REGIONAL FOCUS: Southeast survival

While local companies look elsewhere for PR, area firms are holding up.

While local companies look elsewhere for PR, area firms are holding up.

Frustrating to those who actually live and work there, the Southeast (i.e., Alabama, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia) has been typecast as a region heavily reliant on manufacturing, tobacco, country music, and whiskey. Those industries do, of course, exist - some more profitably than others - but sectors such as healthcare, technology, finance, and automotive abound as well. Despite the reality that the region has representation from nearly every industry that other more popular areas enjoy, the area's propensity for homegrown PR talent kept the presence of multinational agencies at virtually nil. Theories vary on why so few worldwide firms have successfully established a footprint in the area. "Most of the significant spenders still look to the major media markets for their support," says Mark Raper, CEO of Carter Ryley Thomas, which is headquartered in Richmond, VA, with offices in Charlotte, NC and Norfolk, VA. Among the region's major companies that go elsewhere for PR are FedEx (Memphis, TN), which uses Ketchum; Bank of America (Charlotte), which uses Weber Shandwick; and Yum Brands' KFC (Louisville, KY), which uses Edelman's Chicago office. Raper admits there may be less business to be had in the Southeast region, but believes the lack of multinational accounts can be more accurately attributed to "this phenomenon that the clients here are not as sophisticated as far as PR spending goes. It is more common practice for spending levels to be higher in the Northeast and West. Rates here can be ridiculously low." To that point, Joe Gallehugh, president of Trone PR, a Greensboro, NC-based agency, believes worldwide PR firms, for the most part, have opted out of the region because they "have a different way of measuring" success. Rick French, principal of Raleigh, NC-based French/West/Vaughan (FWV), agrees. "When you are homegrown," says French, "you can look at yourself as trying to establish yourself nationally, and go everywhere for business. When you are a multinational agency that establishes here, you are boxed in. You have to rely on that state because you can't start encroaching on your sister agency's turf." FWV boasts that 50% of its clients, which include American Honda, ConAgra, and Cardinal Health, come from outside the Southeast region. When the agency first opened in 1997, it enacted a strategy by which it forbade itself from taking on local clients. This approach, explains French, "allowed us to go and pitch other clients of that stature. Even if it took us longer to establish ourselves, we wanted to go after the nationals first." Earlier this month, FWV was named agency of record by VF Corporation, the world's largest apparel manufacturer. Fleishman comes to Charlotte Despite this consensus that the approach does not work the other way, thus making the Southeast region an uncharacteristic territory for a large, multinational PR firm to establish itself (after all, Ruder Finn, Porter Novelli and Brodeur all tried, and have since closed their doors), Fleishman-Hillard opened an office in Charlotte, NC earlier this month. Led by GM John Falkenbury, the office will initially open with five employees, which Paul Johnson, regional president and senior partner for Fleishman, says are being selected from the Charlotte area. Johnson cites this combination of "national reach and local roots" as one of the reasons the firm believes it will have better luck in the region than its predecessors. "You can't discount that others went to the market and it didn't work," admits Johnson, but he remains confident that Fleishman's local market focus and "great culture of cross-selling" will help keep the agency afloat. Additionally, Johnson says Fleishman will develop its "own version of the larger Triangle opportunity," which will incorporate perspective from work done for existing federal clients with the research and development companies located in the Research Triangle Park, which is 7,000 acres of land nestled between Raleigh, Durham, and Chapel Hill, NC. The property is home to roughly 130 organizations, which are run by close to 40,000 employees, 99% of which work for research and development-related companies. Such powerhouses as GlaxoSmithKline (GSK), IBM, Nortel, and Cisco Systems are based there, along with multiple other smaller concerns, mostly in the healthcare or technology sectors. Charlotte is known as the state's financial hub - it's home to Bank of America and Wachovia - but also has other big names, such as Duke Energy, Nucor, Goodrich, and Ruddick, as well as a Coca-Cola bottling plant. The middle section of the state, essentially the area between Charlotte and Raleigh which includes Greensboro, Winton-Salem, and Highpoint, is known as the Triad. The area's economy has suffered more than most in recent years, as its traditional industries - tobacco and textiles and furniture manufacturing - have seen massive layoffs and overall profit declines. Some sectors in North Carolina, such as healthcare, have actually seen an increase in work as a result of the middle section's demise. Chapel Hill-based Blue Cross Blue Shield (BCBS) of