REGIONAL FOCUS: A leaner, meaner Midwest

Corporations and agencies in the Midwest have become used to working smarter and doing more with less

Corporations and agencies in the Midwest have become used to working smarter and doing more with less

Elizabeth Saunders, chairman of Chicago-based Ashton Partners, says her IR firm is having a good year, with projected revenues of $4 million - up 30% on last year's total. Yet despite the good news, Saunders admits, "I still wake up every morning with a knot in my stomach." Welcome to the Midwest public relations business circa 2002, a year marked by few major RFPs, fierce competition for even small accounts, fee-cutting, and increased client calls for measurable results from every PR dollar spent. "It's definitely not business as usual," says Michael Layne, partner at Michigan-based Marx Layne. "We've had to work harder to maintain the same level of business. Two years ago, there was no fear factor in this business. Now, you need to be more aggressive in getting out there and getting business, and you'd better be exceeding your clients' expectations." Similarly, corporate PR departments across the region are finding ways to do more while spending less. General Motors, the largest private employer in Indiana and Michigan, is in the midst of a long-term cost-cutting program that has meant spending cuts of 5%-10%, says Steve Harris, VP of communications. So while the automaker is having a relatively good year given the recession, PR resources are being redeployed, and Harris is trying to support a slew of new model introductions with a leaner PR budget. He's not alone. Exelon has cut $200 million from its overall costs this year. That's meant a lean PR operation and a focus on results. "It's get-back-to-reality-based communications now," says Don Kirchoffner, VP of corporate communications with the Chicago-based electric utility. Jeff Lacina, PR manager with Garst Seed in Iowa, hasn't had an increase in his PR budget for four years, yet he's about to support a major new branding effort this fall. He's hired a Des Moines, IA PR shop to help, finding the money from elsewhere in his budget. The number-three seller of seed in the country, "our whole goal is to let people know we're here and we're committed to the market," Lacina says. "We have to work smarter and try to find unique avenues to get our message out." Ron Culp, SVP of PR and government affairs with retailing giant Sears Roebuck, saw his budget shrink 4% this year. In the past two years, he's trimmed the number of PR projects his staff handles from 122 to 38. "We're far more focused. There are far clearer business objectives behind everything we're doing," he says. "Even with a 4% budget cut, we haven't noticed any slowdown in what we're doing in PR." Culp also has been hiring agencies for several large projects - such as the introduction of a new store brand called Covington - that he must tackle this fall. Spending boosts provide signs of life Not all the major employers in the six-state region that stretches from Michigan to Minnesota (and includes Indiana, Illinois, Iowa, and Wisconsin) have been cutting PR expenditures. At food titan General Mills, fresh from absorbing Pillsbury, "We're using more PR than we ever have," says Kim Olson, director of brand PR. In its meal division, PR use a year ago was minimal. Today, General Mills has PR efforts underway behind every brand in the group, including Green Giant and Hamburger Helper. In fact, Olson's internal PR staff has grown from seven people last year to 14 this year as a result of the takeover of Pillsbury and four new hires. General Mills is likely to further increase PR activity in the coming year, as it decides which Pillsbury brands to push hardest. "We're taking the summer to figure out what PR goes to which Pillsbury brand. It's a time of learning more about those brands," Olson says. Anticipating a slew of new Pillsbury work, "every agency I know is watching General Mills very closely," says Paul Maccabee, president of The Maccabee Group in Minneapolis. General Mills isn't the exception to the rule. The food and consumer-goods industries, mainstays of the Midwest economy, have continued to use PR to support new product introductions, as well as rev up demand for existing products. "Our clients are not backing off their plans to put out products consumers want," says Joel Curran, SVP with Chicago's CKPR. But as they roll out new offerings, Curran says, clients are saying, "I've got a limited amount of money - I've got to make things happen." "Clients are looking for high-impact, results-oriented programs," agrees Doug Dome, whose Chicago-based Dome Communications expects to double its revenues this year thanks to strength in consumer goods and other areas. The increasing client focus on results has made measurement vitally important for agencies. "I think clients in general are holding firms more accountable, and they're looking for a lot more than gross impressions," says Glenn Karwoski, SVP with Karwoski & Courage of Minneapolis. For example, one of the firm's retail clients is looking at store traffic, and producing weekly reports correlating store traffic to local PR efforts. "The CEO says as long as the PR keeps working, you keep working," says Karwoski. Big agencies struggling The region has seen few major RFPs this year, and that's made it tough on major agencies. They've responded by trying to expand business with current clients and reaching across more states for business. Hill & Knowlton's Chicago office is searching for new business as far off as Ohio, and expects revenues this year to be roughly even with a tough 2001, says COO Gene Reineke. "I think steady is probably the right term," says Reineke, who has seen his Chicago staff drop from 90 people two years ago to 65 today. Golin/Harris International and Edelman are both expecting some growth for their Chicago offices this year, but neither is willing to put out a specific forecast. Each has seen business picking up as the year progressed. Fleishman-Hillard expects flat revenues in the Midwest. "It is very tough; we're fighting for everything we expect to be a respectable piece of business," says Dave Senay, regional president, Midwest with Fleishman. Weber Shandwick Worldwide's Minneapolis office expects this year's revenues to fall about 14% to $16.8 million. "There were no client losses, but we saw cutbacks," says Dave Mona, chairman of WSW in Minneapolis. "All of us wish there were more opportunities for new business." While the major agencies won't discuss fee cutting, smaller shops say they see their big brethren chopping prices every day. "We have been in a few competitive situations where I've been absolutely shocked at what prices the big firms are coming down to," says Ashton's Saunders. Firms asking $300-$400 an hour for specialized IR work a year ago are now settling for $225-$275, she contends. Big firms also are going after accounts smaller than those they sought in better times. Dome says he's seeing them at pitches for $250,000-a-year accounts. "They're clearly interested in those smaller pieces of business," he says. And with pressure on pricing, agencies have been cutting expenditures. Some will see higher profit margins on relatively flat business as a result. Detroit-based Lovio George, for example, expects $2.5 million in revenues this year, but has trimmed expenses by $20,000 a month to boost its gross profit margin to 30%-32% from 22% last year, says president Christina Lovio-George. "You really have to squeeze the sweat out of a stone," she says. Minneapolis-based Carmichael Lynch Spong has increased worker productivity 18% this year while keeping staff levels unchanged, notes managing partner Doug Spong. The agency has also grabbed some major new business from Maytag, and expects to end the year with revenues 15%-20% over last year's level. Agencies across the region are pleasantly surprised at the amount of business inquiries they've been getting as summer draws to a close. Detroit usually comes to a standstill in late June and July as the automakers shut down for the summer, but this year has been different, says John Bailey of Detroit-based Bailey & Associates. "We've had new business activity and calls that have been pretty significant," he says. "It's hard fought, but I believe there's business out there." Rose Ann Anschuetz, president and CEO with Publicis Dialog in Chicago, agrees. "Budgets are not being cut for next year," she says. "There's a good feeling that the worst is behind us." That's what every PR person - whether corporate or agency - in the region is hoping.

