneheim

       Santrizos *         4,800,000   100    4,100,000   100  Bloomington

4   4  Carmichael Lynch

       Sponge*             3,424,000   100    3,300,000   100  Minneapolis

5   5  Fleishman-Hillard 136,272,000     2  115,193,000     2  Minneapolis

6   6  Goff & Howard*      2,014,100   100    1,786,534   100     St. Paul

       Total             245,329,881    15  211,374,293    15



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