North Carolina, for example, worked with its agency of record, Capstrat (formerly Capital Strategies), in 2003 to publicize a program through which displaced workers in the area can get a subsidiary. Mark Stinneford, manager of public affairs for BCBS of NC, says the healthcare provider worked heavily with Capstrat through that because "we had to make sure people understood" what BCBS was offering the unemployed. Being in the news so much, says Stinneford, "helped us determine what our strengths were, as well as our agency's." Seeking new client sources Agencies which are located inside the Triad, however, have had to seek work either outside their immediate area, or inside with clients that do not fall under the Triad stereotype (i.e., tobacco or manufacturing enterprises). According to the Business Journal, a Triad-area publication, last month Winston-Salem based Fyock & Associates declared Chapter 7 and closed its doors. (In the article, CEO Ted Fyock said he was now operating as a freelance consultant. He didn't return PRWeek's calls for comment.) Rachel Barron, former SVP of PR at Fyock, was laid off from the agency in October 2002, and has since formed her own Winston-Salem firm called Next Level Communications. She describes her client list as "a combination of nonprofits, start-ups, and small to medium-size family-owned businesses." Barron claims that small business in middle North Carolina is "one of the few sectors doing well." She adds, "We have no one client that dwarfs all the others." She believes this "is healthier because we won't be devastated if we lose any one client." This determination displayed by ex-Fyock staffers to adjust approaches to new and existing clients is what put the majority of Southeast PR agencies in the black in 2003, and bullish on the prospects of 2004. With few exceptions, 2002 was unarguably a difficult year for agencies. Travel and tourism, a sector heavily relied on by such Southeast locales as New Orleans, Nashville, and North Carolina's Outer Banks, took a huge hit after September 11. The continued demise of the tobacco industry, combined with a job drought in textile manufacturing, not to mention a series of hurricanes, left parts of North Carolina's economy in tatters. Although healthcare remained relatively strong, Birmingham, AL took a big hit in the first quarter of 2003 when HealthSouth found itself at the center of a massive accounting fraud investigation. Bynum & Partners, a Birmingham-based firm, reported an astonishing 70% growth in 2003, which it attributes to the fact that 90% of the agency's business comes from outside Alabama. CEO Cary Bynum's hopes are high for 2004 as well, largely because of a newly adopted strategy: being more picky. "We are trying to go back and assess who is going to meet our criteria this year, instead of just trying to figure out how to get hired." Bynum says he wants to work with clients who have made communications-related decisions that "are vital to their business. We are trying to find people who can prove to us that they are not looking for low-cost providers, but partners." A similar approach in 2003 - looking outside the region - was adopted by New Orleans-based Deveney Communications, which reported 30% growth for the year. CEO John Deveney says his firm's success was an exception in Louisiana, which has suffered greatly in a down economy for hospitality, tourism, and nonprofit. Deveney agrees that 2004 will be even more bullish, as corporations that eliminated their in-house support when the economy turned sour are starting to come back. Their fear of commitment and carrying overheads is going to mean good things for agencies, believes Deveney. Growth in project work Another thing many agencies in the region have had to adjust to, which could be seen as additional support for this commitment-phobic mentality put forth by Deveney, is a decrease in long-term contract agreements, and hence, an increase in project work. Cathy Ackermann, president of Ackermann PR in Knoxville, TN, says, "The days of clients agreeing to year-long retainers are a thing of the past. Many firms have bemoaned that fact, but we haven't." Ackermann says her agency surpassed its profitability goals in 2003, and has predicted 15% growth for 2004. That kind of willingness to roll with the punches was also adopted by Jackson, MS-based Goodwin Group, which does work for clients ranging from Nissan (the manufacturer's plant is located in Jackson) and Amtrak to the International Ballet Competition. When the economy went bad, rather than sitting tight and waiting for it to pass, Goodwin started picking up business with corporate law firms, which hired the firm to media train clients. Says Danny Mitchell, CEO of Goodwin, "With the economy the way it was [in 2003], consumer PR was not as active as corporate communications. We expect to see that reverse in 2004." Ken Eudy, CEO of Raleigh, NC-based Capstrat, believes that the question is not whether there will be an increase in business for 2004, but rather, "As business picks up, are they [PR firms] going to grow in a smart way? As opposed to a late '90s approach, when we were going down to the bus stop to look for people to hire, are agencies going to be strategic in their hiring?"

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