-------------------------- Strong base, slow recovery While Wall Street woes and the tech wreck filled business headlines this year, the Midwest economy - dominated by manufacturing, autos, and food - has been chugging along. Economic activity in the region is down and unemployment is up, but neither has seen the type of drastic change the region experienced in past recessions. As a result, the Midwest PR industry has felt business contract, but not disappear. "There's a great deal of talk that this area lagged the 'new economy,' but we now know a great deal of the new economy didn't exist, scoffs Morton Marcus, executive director of the Indiana Business Research Center at Indiana University. Old-line Midwest industries are tightening their belts in this recession, but not shutting down as they did in past recessions. While US automakers cut expenses to remain competitive, foreign car makers built facilities in Indiana, Illinois, and Ohio, bolstering the region. Solid housing activity fueled by low mortgage rates has also helped the region's economy, which includes household appliance makers, like Maytag in Iowa. "In all these states, we see some impact of the recession, says Marcus, "but the recession didn't have a large impact on unemployment." Unemployment rates in the area range from a low of 3.6% in Iowa to highs of 6.7% and 6.6% in Michigan and Illinois at a time the national rate hovers at 6%. One sector in the region that has been hammered is hi-tech and telecom manufacturing, notes William Strauss, senior economist at the Federal Reserve Bank of Chicago. Major Illinois employers such as Motorola and Lucent, both in the telecom sector, have suffered. While steady consumer spending on cars and houses has bolstered the region's fortunes, Strauss points out a downside: little pent-up consumer demand. As a result, he says, "We're not expecting the kind of bounce you would normally get out of an economic recovery. That could mean a slow recovery for the region's economy next year.

