MARKET FOCUS: Midwest

B-to-b is sluggish, but consumer clients are using PR more than ever.

B-to-b is sluggish, but consumer clients are using PR more than ever.

Scott Chaikin, CEO of Cleveland-based Dix & Eaton, is confident enough about the health of the PR business in the Midwest that he recently signed a 10-year lease for 50% more space than his agency had been occupying. Chaikin admits that the recession made it difficult to find new business in the early 2000s. "The mindset for the past three years has been, 'If you don't have to spend it, don't spend it,'" he says of Midwest corporate clients. But Chaikin and others agree the market is changing. Driven mainly by consumer goods, food, and healthcare, PR activity in the region stretching from Ohio to Minnesota is on the upswing. Growth hasn't reached the heady levels of the late 1990s, but there is some growth to speak of. "My feeling is there's some good reasons to be optimistic," says Frank Parisi, GM and partner with Fleishman-Hillard, Minneapolis. "People are taking vacations again, but we're not dancing in the hallways yet." Manufacturing is still lagging in this recovery, and that means the b-to-b arena remains slow. In Fort Wayne, IN, where manufacturing accounts for a major portion of the business base, manufacturers have "been unwilling to part with any money if they don't have to," notes Steve Cebalt, president of Bottom Line PR & Marketing. The area has a number of auto industry suppliers. With automakers squeezing suppliers to keep cutting costs, such companies have been reluctant to spend on b-to-b PR, Cebalt says. Matt Gonring, VP of global marketing and communications with Rockwell Automation in Milwaukee, says: "It's still difficult to come by new money. However, very solid business cases have been able to wrangle new funds." Rockwell is spending a higher percentage of its marketing dollars for PR, and direct and interactive marketing than it did in the past, he notes, but adds, "There's an increased expectation of metrics for all spending. PR does contribute to growth, but it challenges even the best of us to show how." Audience growth through PR While manufacturing lags, other segments are picking up steam. Consumer goods companies that spent the past three years cutting expenses now know they must grow sales to see continued improvements in their bottom lines. That means new products and/or services that need PR to become known among their target markets. "A lot of our attention is really going to building awareness in major metropolitan markets, says Ann Folkman, PR director for Select Comfort, a Minneapolis maker of mattresses and bed gear. With its overall sales up last year, Select Comfort this year is increasing PR spending. "We've made a concerted effort to keep marketing spending as a percentage of sales and the same for PR," Folkman explains. Mo Moorman, corporate, media, and PR manager with Pacific Cycle in Madison, WI, spent the first half of this year launching a major PR drive for his company's new Schwinn Sting-Ray bicycle. "Every business is still smarting from the downturn of the past couple of years," he notes. The lessons of those years were to make every dollar count. "I really see this as an opportunity for PR," he says. The business mood across the Midwest today is "grow smarter, not just bigger - and who knows better than PR people how to grow smarter?" Newton, IA-based Maytag has a new super dryer on the market this year. It's hired a second in-house PR person and continues to work with Minneapolis agency Carmichael Lynch Spong on a range of PR efforts. "PR is such a strong part of our marketing mix," says Jill Spiekerman, director of PR, sales, and marketing communications. Automakers are rushing out caravans of new models, trying to capture public attention and sales. PR is a major part of new car introductions. "The auto industry, in general in PR, is brutal; there's so much competition," says Jason Vines, VP, Chrysler Group communications at DaimlerChrysler. Chrysler's PR spending is up this year as it recognizes the cost-effectiveness of PR compared with advertising, he says. "We can do with a dollar what they can do with a hundred dollars," says Vines of PR versus ad spending. While the auto industry keeps PR shops in Michigan busy, in neighboring Ohio, consumer goods, financial services, and healthcare are spelling more work for agencies. Cleveland-based Edward Howard expects revenues to grow 18% this year, thanks to work from vacuum maker Hoover and fire-safety equipment maker Kidde, among others, says Kathy Obert, chairwoman. The agency recently began working for Wal-Mart in Ohio on issues revolving around site selection. The agency also still does a large amount of bankruptcy-related work, a segment that helped it weather the recession, Obert notes. In Indiana, Borshoff Johnson Matthews PR & Marketing Communications has seen a 25% rise in revenues through May. "We're seeing a significant growth in healthcare," says Erik Johnson, principal of the Indianapolis-based firm. Education and retail clients also have contributed to growth