THE AMERICAS: A rise in expectations

The US PR industry is feeling the pressure as clients expect more for less money. Julia Hood reports.

The US may have an international reputation for insularity, but its PR brands constantly strive for greater understanding of the markets in which they operate. This is particularly important now, as anti-American sentiment is increasingly problematic for companies following the war in Iraq.

'To deliver across cultures seamlessly relies on agencies understanding cultural differences, and involving local partners in business development,' explains Porter Novelli CEO Helen Ostrowski.

At the same time, the pressure on agencies to run efficient businesses globally - and demonstrate success to clients - has never been greater.

'While the pace of business consolidation has slowed, it has not stopped,' says Ketchum CEO Ray Kotcher. He points out that comms continues to grow as an increasingly powerful entity across borders, even if global business is relatively quiet.

Firms headquartered in the US generate the bulk of global revenues. Although the Sarbanes-OxleyAct has put a stop to global rankings this year, the big players remain the same as last year - Weber Shandwick, Burson-Marsteller, Hill & Knowlton and the rest of what used to be known as the Top 25 firms.

Smaller shops with international reach include The Hoffman Agency, Gibbs & Soell and The Jeffrey Group.

Domestically, the business environment in the US has been characterised by an increase in project work, declining budgets and fierce competition for accounts of all sizes - the combined result of continued economic malaise. Hewlett-Packard's global consolidation of its PR business, which took place after the company's merger with Compaq, was the most high-profile review of 2002.

The Dupont consolidation, out of which Ogilvy & Mather and its sister units, including Ogilvy PR, emerged victoriously, was noted mainly for the central role of procurement in the process. Pricing, domestically and internationally, continues to be a major issue.

Most consultancies agree they are under greater pressure to prove their ability to execute across markets. That means every level of account management has to be carefully monitored, from brainstorming to billings. 'On both sides of the house, for global clients it's very important to be able to demonstrate prowess,' says Weber Shandwick chief executive Harris Diamond.

Even the largest firms work with affiliates in some markets. 'Unless a company or a location gives us something that adds value to the client, we don't necessarily need wholly-owned offices in every location,' says Burson-Marsteller CEO Chris Komisarjevsky.

For smaller international players, putting programmes into operation and demonstrating tactical ability is crucial. 'The issues that may cause difficulty are the simple things, such as ensuring you have good spokespeople in all the markets,' says The Hoffman Agency CEO Lou Hoffman.

Finding global business

Despite the economic turmoil and the ongoing threat of terrorism, agency leaders maintain that globalisation continues and, with that, new business.

Fleishman-Hillard CEO John Graham explains why healthcare remains one of the most resilient practice areas: 'We used to think of healthcare as being a US-based practice only, but now we are working with healthcare clients all over the world.'

Edelman CEO Richard Edelman agrees, pointing to the growth in international interest in healthcare issues as a significant trend. For example, obesity is gradually becoming a global issue, and it is one Edelman is finding more clients requiring counsel to navigate. 'You're starting to see these complex issues playing out globally,' he says.

Healthcare specialist Chandler Chicco conducts two thirds of its business globally, working with clients such as Novartis and Bayer Diagnostics.

Gianfranco Chicco, one of the firm's principals, says while the US and Canada are most active in biotech, the UK, Ireland, Switzerland and Germany are also picking up in this area. The firm was one of 2002's success stories, with an 8.5 per cent increase in revenue.

The tech sector is showing signs of new life, according to many firms, although no one is expecting any kind of late-1990s-like boom. Tech specialist Brodeur Worldwide CEO Andy Carney claims several of the company's global accounts have been growing organically, such as IBM and Philips Electronics.

Carney adds that, while his firm has seen fewer tactical assignments, there has been more work in sales force communications, issues management and crisis comms within the sector.

Elsewhere, Graham points out that F-H is seeing more consumer pitch requests as marketing dollars begin to loosen up again, a view echoed by other consultancies.

Measurement and evaluation

Measurement has always been a major point of debate and differentiation for PR firms and service providers in the US and UK, yet there is evidence that evaluation is becoming more prevalent in global business too, according to Ostrowski. 'And it's also coming from regions that weren't asking about measurement before,' she adds.

Many agencies are therefore refining or creating programmes to prove their work is going to be measured accurately, and many clients now expect agencies to take on the financial burden of measurement tools. Hill & Knowlton, for example, recently established a business intelligence unit to help fulfill these needs.

One of the more contentious issues in PR, both in the US and internationally, is competitive pricing. While it is a practice no firm will actually admit to doing, Hoffman reports he has seen large PR firms slash their fees in the final days of a review, in order to secure the business.

However, from a day-to-day management perspective, international pricing and billing, along with account co-ordination, remain difficult, and the rules can depend on the region. 'It's a very complex undertaking to manage a global account,' says Kotcher.

'You run into situations where there might be some markets where you run the business on a more profitable basis than in other markets.'

Ensuring a client sees the benefits provided by the firms within each market, and not just overall, is essential. Chicco agrees: 'There is a lack of appreciation of the huge undertaking involved to manage a global programme.' He adds that many clients don't want to see a programme management fee in their budgets, although managing different affiliates and pricing structures across teams in a range of regions is an enormous task. But, he says, clients such as Novartis, who invest in the infrastructure, 'reap huge rewards in terms of a well-co-ordinated, effective campaign'.

Yet in an environment that is sceptical of the US's motives on the world stage, agencies operating on a global scale are conscious that employing locally, being sensitive to regional differences and having the right depth of experience for each market are essential attributes when working for global clients.

LATIN AMERICA A STRUGGLING REGION

Last year the Latin America story was dominated by Argentina's economic crisis, and a sense of instability across the region. Now, while there is some optimism that things are getting better, continuing monetary issues, coupled with a growing anti-American sentiment, means agencies remain cautious.

Ketchum Argentina CEO Gustavo Averbuj says the region's growing anti-American sensibility concerns his clients, most of whom are multinational companies. 'The issues and crisis work that used to be a separate practice area has gone into everyday life for most of our accounts,' he adds.

The region's economic problems remain a major issue. According to an Economist Intelligence Unit report this month, Latin American GDP fell by 0.7 per cent in 2002, the worst performance since the early 1980s. Still, the EIU is forecasting recovery this year and next.

A notable exception on the troubled continent is Chile. Burson-Marsteller Latin America president and CEO Santiago Hinojosa says Chile has been a strong market for the company for the last four years.

For Latin America specialist The Jeffrey Group president and CEO Jeffrey Sharlach, one positive aspect is the change in the media scene, where print and broadcast outlets are now crossing borders. Sharlach says many of the programmes the agency develops have become pan-regional as a result.

However, the region continues to struggle overall, an aspect that makes future planning more difficult. Weber Shandwick chairman Jack Leslie says: 'I think we're in sort of a holding pattern until we see an upturn in the economies.'

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