PR chiefs weigh in on market freefall

NEW YORK: The Dow Jones Industrial Average plummeted more than 500 points on Thursday, setting off recessionary red flags. How do PR CEOs view the economic uncertainty?

NEW YORK: The Dow Jones Industrial Average plummeted more than 500 points on Thursday, setting off recessionary red flags. It fell a further 200 points during Friday trading before eventually finishing up 61 points at the end of the day.

A drastic decline in the US market, coupled with lingering unemployment problems and the debt crisis in Europe, has reawakened fears of a double-dip recession. While the PR industry has largely been immune to economic troubles in the past thanks to the rise in social media and the need for corporate reputation counsel, the latest round of economic pressures may be a game-changer.

Here's what chief executives across the world of communications are saying about the macroeconomic uncertainty and its potential effects on the PR economy:

Fred Cook, president and CEO, GolinHarris:

“Hopefully the wider economic situation will not have a big impact on PR. But it is bigger than our industry and it is awfully hard to predict – there are bigger forces at work than just marketing and PR.”

“We are not seeing any signs of reductions in budgets from our clients. These are unpredictable times, but hopefully these giant macro issues will not filter down into marketing and corporate reputation work, which often operates a level below that.”

Richard Edelman, president and CEO, Edelman:

“Despite these difficult macroeconomic issues, I still believe PR will gain share of total spend over time. But if the pie is shrinking, growth will be slower. It is likely that clients will look at their overall spend and review retainers in Q3 and Q4 to see if they can do it cheaper – then it becomes all about market share.”

“There will be a continuing trend towards consolidation at the holding companies, as that's what happens at the networks when economic stresses come along.”

Kathy Bloomgarden, CEO, Ruder Finn:

“Companies need to step out and get ahead of the uncertainty in terms of management strategies, growth opportunities, and investments, so they can build the trust they need as this market goes up and down and as economic uncertainty causes people to question what their growth and profitability might look like.”

“We all know companies are being very slow to increase headcount and that most likely presents more opportunities for agencies because there is a need to do the work and people are a bit overstretched. If the economy continues to decline, some projects will get put on hold, but it's too early to say whether retainers will be reduced or budgets will be stopped.”

David Chamberlin, SVP and director of issues and crisis, MSLGroup:

“We don't know if we're in a double-dip recession. Nobody really knows because you find out after you're in it. That said, the first quarter and first-half GDP numbers were pretty flat and the economic situation and unemployment are very uncertain. I can't say it's leading to agency switches, but we may see smart companies that have a good deal of cash and are pretty settled in their financial outlook using this period to increase market share and potentially steal it from others.”

“If agencies try and gain more and more efficiency when the economy gets tough, it becomes harder for them to maintain their levels of service unless they're continually beating that drum to make sure it happens. They're going to have to stay vigilant if they end up going through periods of layoffs to make sure their service levels stay up.”

Liz Kaplow, president, Kaplow Communications:

“It's going to be important for companies to communicate to consumers what they stand for, and loyalty and differentiating will become even more crucial. All of that happens by communicating the brand's story, so that is an area that will be able to continue to move forward as brand reputation and brand stories become even more critical.”

“During this time, PR will really begin to rise to the occasion. We have good momentum now, but social media is more important than ever for companies during difficult economic times.”

Alice Chan, principal, Bird PR:

“Oftentimes, the immediacy of what is happening in the market is not impacting the startup market. It takes a little longer for the effects to be felt. There is no doubt companies may start to be even more conservative with their spend.”

“In general, I don't think anyone has gotten frivolous with their budgets in the last 18 months. They have never gotten back to the size of budgets they had in ‘07 and ‘08. Spend has remained conservative and thoughtful for the most part.”

Sabrina Horn, president and CEO, Horn Group:

“Dips or gains in the stock market don't make companies reduce or increase their PR spending. These days everyone is being cautious and conservative whether that be client or agency.”

“One should not overreact to such market conditions but instead follow a strategy of focusing on what is best for a client given its situation and delivering quality results.”

Susan Butenhoff, president and CEO, Access Communications:

“PR has been somewhat insulated because of the additional services we offer in times of economic change: organizational change and internal communications counsel for companies experiencing downturns; social media for a broader communications reach; M&A advice for the inevitable consolidation that takes place in the market when there is a slow recovering economy; and even IPO support for those brands, primarily in the social media and consumer tech space, that are defying the macroeconomic realities. These dynamics will continue for the foreseeable future.”

“Agencies will constantly be waiting for the other shoe to drop because clients will promise budgets and activities and then be slow to activate, or will fluctuate on timing and available funds. The impact to agencies is that they will continue to run staff lean given the unpredictability of the work and budgets.”

Dushka Zapata, EVP, Office Head San Francisco and Denver, Ogilvy Public Relations Worldwide:

“A drop in the Dow has more of an effect on people's behavior than it does on the PR industry. What it does is make people more cautious, more risk adverse. How it affects PR depends not only on the industry or discipline, but on each specific case. This is because people react differently to the news: some resort to shorter term planning, quarter by quarter; some industries are more effective than others at leveraging what PR can do for a company during a recession.”

“I do think that PR is a resilient industry, and that company needs – crisis work, reputation management, external communication as it relates to selling products – don't change in relation to how the Dow is doing.”

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