this year. Wisconsin has been trying to find new bedrocks for its economy as its manufacturing base has declined in recent years. Gary Myers, CEO with Morgan & Myers in Jefferson, WI, expects revenues this year to be flat to perhaps 10% higher, but adds, "We're having a good year compared to the last several." The agency has had only four down years in its 22-year existence, but two of those came back to back in 2002 and 2003, he notes. Business this year from food and agricultural clients has been good, spurred by the national obesity obsession. His firm also is seeing growth in its Minneapolis office. "I think in the Minneapolis market, people are starting to spend again," he says. Firms based in Minneapolis agree. Glenn Karwoski, MD with Karwoski & Courage, says, "We are seeing business pick up. It's not a dramatic increase; it's a steady increase." About half of his agency's business comes from b-to-b work, and that segment remains sluggish, he notes. But in the consumer products area, he finds he's pitching at least two new accounts a month and has been successful attracting business in the dental products segment from clients like 3M Dental and GlaxoSmithKline's dental division. Parisi says Fleishman's Minneapolis office has seen an uptick in tech business. Work it has done with longtime client Imation, a Minnesota-based data-storage company, has attracted other tech work. It picked up business from a new division of Kodak, for example, that is using tech spun off from hometown juggernaut 3M. Iowa, thought of as a farm state, has been working to turn its capital, Des Moines, into an insurance and financial center. That has meant PR assignments. Des Moines ranks third in the country in terms of insurance companies based there, notes Ron Hanser, president of Hanser & Associates, Des Moines. "It's a very strong, stable economy here in the central part of Iowa," he notes. He's brought in nine new clients in the first half of the year. "It's shaping up as a real good year," he says, with business coming from consumer products, healthcare, and financial services. Hiring new employees The growing strength of the Midwest PR market has meant that agencies are starting to hire again. Indeed, participants at PRWeek's Chicago Roundtable in June worried that the job market was becoming so strong there that many employees were poised to leap at better offers. While Chicago firms anticipate a hiring race, firms in other Midwest states are taking on new help at a much more measured pace. Dix & Eaton's Chaikin says his Cleveland agency may have as many as four new staffers this year. Greg Sendi, SVP and MD of PR with Northlich in Cincinnati, has been hiring at all experience levels to handle more business from consumer goods clients, such as Valvoline motor oil. "Consumer and healthcare are very bullish; they're doing quite well," Sendi says. But in his area, manufacturing remains in the doldrums. "I've never seen such a difference [between the segments]. There's so much uncertainty in the manufacturing economy," he says. The cloud of a slow manufacturing sector will continue to hang over the Midwest this year. But it's not stopping companies in other sectors from stepping up PR efforts, and that has meant good news for Midwest PR firms so far this year. All have their fingers crossed that the good news will continue to roll.
  • Comprehensive listings of agencies in the region can be found in PRWeek Contact. Visit PRWeek.com for details. Fact file
  • Illinois Population: 12,419,293 Largest industry sectors: Educational, health, and social services: 19.4% Manufacturing: 16% Retail trade: 11% Fortune 1,000 companies: State Farm Insurance Caterpillar Archer Daniels Midland Company
  • Indiana Population: 6,080,485 Largest industry sectors: Manufacturing: 22.9% Educational, health, and social services: 19.3% Retail trade: 11.8% Fortune 1,000 companies: Eli Lilly & Co. Anthem NiSource
  • Iowa Population: 2,926,324 Largest industry sectors: Educational, health, and social services: 21.8% Manufacturing: 17% Retail trade: 12% Fortune 1,000 companies: Principal Financial Group Maytag Corporation Rockwell Collins
  • Michigan Population: 9,938,444 Largest industry sectors: Manufacturing: 22.5% Educational, health, and social services: 19.9% Retail trade: 11.9% Fortune 1,000 companies: General Motors Ford Motor Co. Kmart
  • Minnesota Population: 4,919,479 Largest industry sectors: Educational, health, and social services: 20.9% Manufacturing: 16.3% Retail trade: 11.9% Fortune 1,000 companies: Target Corporation UnitedHealth Group Supervalu
  • Ohio Population: 11,353,140 Largest industry sectors: Manufacturing: 20% Educational, health, and social services: 19.7% Retail trade: 11.9% Fortune 1,000 companies: American Electric Power Company The Kroger Company Cardinal Health
  • Wisconsin Population: 5,363,675 Largest industry sectors: Manufacturing: 22.2% Educational, health, and social services: 20% Retail trade: 11.6% Fortune 1,000 companies: Johnson Controls Northwestern Mutual Life Insurance Manpower

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