Ad agencies long ago realized they could grab extra fee income by starting PR operations that would serve their ad customers. But in the Minneapolis/St. Paul market, several local ad agencies have taken such combinations one step further - creating PR operations that vigorously compete for non ad-client PR business.
Ad agencies long ago realized they could grab extra fee income by
starting PR operations that would serve their ad customers. But in the
Minneapolis/St. Paul market, several local ad agencies have taken such
combinations one step further - creating PR operations that vigorously
compete for non ad-client PR business.
The presence of such aggressive ad-owned PR shops has turned up the
competitive heat for the area’s stand-alone PR firms, forcing them to
improve their presentation skills and results-measurement techniques,
industry pros contend.
Add to that the presence of two major international PR powerhouses,
Shandwick and Fleishman-Hillard, and you get some idea of how
competitive the Twin Cities’ PR market has become. It’s a far cry from
the early 1980s, when major corporations did most of their PR in-house
and one or two local PR firms dominated the landscape.
Downsizing
Today, many area corporations have shrunk their in-house PR departments
and shifted project work to outside agencies, several of which were
started by refugees from the downsizing trend.
Still, despite the heightened competition, PR pros in Minneapolis - the
business capital of the Upper Midwest - agree that business is good.
Area firms in PRWeek’s Top 200 saw a combined 20% growth last year,
roughly in line with the overall Top 200’s growth rate of 24%. Not bad
for a market that’s lost several major corporate residents, such as
Norwest Bank, US Satellite Broadcasting and, most recently, Honeywell,
due to mergers.
Area PR firms have reacted to take-overs, and to their desire to grow
their businesses, by stepping outside their home base to find new
clients.
Many report major chunks of their income now come from beyond their
Midwest base.
While takeovers have impacted Minneapolis’s corporate landscape, the
area’s PR market is still seeing growth from local food and agricultural
companies, such as General Mills, Pillsbury and commodities giant
Cargill; retailers such as Dayton Hudson and Best Buy; and a growing
medical and med-tech community anchored by the University of Minnesota’s
hospital and the Minnesota-based Mayo Clinic. A strong economy has also
given rise to a host of start-ups.
The Minneapolis/St. Paul unemployment rate stands below 2%, one of the
lowest in the nation and a sure sign of a robust local economy.
’While the large corporate environment has shrunk a little bit, the
overall corporate environment has grown,’ notes Warren Vollmar,
president of the local PRSA chapter and communications manager with 3M
Industrial Markets, a division of 3M, another major area employer.
And - if nothing else - flamboyant governor Jesse Ventura has brought a
lot of attention to the state.
Sitting atop the Twin Cities PR landscape is the local Shandwick office,
which with more than dollars 16 million in PR fees last year accounted
for 18% of the agency’s total US income and is its largest office in the
world, according to Dave Mona, chairman of Shandwick Minneapolis. The
agency bought Mona’s locally based firm in 1988, gaining instant
credibility in the market. Not only was Mona’s firm well known, but he
is a local personality, doing a weekly sports radio show and providing
color commentary for University of Minnesota football games. One of his
former partners, Scott Meyer, is now CEO of Shandwick America.
Mona expects his 224-person office to do more than dollars 20 million in
PR business this year. Roughly half of his office’s billings come from
outside the Twin Cities area, a trend not uncommon for the area’s major
firms.
’There are no boundaries on who different offices go after,’ notes
Sandra Hart, president of The Hart Group, a local media relations
firm.
Fleishman is the other major international PR firm making a mark in
Minneapolis.
It too decided local talent was the way to go. It hired Ann Barkelew,
who in 1994 had retired from PR work with Dayton Hudson, to open its
Twin Cities office in 1996. ’We started with one huge client (Imation, a
3M technology spin-off) and four or five others,’ she recalls. The
Fleishman office ended that first year with roughly dollars 500,000 in
PR fees and was still relatively small at dollars 3.1 million in ’98,
but expects to do more than dollars 4 million in billings this year,
Barkelew says.
Barkelew has seen the changing shape of Minnesota’s PR marketplace.
’When I was at Dayton Hudson, almost every company had a fully staffed
PR department and there wasn’t a lot of outside work,’ she recalls.
Today, outsourcing is a given for much PR project work.
While the international firms have made their presence felt, several
strong local firms have also seen dramatic growth and remain among the
area’s largest. Tunheim Santrizos reported dollars 4.8 million in fees
last year and this year has demonstrated that it plans to make a major
push for national public affairs business by taking on as a consultant
Hubert ’Skip’ Humphrey, a former Minnesota attorney general and a leader
in state government battles with the tobacco industry. Tunheim Santrizos
also hired a number of Humphrey’s former staff from the AG’s office. ’It
has been important for us to think of ourselves as a firm with expertise
that has no regional bias,’ says president Kathy Tunheim. Roughly 50% of
her company’s PR fees come from outside the Twin Cities, although 75% of
its clients are local. She expects her fee income will reach dollars 5.5
million this year.
Vigorous climate
Another major PR firm, second-place Padilla Speer Beardsley, saw only a
9% jump in fees last year. But chairman John Beardsley notes that the
small rise came after the loss of its second-largest client, US
Satellite Broadcasting, due to its merger with DirecTV. Growth this year
should be in the 19% range, Beardsley predicts. ’The Twin Cities market
is a remarkably vigorous business climate,’ he says.
