THE AGENCY BUISNESS: As corporate strategies shift, PR firms ready to reap benefits

While CEOs report a change in priorities from cutting costs to growing revenue, midsize PR agencies now feel as if they're on the verge of greatly benefitting from this reversal in strategy.

While CEOs report a change in priorities from cutting costs to growing revenue, midsize PR agencies now feel as if they're on the verge of greatly benefitting from this reversal in strategy.

Top executives at midsize PR firms are feeling good. And two surveys published late last month seem to demonstrate why. A membership survey by the Worldcom Group, the world's largest network consortium of independent PR firms, found that 82% of respondents saw a jump of at least 10% in business leads during Q4 2003 from the same quarter in 2002. A mere 10% reported a decrease in such leads over the same period. A second survey, this one of CEOs of 450 midsize and large companies conducted by IBM, appears to bolster the idea that the bullish signals found in the Worldcom survey won't be fleeting. A whopping 80% of CEOs in the IBM poll said that their priorities had now shifted away from cutting costs to growing revenue. After interviewing several of the respondents to the Worldcom survey, PRWeek found that midsize PR firms feel they are now poised to be among the biggest beneficiaries of corporate America's new offensive posture. "We feel like the local economy - and that includes many of the national and international companies that are located in this region - experienced its nadir in the fourth quarter of 2002," explains Worldcom member Joe Snowden, president of Atlanta-based McRae Communications, a 24-person agency that he opened shortly after graduating college in 1989. "That was the point when companies just could not bring themselves to project marketing. What's happening now is that our current clients are succeeding more financially, but at least as importantly is that they are becoming braver. And that's the part where you see plans taken off the shelf and put back into our discussions." Not only is Snowden bullish on new business opportunities, but he also believes that some of the corporate streamlining that occurred during the marketing downturn might have created openings for his agency as clients try to ramp up their marketing efforts quickly. "In many cases, clients are trying to reenergize [marketing efforts] with leaner and meaner marketing departments and, therefore, sending more outsourcing [to agencies]. And we expect outsourcing to be a trend that will continue." Other midsize executives see some holdover cost cutting trends from the downturn that they don't take comfort in. The most notable of these is the introduction of clients' procurement apparatus into the agency review process, a phenomenon that even midsize firms say they have begun to encounter. "We are seeing procurement involvement on both the PR and advertising side," says Dave Anderson, managing partner of Tempe, AZ-based Off Madison Ave, a 5-year-old integrated marketing agency with a 12-person PR staff. "There are a lot of questions asked by the procurement people. You spend a lot of time having to justify stuff. So you ask yourself at what point do you stop answering the questions, especially when they begin to ask about profit margins and employee salaries." Still midsize firms might be at a slight advantage as clients ask their firms to start running more efficient operations. "We're a lot more nimble [than the giant agencies]," says Anderson. "We can be very cost competitive. We don't have anywhere near as much overhead as the big guys." Beyond demanding that firms be cost competitive, midsize firm chiefs also say that clients are now asking for serious attempts at measurement. "Clients are asking for much more accountability - even in pitches - then they were five years ago." says Mike Nikolich, president of Chicago-based Tech Image, a 12-person tech-focused agency. "What I'm finding now is that clients are no longer just happy to hire a PR agency. They want programs that can demonstrably move the needle somehow." Despite the fact that giant agencies continue to earn a bulk of the industry's fees, midsize agencies continue to display a remarkable aplomb in the face of such giant competition. "I think that we occasionally run into a client that feels the need to be associated with a large brand name from our industry," says Snowden "Yet we would rather compete against a large public [company-owned] firm than another good independent pretty much any day of the week." ------ Worldcom survey findings When asked to compare their Q4 2003 volume of new business leads to the same period in 2002,the survey found:
  • 82% report an increase of at least 10%
  • 8% report no fluctuation
  • 10% report a decrease

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