THE AGENCY BUSINESS: Move from 'support' to 'partner' remains challenge for PR firms

While the size of the two industries makes comparing PR and ad agencies a bit unfair, implementing some of the latter's metrics programs could help the former raise its corporate status.

While the size of the two industries makes comparing PR and ad agencies a bit unfair, implementing some of the latter's metrics programs could help the former raise its corporate status.

Can you recall a recent integrated pitch led by a PR firm and supported by an ad agency? The answer is probably "no" because such pitches are typically billed in the reverse order. Therefore, it isn't a surprise that a recent study finds that large corporations rank their relationships with advertising firms higher than those they have with their PR firms. For reasons of scale alone, this comparison - though probably inevitable - is admittedly a bit unfair. In terms of revenue generation (and by implication client spending), advertising is a much larger industry than PR. A quick glance at the financials of any of the major marketing holding companies underscores this disparity. For instance, in its most recent financial quarter, Omnicom, which owns three of the world's largest PR firms, attributed 44% of its revenue to "traditional media advertising" and less than 12% to PR. But beyond just numbers, there are other obvious advantages for ad agencies. Whereas advertising shops tend to offer clients services that most companies do not have in-house - such as creative advertising talent - every major corporation has developed some in-house PR apparatus. Therefore, most companies approach PR with an in-house team that it already views as its hand-picked expert. An SVP of corporate communications at a Fortune 500 company recently echoed this point to PRWeek, saying, "It's hard for agencies to pitch me on strategic advice because I'm always thinking about my company's business, and nobody knows the company from a communications point of view better than I do." Add all this up and the results of a recent client-side survey about "integrated communications" by consulting firm Osgood O'Donnell Walsh, an affiliate of Fleishman-Hillard, should not come as a shock. The survey found that while giant multinationals tend to view ad agencies as "partners," they consider their PR firms to be "tactical support." Although the study only polls eight Fortune 500 companies (the firm is looking to expand the sample), the survey is an extremely in-depth look at communications at each company. Osgood conducted 42 one-on-one interviews with the communications leaders at the eight companies. Generally, these communications executives tended to be the heads of marketing, corporate communications, investor relations, and government affairs. Among the participating companies were DaimlerChrysler, Gillette, and Honeywell. "The companies we studied see the PR side offering support to an already existing function within the company," says Lawrence Walsh, a principal at Osgood. Walsh says clients appear to consider PR firm offerings as less tactical and more strategic when the companies are facing new and unfamiliar challenges, such as a large merger. And these specialized areas of communications tend to be dominated by a small number of boutique firms, who often move on after the major issue is behind the company. So if PR agencies with ongoing relationships with large corporations want to shift to "partner" from "support," what can they learn from their advertising counterparts? The answer may come down to two words: measurement and accountability. The Osgood study found that while company's advertising programs are consistently measured, most other communications efforts are not. Walsh says that as PR continues to grope around for a universal ROI metric, it is important to remember that much of the advertising world still continues to measure itself on a comparative basis - not an ROI basis. "Ad agencies mostly use comparative measure [comparing one campaign to previous efforts]," says Walsh. "Usually it's just really an effort to help you get better." Yet beyond even conducting measurement of individual programs, the study also found that marketing departments are far more likely to conduct formal annual reviews of their ad agency relationships than other communications functions - like PR - are to evaluate their outside firms. In its "Best Practices" advice to clients, Osgood says that formal annual evaluations of all agency relationships are a must. Walsh says that these reviews are not just in the client's interest, but also in the agency's interest. He adds that this is probably something all agencies should request of their clients - even if they have to initiate the process themselves. At the very least, it will help keep the lines of communication between agency and client open. It may also help put PR firms one step closer to assuming the title of partner. Integrated comms comparison A survey of integrated communications at large corporations by consulting firm Osgood O'Donnell Walsh found that:
  • Advertising is measured, but other comms programs aren't. Measurement of comms testing, is far more prevalent in marketing comms than in other functions
  • Ad agencies are partners, while PR firms are generally tactical support
  • Ad-agency performance is formally evaluated each year in most cases. Marketing departments are far more likely to conduct formal evaluations of their agencies - usually on a yearly basis - than are other comms functions
  • The study's eight participant companies are: DaimlerChrysler, Gillette, Honeywell, Intuit, Johnson & Johnson, Merrill Lynch, PepsiCo, and Union Pacific

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