Taking the pulse of PR agency business right now, it's hard to find
out what's going on. Just as hard as it is to work out the state of the
economy. With layoffs at most agencies (either publicly announced or
privately executed), it's clear that the PR business is feeling the
pinch. But how bad is it?
The Council of PR Firms found that at the end of March, agencies had
halved their 2001 growth predictions to 11%, which is still not at all
bad. But this average masks some wildly different figures, as PR agency
heads reveal tentative, and conflicting, predictions about their growth
prospects for the next six months.
Are things picking up?
After new business shriveled up almost completely at the start of the
year, some agency CEOs have reported an upturn. "We're seeing existing
clients starting to turn the budget faucet back on in quarter two," says
Fleishman-Hillard's chairman and CEO John Graham. But there's not too
much consensus. Many quietly predict a tough year. When Graham forecast
growth of 36% in PRWeek in April, he says he received plenty of
disbelieving phone calls.
There are two schools of thought on the value and volume of work that
has emerged in the last six months. Some agencies, principally the
largest shops, contend that new business is increasingly coming from
large consolidations, with businesses taking advantage of the economic
climate to rearrange their PR into one agency. The current IBM review of
its 40 agency roster reflects this trend.
"A number of Fortune 200 companies have been calling IBM to say 'We
should have done this ourselves, we need to do it too,'" says one agency
"Global PR is just happening now," adds Weber Shandwick Worldwide CEO
Larry Weber. "Finally, clients are saying I want you in six or seven
countries. The IBM review really is global, and the same is happening
with Coke and GM too. If you had told me two years ago that we'd be
seeing PR budgets from dollars 10-60 million, I would not have believed
Other agency chiefs contend that new business is becoming more focused
around project work and specialists for different PR disciplines, with
clients seeking to extricate themselves from agency of record
The Sun account, which was recently split four ways, is a perfect
Either way there are now more agencies chasing each piece of new
business, and that has come as a rude shock after last year's bounties.
"Last year everyone got fat and happy," observes Edelman president and
CEO Richard Edelman. "Now, it's so much more competitive. We have to
shine, we have to hustle."
Getting business - old and new
Shining and hustling has meant that agencies are using a variety of
tactics to crank the new biz machine back into action. Ketchum has put a
lot of effort into sprucing up the new business resource on its intranet
so that teams can scramble a wealth of information on a new client in
minutes and find out which employees have experience in relevant
Some agencies employ a new business or business development officer (see
sidebar). But it's a team effort. Ogilvy has gotten back to the
fundamentals in order to win back the business that has been lost by the
tech crash, mobilizing senior people onto pitches has been the priority,
with directors, practice heads and regional presidents being directed to
spend more time identifying and attracting new prospects. The plan
worked - Ogilvy's new business haul for the first quarter was a robust
dollars 29.9 million - a 41% increase from the dollars 21.9 million the
agency brought in over the same quarter the year before.
The fact that Ogilvy has done better than last year, when business was
so buoyant, at winning new business, serves to illustrate one of the
great ironies of the market. There is new business out there; but much
of the new business being brought in through the front door is
effectively replacing business walking out the back door.
Burson-Marsteller lost the Sun account, worth an estimated dollars 10
million, earlier this year; but the tech practice brought in dollars 7
million of new business in the first four months. (Overall, Burson
reports dollars 29 million in new work since the start of the year
across all practices).
Many agencies are also trying to decide whether to focus efforts on
"new'" new business or look at expanding projects with current clients.
Graham believes that existing clients must be the primary focus. "Our
golden rule has always been to not let the new business effort get in
the way of servicing current clients," says Graham. "We've found that is
the best plan, and it's coming to fruition as we're starting to see our
clients raise their PR spending." Fleishman won dollars 17.2 million of
new business in the first four months of this year (although this figure
includes wins from existing clients).
The fact is it's cheaper to cross-sell to current clients than to reel
in totally new ones, and you run the risk of losing your roster if you
take much more than an eye off them. "You've got to be sure that you're
buttressing your existing clients, or people will poach them," says
Although many agencies are suffering from hiring freezes, some have
invested in strategic hires that help them "buttress" clients while
potentially expanding the agency's offering to new clients. For
instance, Burson took on aviation expert Jim Cunningham to lead a new
aviation group. Designed to center on client American Airlines, the unit
has succeeded in winning projects from Qantas and Cathay Pacific.
Similarly, Edelman hired Greenpeace's head or PR Jonathan Wootlif in
December, allowing the agency to provide corporate social responsibility
work to existing clients Home Depot and Mastercard.
Ogilvy chairman and CEO Bob Seltzer believes it is a mistake to focus
too heavily on cross-selling to current clients. "We've got this great
client who really likes our work, but has just had his budget cut by
20%. No matter how good our service is, they're limited."
