Is it cost effective for large firms to apply for small clients' business?

Large agencies certainly can and should take on small clients, especially in the tech space, since today's unknown startup is tomorrow's Pinterest. Yet they should only do so if they can satisfy that client and give it enough attention.

Yes

Chaim Haas SVP, executive director, Kaplow's Knext business unit
Fifteen years of agency experience counseling startups, upstarts, and tech brands

For more than 15 years, I've worked with small and large tech brands. Increasingly, they both want to make an emotional connection with everyday people through mainstream consumer media.

In the early days of dotcom 1.0, startup executives wanted coverage in The Industry Standard or Business 2.0. Now startups and upstarts ask for NBC's Today. Why the change?

In the late '90s, companies were mainly interested in getting in front of Silicon Valley venture capitalists and tech early adopters to raise their valuations. In today's market, which has been sped up by the viral nature of the social Web and the rise of mobile devices, they need to be seen as "the next big thing." They have to reach the mainstream consumer early to propel their growth.

For this reason, many are seeking PR agencies at the outset that have existing relationships with consumer media and the expertise to help them reach specific consumers. How are agencies responding? Many look at startup failure rates and turn away. A better approach is to embrace the innovation, invest in entrepreneurs, and leverage the agency's consumer media relationships to help build these brands.

I'm not suggesting that you go with every startup. Use due diligence, and choose to work only with those small companies that complement your agency's expertise and subscribe to your communications approach. If done right, you get long-time clients whose budgets increase as their brand grows.

At Kaplow, we've experienced this repeatedly. We spent a decade turning eBay from an interesting tech story to part of Americans' everyday conversations. For seven years, we've built Skype into a beloved household brand used by 250 million consumers worldwide each month. Neither were the brands they are today when they first walked through our door.

Through smart nurturing and great consumer PR, we helped them become the brands they are now. So, do you want to help build the next big brand or do you want to wait around for big brands to come along with an RFP? We choose both. 


No

Emily Scherberth Founder, CEO, Symphony PR & Marketing
Has more than 16 years of experience in public relations and marketing

As someone who spent 12 years on the agency side before starting my own consulting business, I have experience on both sides of this issue. As a result, I firmly believe that it is not worthwhile or cost effective for large agencies to service small accounts.

Large agencies have higher overheads, which means they need to fill their roster with clients that will generate enough revenue to cover salaries and operating expenses. As a former group leader, I had a rule that each person on my team had to bill at least three times their salary in order to make a profit for the agency. Unfortunately, this sometimes ends up forcing teams to prioritize accounts that will help them meet their numbers, while less lucrative accounts receive less attention.

For the admirable agencies that have more tolerance for over-service, investments made in small accounts still tend to yield smaller returns over the long term. And once the administrative costs are factored in, there just isn't enough net profit in these smaller accounts to make them worthwhile.

In contrast, independent practitioners can over-service without having to worry about meeting an agency's projections.

As a consultant who works with early stage technology startups, I can be flexible with billing structures and do more with small budgets since I don't have employees or overhead.

Every penny goes straight into my pocket, meaning that I can make more money from fewer clients. This also allows me to limit my client base to two or three companies at a time and provide better service to each. At the same time, my clients benefit from the counsel of a senior strategist with 16 years of experience for the cost of someone with three to five years of experience at an agency. And as an entrepreneur myself, I "get" other entrepreneurs and the need to stretch a dollar as far as possible.

While large agencies are far more effective in servicing large brands with a global footprint, startups and smaller companies are best served by seasoned, independent PR practitioners who can afford to put their clients - not profits - first. 


PRWeek's View
Large agencies certainly can and should take on small clients, especially in the tech space, since today's unknown startup is tomorrow's Pinterest. Yet they should only do so if they can satisfy that client and give it enough attention.

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