Agencies need to be mindful of new economic reality

This week, third-quarter earnings from several holding companies displayed the continued pressure and challenges facing the industry.

This week, third-quarter earnings from several holding companies displayed the continued pressure and challenges facing the industry. Omnicom's PR revenues were down 15% from the same period last year. Havas reported an overall 10% decrease in revenue, while Next Fifteen showed a boost in revenues, but a decline in profit.

Though these earnings provided better news than in previous quarters this year, it still serves as a reminder that economic recovery continues to be a slow going process. Agencies across the industry are quick to point out that companies are nowhere near ready to consider increasing budgets back to levels at which they once were. As a result, client budgets are likely to remain flat throughout 2010

More than ever, this marks a new reality for the PR industry, particularly in the agency world as firms aim to serve and keep their clients while keeping an eye on the bottom line.

Throughout the recession, some agencies have made choices to drastically reduce rates—up to 40% at times—in order to keep clients. Others have participated in RFPs where they are competing against more firms than ever, and price becomes the biggest differentiator when it should be about ideas and service. Complying with requests like this can be viewed as a temporary fix in an environment where winning new business has become crucial to survival.

The problem is that in this current economy, nothing is temporary because the actions that companies adopt during this time are likely to outlast any recovery that might occur in the future. Agencies need to be even more considerate of the moves they make now, as the repercussions will be long lasting. Keeping clients and winning new business should of course be a concern, but doing so in a manner that sets a precedent that is not sustainable can only hurt agencies in the long run.

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