MIDWEST AGENCIES - BREAKDOWN BY STATES

ILLINOIS
Firm Name                           Revenue       Change Staff Location
                                   (dollars)
                                  2001       2000      %
Edelman Public
 Relations WW               41,915,604 47,810,102    -12   369 Chicago
Weber Shandwick Worldwide   37,849,123        N/A    N/A   175 Chicago
Golin/Harris International  23,525,549 29,397,445    -20   149 Chicago
Burson-Marsteller           17,949,000 23,296,000    -23    88 Chicago
Ketchum                     15,860,000  9,715,000     63    93 Chicago
MS&L                        12,505,720 10,503,637     19    74 Chicago
Fleishman-Hillard           10,104,000 13,000,000    -22    49 Chicago
Hill & Knowlton              9,701,000 10,225,000     -5    63 Chicago
Porter Novelli               6,210,000 10,129,000    -39    46 Chicago
Jasculca/Terman &
 Associates                  5,938,124  6,761,590    -12    48 Chicago
Public Communications        5,255,374  5,979,686    -12    42 Chicago
Publicis Dialog              4,509,554  4,671,584     -3    34 Chicago
Dome Communications          4,400,000  3,200,000     38    45 Chicago
PR21                         4,249,675  5,790,634    -27    33 Chicago
GCI Group/APCO Worldwide     4,074,352  5,221,156    -22    27 Chicago
CKPR                         3,750,000  4,160,000    -10    29 Chicago
Ogilvy Public Relations
 Worldwide                   3,592,106  5,591,000    -36    12 Chicago
Ruder Finn Group             3,489,000  3,364,000      4    28 Chicago
L.C. Williams & Associates   3,383,373  3,348,894      1    26 Chicago
Gibbs & Soell                3,330,900  3,266,400      2    24 Chicago
HLB Communications           3,232,051  3,746,227    -14    17 Chicago
Cushman/Amberg
 Communications              3,069,208  2,868,401      7    30 Chicago
Ashton Partners              3,014,559  2,047,052     47    23 Chicago
Incepta (Citigate)           1,834,614  1,148,144     60    15 Chicago
Donnellon Public Relations   1,450,260  1,876,582    -23     8 Chicago
The MWW Group                1,130,363  2,004,000    -44     6 Chicago
The Weiser Group               880,000  1,236,800    -29     9 Chicago
David Grossman & Associates    558,384        N/A    N/A     4 Chicago
Magnet Communications          283,000    287,000     -1     4 Chicago


INDIANA

Firm Name                     Revenue         Change Staff Location
                             (dollars)
                              2001       2000      %
Borshoff Johnson Matthews 3,748,987 3,012,912     24    25 Indianapolis
Public Relations Network   480,531        N/A    N/A     4 Indianapolis,
                                                           South Bend
Publicis Dialog            182,167    619,360    -71     2 Indianapolis


IOWA

Firm Name                     Revenue         Change Staff  Location
                             (dollars)
                              2001       2000      %
Morgan&Myers             1,833,909  1,359,581     35     6  Waterloo


MICHIGAN

Firm Name                     Revenue         Change Staff  Location
                             (dollars)
                              2001       2000      %
Campbell & Company      16,433,000        N/A    N/A   152  Dearborn
MS&L                     7,543,602  8,187,067     -8    55  Detroit
Marx Layne & Company     3,833,137  3,344,085     15    39  Farmington
                                                            Hills
John Bailey &
 Associates              2,402,000  2,074,514     16    30  Troy
Caponigro Public
 Relations               2,362,074  2,140,838     10    17  Detroit
Seyferth Spaulding       2,803,274  2,281,053     23    33  Detroit,
 Tennyson                                                   Grand Rapids
Airfoil Public
 Relations               1,526,587        N/A    N/A    11  Detroit
Burson-Marsteller        1,417,000  2,195,000    -35     6  Detroit
Lovio George             1,132,214    860,210     32    15  Detroit
Stratacomm               1,118,746    667,820     68     7  Detroit
Rossman Martin &
 Associates                978,242        N/A    N/A    10  Lansing
Bianchi Public Relations   914,078    845,475      8     9  Troy


MINNESOTA

Firm Name                     Revenue          Change Staff  Location
                             (dollars)
                               2001       2000      %
Weber Shandwick Worldwide 19,659,000       N/A    N/A   142  Minneapolis
Padilla Speer Beardsley   7,814,784  9,281,426    -16    72  Minneapolis
Fleishman-Hillard         6,482,000  6,450,000    0.5    36  Minneapolis
GCI Group/APCO Worldwide  6,131,516        N/A    N/A    43  Minneapolis
Carmichael Lynch Spong    5,686,450  6,412,600    -11    34  Minneapolis
Colle & McVoy             3,185,000  5,585,237    -43   193  Minneapolis
Goff & Howard             2,075,260  2,240,670     -7    13  St. Paul
Morgan&Myers              1,780,874  2,949,353    -40    15  Minneapolis
LaBreche Murray           1,670,000  1,850,000    -10    18  Minneapolis
Maccabee Group              947,900    745,032     27     9  Minneapolis
Clarity Coverdale Fury      590,000        N/A    N/A     5  Minneapolis


WISCONSIN

Firm Name                     Revenue           Change Staff  Location
                             (dollars)
                                2001       2000      %
Bader Rutter & Associates  4,827,195  4,925,709     -2    54  Milwaukee
CKPR                       3,580,000  3,570,000    0.3    27  Milwaukee
Morgan&Myers               4,744,802  4,721,746     19    21  Milwaukee,
                                                              Jefferson
Zeppos & Associates        1,713,824  1,713,323   0.03    19  Milwaukee

SOURCE: Council of PR Firms Auditing: No audit was required for
inclusion in the rankings. The CEO/CFO/principal was required to sign a
statement verifying the accuracy of the data and agreeing to possible
participation in a random audit. Disclaimer: While every effort has been
made to ensure the accuracy of these figures, PRWeek cannot accept
liability for, nor make financial guarantees based upon the information
in this chart.

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