REGIONAL FOCUS: PITTSBURGH - Sturdier stuff than steel. No longerjust a steel town, Pittsburgh's new business diversity has opened freshstreams of growth for local PR firms

Acres of smokestacks jutting out from miles of steel mills dominate the landscape where the Allegheny and Monongahela Rivers come together to form the Ohio. At least that's the mental picture most people will paint when you say "Pittsburgh."

Acres of smokestacks jutting out from miles of steel mills dominate the landscape where the Allegheny and Monongahela Rivers come together to form the Ohio. At least that's the mental picture most people will paint when you say "Pittsburgh."

The problem with that, say Pittsburgh PR people, is that the image of the city as a metropolis totally dependent on steel is wrong. The steel industry no longer dominates the business landscape (see "A city in transition

below).

"Outside the region, there is the perception of the same old Pittsburgh,

says Jeffrey Cohen, president of Denmark Public Relations. "But Pittsburgh is not a steel town anymore. The economic force is small and mid-size businesses."

After decades of painful economic adjustments as the importance of steel declined in the local economy, Pittsburgh now has a diversified economic base that includes service industries, retailing, and manufacturing. The combination of the engineering know-how of local Carnegie Mellon University, along with the medical expertise from the University of Pittsburgh, has also given rise to a growing biotech sector. And the city's manufacturing roots have spurred growth in applied technology businesses that have weathered the tech wreck better than many dot-coms did.

Smaller shops stay the course

What all this has meant for Pittsburgh PR is economic cycles much less prone to wild swings than in the past.

While the country boomed in the 1990s, Pittsburgh saw modest growth.

But when the US economy tanked in 2001, Pittsburgh and its PR sector experienced a somewhat milder downturn.

True, the largest firm in the marketplace, Ketchum, saw layoffs and a drop in business. But local agencies that rank below Ketchum on the PR totem pole say they either kept revenues steady last year or saw only modest declines. Some even had gains in 2001. Today, several report that business seems to be picking up.

"In December, we had more new business activity then we did most of the year,

says Laura Gongos, MD of Burson-Marsteller's Pittsburgh office.

On the corporate front, Heinz has developed a solid reputation for effectively using PR to roll out new products. The company that brought the world green ketchup and multi-colored french fries has no intentions of stopping its new product blitz either. That should mean more PR work for a variety of agencies. Heinz has worked with Ketchum, Jack Horner Communications and Edelman, as well as Hill & Knowlton overseas. Says Patty Tascarella, a reporter who covers PR for the Pittsburgh Business Times: "Heinz does a lot with PR, and they keep a lot of it local."

What Heinz is looking for from its PR agencies is "people who so well understand the media that they know how to get impressions,

says Ted Smith, SVP corporate and government affairs at Heinz. Adds director of corporate communications Debbie Foster: "We look for people who are highly creative, highly motivated, and very quick to respond to change. We want great ideas, great service, and great relationships with the media."

Financial powerhouse PNC Financial Services Group, another mainstay of the local business community, used PR last year to reemphasize its basic banking services. Community involvement efforts included events at branches and local sponsorships, says Jeep Bryant, SVP and director of corporate communications. PR sought to "raise awareness of PNCs long tradition of community service,

and also to touch on such offerings as no-fee checking. PNC saw a 32% increase in new checking accounts last year as a result, he says. The financial service company works with PR agencies on a project basis and has 12 people in its corporate PR operation, with another 13 scattered among its business units.

Life at the top firms

Ketchum, a firm founded in Pittsburgh, is still the 800-pound gorilla on the local PR scene. But being the biggest likely hurt the agency in Pittsburgh last year. Larger clients were either cutting PR spending or shifting work to smaller agencies that charged less, according to local PR people.

Jerry Thompson, Pittsburgh MD for Ketchum, says revenues for last year may have fallen to the $8.5 million-$9 million range from $9.5 million the prior year. Staff in Ketchum's Pittsburgh operation was down by 15-20 people, to about 50. "Last year was a challenge for us,

Thompson admits.

But he adds that corporate and branding work seem to be picking up to the point where he may be hiring one or two new staffers soon.

