REGIONAL FOCUS: Midwestern muscle

A difficult year has left PR firms fighting to persuade clients to loosen their purse strings.

A difficult year has left PR firms fighting to persuade clients to loosen their purse strings.

The worst of the recession seems to be over in the Midwest, but PR people in the heartland - whether at agencies or in corporate communications departments - aren't quite ready to say recovery is at hand. Corporate PR departments across the region by and large are doing more projects with lower or static budgets this year. "It's fair to say that there's very little new money," says Matt Gonring, VP of global marketing and communications at Rockwell Automation in Milwaukee. The health of Midwest agencies has been closely tied to the types of business they specialize in and the businesses that drive the economies in their states. At the Eastern end of the region, in Ohio for example, manufacturing has been hit hard by the recession, and b-to-b PR has been hurt as a result. Kathleen Obert, chairwoman of Edward Howard & Co. in Cleveland, says, "It's continuing to be a hard year. Certainly, this has been one of the most challenging years we've had." In Michigan, the auto industry has managed to keep sales brisk by offering costly incentives and rebates, so the pressure has remained on auto PR to watch and often cut costs. "It's definitely lean and mean across the board here," says Michael Layne, partner in Michigan-based Marx Layne & Company. As a result, for agencies in the Detroit area, "We're working probably twice as hard to do 10% more business," Layne says. Indiana has benefited from a growing healthcare industry, but its state government - like most in the region - has been cutting back, notes Myra Borschoff, a partner with Borschoff Johnson Matthews in Indianapolis. Strength in the heartland Moving west to Illinois, Wisconsin, Iowa, and Minnesota, the strength of the food business during the recession has helped some agencies stay afloat. Ditto for those involved in agriculture and animal sciences. Morgan & Myers, based in Wisconsin (with offices in Minnesota and Iowa), expects revenues to climb 10%-15% this year, for example, thanks largely to business in the food, animal-health, and agricultural arenas, says president and CEO Gary Myers. After laying people off in 2001 and 2002, Myers decided to concentrate on improving his new-business prospecting methods. He put together a new-business plan for this year that set a goal of bringing in $250,000 of new business each quarter for the $5.9 million agency, which saw revenues drop 29.6% last year. Through the first half of the year, Myers was on track with his goals, though he notes that wins this year are in the $50,000-$100,000 range rather than the $100,000-$200,000 range he saw before the recession. He now has 54 employees (compared to 89 three years ago), and plans to hire two more people in Iowa and Minneapolis. A rash of new food-product introductions this year hasn't meant a major jump in food-company PR spending, however. Minneapolis-based General Mills, for example, continued to cut its overall PR spending this year even as it worked with local agency Padilla Speer Beardsley to roll out Berry Burst Cheerios, a major new product. Kim Olson, public relations director at General Mills, has been building a larger internal product PR team at the company in recent years, and as that team continues to gel, it has taken on more projects that once were outsourced, accounting for the lower spending, Olson explains. "It's really getting more with less for us," she says. PR efforts at General Mills generated 3.4 billion media impressions in the company's fiscal year ending June 1, up from 3.1 billion the previous year. Olson's department handled 260 PR projects, also an increase from the year before. Iowa-based Maytag has held PR spending steady this year, even as it benefits from strong home sales and consumers' increasing tendency to stay at home and upgrade appliances as a result of more home cooking and entertaining. In addition to Maytag, the company also sells the Amana and Jenn-Air product lines. "Our budgets have been very steady," says Jill Spiekerman, PR manager in the brand-management department of Maytag Appliances. Maytag management believes strongly in the value of PR, she says, but it also believes in using a variety of metrics to gauge the effectiveness of its PR efforts. Maytag looks at not only media impressions but also brand awareness, consumer conviction to buy a Maytag product, and sales, she explains. Ohio-based Bob Evans Farms, which operates restaurants in 22 states, has increased its PR spending slightly this year, hoping to stay top of mind for consumers as the economy revives. "We want to be prepared and positioned to take advantage of a recovery," says Mary Cusick, VP of corporate communications at Bob Evans' Columbus, OH, headquarters. Minneapolis-based