Internet staffing costs drive down PR agency profits

PR firms have been sacrificing profits at a rapid rate as they rush to claim a stake in the PR e-conomy, according to a new survey by marketing services group Willott Kingston Smith and Associates.

PR firms have been sacrificing profits at a rapid rate as they rush

to claim a stake in the PR e-conomy, according to a new survey by

marketing services group Willott Kingston Smith and Associates.



The Marketing Monitor survey showed operating profits per head fell by

nine per cent across the industry - despite a gross income increase of

5.3 per cent over the last quarter.



In spite of increased productivity from internet-related activity,

profits fell short of expectations as firms expanded their on-line

divisions and chased the limited supply of staff qualified to undertake

e-commerce work.



’PR companies will have to change their remuneration packages for

e-commerce related staff or face wage cuts and massive job losses

somewhere down the line,’ said Amanda Merron, who co-ordinated the

research.



The survey, which examined the top 30 PR companies, showed the profit

decline had been fuelled by increased employment costs of over 2.5 per

cent per head and predicted that the boom will ’bottom out with more

losers than winners’ during an anticipated market correction.



’Pay will have to be performance-related, both on the part of the

individual’s productivity and of the company’s if positions are to be

safeguarded long-term,’ said Merron.



’Linking reward to performance is essential for reaching a balance,’ she

added.



Leader, p8.



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