So even if focusing on current clients is top priority for some
agencies, that isn't going to keep the wolf from the door, and winning
new clients in this market is essential. There is no perfect mix, but
clearly a balance is helpful. Porter Novelli reports dollars 17.5
million of new business, with 45% from existing clients and 55% from new
ones. Meanwhile, Golin/Harris reports dollars 17.5 million of business,
with a slightly higher proportion of new business (dollars 10.2 million)
in the first four months.
The changing client landscape
Agencies are also confronting the fact that the client has become a very
different, and often difficult animal. Some business wins are "won"
because the client wanted to pay less. Clients are strapped with their
own pressures and expect agencies to prepare far more detailed pitches
with ever-shorter time to prepare. Many clients are also taking longer
to make up their minds after the pitch, having to go through evermore
layers of their own management to get budgets approved.
"There was a time when we would pitch 10 ideas to a prospective client,
knowing that we'd probably never be actually asked to execute them,"
says Cathy Lugbauer, COO at Weber Shandwick. "Most of the time we didn't
have enough proper market information to be able to produce something
"Today, the client is smarter about what they want, will give a tighter
brief and knows that we have access to the relevant information," she
adds. "They expect ideas that they can hit the ground running with. The
pitch is no longer just about chemistry between them and us."
There is a wealth of new business out there, however. Corporate work
tops the list of fertile PR ground. All agencies agree that this has
been a prime area of new business, albeit involving the vulture-like
strategy of helping companies in financial straits.
Agencies have been called on for their internal communications expertise
- Ogilvy CEO Bob Seltzer points to the particular need to motivate the
survivors after layoffs - and for their investor relations skills. And
while IPOs have dried up, leading to some problems, mergers and
acquisitions are still keeping corporate practices busy. Graham points
out that many companies are taking advantage of the current climate to
snap up bargains, while giving more work to agencies that can help
engineer changes in culture and identity.
Hill & Knowlton has been one of the hottest agencies for new business
this year, claiming dollars 30 million in new business during the first
quarter of 2001. Marconi and Compaq are two key client wins in recent
Marconi wants to expand its perception as principally a defense firm
into a more general electronics operation, while Compaq needs consumers
to understand that it is more about storage and hand-held devices than
the desktop computers it used to focus on.
New areas of growth
Healthcare PR has become the great white hope, and the recent shift in
Senate power brings initiatives such as the patient's bill of rights and
Medicare reimbursement for prescriptions back on the agenda.
Biotech has become the real engine of growth for many agencies, and has
provided a neat way of switching hi-tech skills. Medical devices and
technology is another booming area that has allowed a similar
transferral of agency resources.
Consumer remains a reasonably healthy area for new business
opportunities, with food and drink a particularly bright spot of
development. Porter Novelli picked up a global account for Mars in
January and followed it up over the next few months with wins from
Krispy Kreme and Wrigley contributing to the agency's new business haul
of dollars 17.5 million since January.
Ketchum attracted business from Hershey's and drinks company Roll
International, while WSW has managed to get extra work from its
Coca-Cola client by winning the brand's Harry Potter promotion work. WSW
(which has attracted dollars 30 million in new accounts since January)
also picked up an account last month to help the US dairy industry
manage public fears about mad cow disease and foot and mouth disease -
another lucrative issue for many agencies.
Non-profits don't yet appear to have been hit as hard as commercial
organizations by the recession. Many have brought in outside PR help,
typified by P-N's recent win of a seven figure account to promote the
American Cancer Society.
There is work out there, and, for the most part, agencies are finding
it. But the question remains whether some agencies, in their eagerness
to sustain their bottom and top line growth, are blundering into any
work they can bid low enough to get their hands on.
As Ogilvy's VP of marketing Derek Creevey observes: "The challenge is to
work out which business is really worth pursuing and to identify who we
want to be working with in five years and be strategic about chasing it.
We're not going to just pull down any low hanging fruit."
THE NEW BIZ CREW
JIM COX, senior MD and director of client development, Hill &
Began in May 2000 after spending 18 months running H&K's New York
corporate practice. Previously headed GCI's US corporate practice.
On H&K's new business effort: "I hold a weekly teleconference with all
practice heads. We go through a list of 50-75 new business prospects and
work out which we want to go for. Luckily we started this in the middle
of last year, when new business was good, to try to control our
DEREK CREEVEY, vice president, marketing, Ogilvy
At Ogilvy for two years. Previously held a similar role at Edelman for
On the state of new business: "I think the economy is more robust than
people think and there will be an upswing fairly soon. I see the signs
of it in the business we're currently chasing. But it will be a return
to normality, not the frenetic pace of last year."
ANDY EKLUND, worldwide creative director, Burson-Marsteller
Also responsible for training, and marshalling ideas across the
Added the new business role 18 months ago. Worked for the agency for six
On making the best of a tough market: "Even in the bad times there are
significant opportunities resulting from the business environment.
Companies need help to weather their stock performance, amongst other