Select Comfort, which makes beds and sleep accessories, is one of the few companies in the region talking about a PR spending increase of 15%-20% this year, says Ann Folkman, director of PR. The company is in the midst of a three-year-long turnaround under a new CEO, explains Folkman. In Wisconsin, Rockwell typifies the approach to PR many industrial concerns have taken this year. "There's a continuing pressure to show ROI and to target PR more precisely," says Gonring. While he's holding spending steady in other areas, Gonring says he is spending more to measure the effectiveness of the PR efforts his company undertakes. With industrial contraction in the dairy state, "there haven't been a lot of RFPs flowing out of Wisconsin," says Joel Curran, SVP and managing director in Chicago with CKPR, which also has offices in Milwaukee, Florida, and Arizona. CKPR expects 15%-20% overall agency growth this year thanks in some measure to a resurgence in its Chicago office, where business is up 30%, Curran says. Tough times in Minnesota For agencies in Minneapolis, "if anyone tells you that things are just going fabulous, they're not telling the truth," says Glenn Karwoski, managing director of Karwoski & Courage. Paul Maccabee of The Maccabee Group agrees: "Everybody in the Twin Cities is trying to look desperately for the silver lining, and I'm not sure we're there yet." Some Twin Cities agencies are more upbeat, however. Carmichael Lynch Spong is seeing its revenues rise 15%-20% this year thanks to work with housing and food clients. The local Fleishman-Hillard office has seen its three largest clients increase spending this year, says Frank Parisi, GM at Fleishman Minneapolis. "From Minnesota's viewpoint, there are a number of bright spots," he says. Fleishman's Cleveland office, which has seen 90% client turnover in recent years after it was acquired from local owners, is seeing business come in from healthcare and b-to-c work for retailers, says Doug Bell, Fleishman's Cleveland GM. The Chicago market remains tight, says Cynthia Hardie, SVP with Fleishman in Chicago, but "we are much more optimistic. It is much different than it was last year." Cincinnati-based Northlich expects its revenues to rise 5%-10% this year. "There aren't any particular big wins," says Greg Sendi, SVP and managing director of public relations with Northlich, summing up most of the region. He says that gains are coming in the form of new assignment from existing clients. Neil Mortine, president and CEO with Lord Sullivan & Yoder Public Relations in Columbus, OH, agrees, saying, "Volume is definitely picking up, but the accounts are smaller, and the fees are smaller." He expects his firm's revenues to rise to $3 million this year, from $2.5 million last year. "We're not setting the world on fire, but that's solid growth for us," he says. Others in the Midwest who can say the same thing this year are thanking their lucky stars, and wishing on another star that next year brings a full economic recovery and an increase in PR spending across the region. ----- Blue-collar blues The nation's ongoing economic woes haven't spared the Midwest. Indeed, while the current recession may have hit the technology-heavy West Coast the hardest, the Midwest was battered economically thanks to its reliance on manufacturing in such troubled industries as telecommunications. "The Midwest has felt this slow period in the US economy modestly more than the rest of the nation," contends William Testa, VP and director of regional programs at the Federal Reserve Bank of Chicago. "It's been a manufacturing recession that started here in 2000," he explains. The Chicago economy, for example, was hit by the slowdown in telecom equipment manufacturing, by a falloff in its burgeoning dot-com service sector, and from a drop in business travel and meetings after September 11. "Chicago is the business-meeting center for the mid-continent, and that's still hurting," Testa says. Sung Won Sohn, chief economic officer with Wells Fargo in Minneapolis, says, "The Midwest economy is trying to recover. Manufacturing was really hit the hardest." While Midwest manufacturing may still be down, its food and agriculture segments have held up relatively well thanks in part to government subsidies to farmers, Sohn notes. The housing sector has done well in the region, as has healthcare. And "tech people seem to feel better about the economy," Sohn says. "I think the recovery has begun. The area where we don't see a recovery is in jobs." Unemployment rates in the region in June ranged from a low of 4.2% in agriculture-dependent Iowa to a high of 7.2% in Michigan. Illinois and Ohio, both with large manufacturing bases, each had unemployment rates of 6.3%, followed by Wisconsin at 5.6%, Indiana at 4.7%, and Minnesota at 4.4%. The national rate was 6.4% in June, but dipped to 6.2% in July.

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