While smaller agencies say the number of major corporate clients a firm the size of Ketchum needs has dropped in the market, Thompson contends he can still find new business. "People in this market who hire Ketchum are looking for a big-agency platform,

he acknowledges. "It's true that we have fewer corporate headquarters than we once had here, but I think there's still a lot of significant and high-quality opportunities in Pittsburgh."

Burson-Marsteller, the other multinational PR firm with a Pittsburgh beachhead, had a flat year in 2001, but expects revenues to rise 10%-15% this year, says Gongos. "Most of what we're seeing (in new business) is coming from healthcare and energy,

she says.

Hill & Knowlton maintains a local presence with its Business Events operation that handles seminars and other events. It saw business pick up last year as companies put more emphasis on employee-related teleconferences, says Dale Stetzer, who heads up the office.

Magnet's Pittsburgh office saw revenues of about $2 million last year, roughly the same as in 2000, says Katie McSorley, EVP. "The first six months of the year were very tough for us, but our business has picked up significantly in the second half of the year,

she says. The office picked up new business from PPG Industries last year, and has started this year winning local business from Filene's Basement and from a subsidiary of USX. "I think people are feeling optimistic that there are opportunities out there,

McSorley says.

Marc Public Relations, which bought into the Pittsburgh market in 2000, saw its local business climb 29% last year thanks to new clients such as Equitable Resources, a gas utility company, Checkers hamburgers, and other wins in healthcare and technology, says Jim Nellis EVP. Marc often wins PR business through joint pitches with its advertising division.

Horner's president Jack Horner, says his business was up last year and he's expecting more gains this year. January was the most active month he's had for new business in the 10-year history of his firm. Work is coming from three main sources, he says: larger corporate accounts looking for lower rates than big PR shops charge; companies cutting internal staff and turning to agency help instead; and clients who have cut ad spending and are increasing PR usage.

Skutski & Oltmanns had a flat year in 2001 at around $1.6 million in revenues. "We weren't setting any land speed records, but at least the numbers were all black,

says Bob Oltmanns, president. He cut staff from 20 to 18 in 2001.

Desbrow & Associates saw its PR revenue rise 5% last year as it snagged new work from nonprofits, healthcare, banking, retailing, and technology, says president Wayne Desbrow. Mary Ann Miller, EVP, sees business continuing to pick up this year. "We're seeing a lot of proposals strictly for PR. People are starting to plan for the second half of the year,

she says.

That's good news for Pittsburgh's PR business. While there has been some pain in the local market, the worst seems to be over.

A CITY IN TRANSITION

Manufacturing was once the life-blood of Pittsburgh, but the local economy has changed markedly in the past 20 years, says Richard Moody, VP and regional economist with PNC Financial Services Group.

Manufacturing ranks only third in Pittsburgh today, in terms of employment, behind service industries and the retail trade. "We're becoming a more knowledge-based economy, as opposed to manufacturing," he says.

Local educational powerhouses Carnegie Mellon University and the University of Pittsburgh's medical center can be thanked for the changing business scene. "The two universities are significant magnets for R&D in hi-tech and biotech,

Moody says.

The lack of a dominant industry meant Pittsburgh didn't see as robust an economic expansion in recent years as did other parts of the US, but it's also meant a softer landing from the recession, Moody contends.

Pittsburgh's unemployment rate averaged only 4.4% last year, although it did rise to 4.8% at year's end, and 5.1% in January, below the national rate of 5.6% in January and 5.5% in February. Total employment in the area actually increased 0.6% last year, and is up 1.6% during the past four years. "We think we're going to have another modest year of job growth,

he adds.

Major employers in Pittsburgh include Heinz, Alcoa, USX, PNC, US Air, the University of Pittsburgh healthcare system, and PPG Industries, which develops glass products and glass coatings.

The city of 334,000 inhabitants is also undergoing a civic revitalization with the arrival of new baseball and football stadiums, along with a new convention center. Pennsylvania is considering funding a biotech greenhouse in Pittsburgh to develop new biotech applications and businesses, Moody says.

Maybe it's time the city works on its image. "This is a city that's been sold short,

says Jim Nellis, EVP with Marc Public Relations. "It's a lot better than it was 20 years ago."

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