It’s also a vigorous market for ad agencies to start and build PR
operations. Doug Spong, now with Carmichael Lynch Spong, has done just
that for Carmichael after doing it for his previous employer Colle &
McVoy. Spong says Minneapolis ad agencies realized that they needed PR
functions. ’Those agencies look at how they can ignite and sustain brand
identity for their clients,’ he says, and PR is a part of that picture.
Spong joined Carmichael in 1990 after nine years with Colle & McVoy.
Last year, Carmichael Lynch was fourth among Minneapolis firms on the
PRWeek Top 200 but saw only 4% fee growth.
’Last year was the year to catch up on our work,’ Spong says. The
company had trouble finding new staff because of the tight local job
market, which led it to curtail new business activity. It has since
hired a staffing manager to better identify, attract and retain people.
The company ended 1998 by buying another local PR firm, McGrath Buckley
Consulting Group, a move that adds dollars 700,000 to its annual PR
fees, Spong says.
Surviving the merger wave
Spong’s firm has lived through the merger wave hitting corporate
Minneapolis and survived relatively unscathed. It had done work for
Norwest, a major bank that is now part of Wells Fargo. It continues to
work with the bank after the merger, doing in the six-figure range.
Even companies that aren’t being bought are trimming the number of firms
they work with, a national trend mentioned in the recent Harris/Impulse
survey. Beth LaBreche of LaBreche Murray notes her firm recently
survived a culling of outside agencies done by 3M.
Other local firms with ad connections include Miller Meester Public
Relations, with fees around dollars 3 million in its last fiscal year,
and Karwoski & Courage, owned by ad agency Martin/Williams, with PR fees
in the dollars 2.6 million range.
’We were integrated before people started using integration,’ jokes
Douglas Kline, Miller Meester VP, discussing the integrated marketing
approach his firm and others have taken.
Roughly 65% of Karwoski’s PR business is with clients not using its
advertising parent, says Glenn Karwoski, senior vice president. ’From a
marketing communications standpoint, this is a very sophisticated
market,’ he says.
’PR has evolved more and learned the language of marketing’ because of
the competition from ad-owned firms, he contends.
Mona admits such competition has caused Fleishman to ’sharpen our
proposals,’ adding some of the panache and flair usually reserved for ad
pitches. It’s also put more emphasis on measuring results, something ad
agencies have been doing longer and in more detail than many PR
firms.
But not everyone in the PR community thinks advertising and PR fit under
one roof. Robert Goff, of Goff & Howard, a St. Paul firm that does
public policy work in the state capital, had once worked for an ad
agency but bought out his operation about seven years ago. ’Ad agencies
generally are people who aren’t very comfortable when the message isn’t
carefully controlled,’ he contends. ’PR and advertising are two distinct
approaches to message development.’
While the wisdom of combining advertising and PR under one roof sparks
debate, one thing everyone in Minneapolis agrees on is the tightness of
the PR job market. New PR grads - fed to the business from the
University of St. Thomas, the University of Minnesota and the University
of Wisconsin’s nearby northern campuses - can command in the high
dollars 20,000 range. Account executives get in the dollars 40,000
range, with account supervisors earnings in the dollars 60,000 to
dollars 70,000 range. A recent survey done for PRSA by a team of
University of Minnesota researchers found average salaries ranging from
dollars 61,703 for agency PR people to dollars 41,463 for government and
nonprofit PR pros.
People with five to eight years experience are so hard to find that ’if
you have them, you have to lock them in,’ says Miller Meester’s
Kline.
Another point of agreement among local PR pros: Gov. Jesse Ventura is
garnering widespread media attention without using an army of PR
pros.
’Ventura just shreds the book when it comes to PR basics,’ says Tony
Harris, executive vice president with Nemer, Fieger & Associates, who
worked on PR for the inauguration. Gerri Drewry and his Drewry
Communications won a local PRSA public affairs award this January for
its 1998 PR work on the Ventura campaign. But since taking office, it’s
been largely Ventura carving out his own image.
And that’s fine with local pros. The more attention Ventura focuses on
Minnesota, the easier it is for them to explain where they come from
when pitching for new business outside their home state.
TWIN TOWERS: THE TOP SIX MINNEAPOLIS-ST. PAUL PR AGENCIES
Rank Company Income Change
98 97 1998 1997 %
1 1 Shandwick
Minneapolis 16,165,000 12,569,000 29
2 2 Padilla Speer
Beardsley* 7,334,781 6,702,759 9
3 3 Tuneheim
Santrizos* 4,800,000 4,100,000 17
4 4 Carmichael Lynch
Sponge* 3,424,000 3,300,000 4
5 5 Fleishman-Hillard 3,171,000 2,191,000 45
6 6 Goff & Howard* 2,014,100 1,786,534 13
Total 36,908,881 30,649,293 20
Twin Twin
Cities Cities
Rank Company US income % US income % Location
98 97 1998 1998 1997 1997
1 1 Shandwick
Minneapolis 91,485,000 18 80,292,000 16 Minneapolis
2 2 Padilla Speer
Beardsley* 7,334,781 100 6,702,759 100 Minneapolis
3 3 Tuneheim
Santrizos * 4,800,000 100 4,100,000 100 Bloomington
4 4 Carmichael Lynch
Sponge* 3,424,000 100 3,300,000 100 Minneapolis
5 5 Fleishman-Hillard 136,272,000 2 115,193,000 2 Minneapolis
6 6 Goff & Howard* 2,014,100 100 1,786,534 100 St. Paul
Total 245,329,881 15 211,374,293 15
