EDITORIAL: Firms must adapt to new economic rules

New business is the lifeblood of every PR agency, and never more so

than now. As our feature shows (see "Courting the client," p. 17),

there's plenty of evidence that new business opportunities are out


That's the good news. But the market right now is bizarre, and not just

because PR agencies are suddenly having to try hard to win business

(that's not bizarre, that's normal).

Take Ogilvy PR. It's had a torrid year, with four rounds of layoffs in

less than six months, but it's won more new business (dollars 29

million) so far this year than it did in last year's boom, when it

picked up dollars 20 million in the same period. The problem, of course,

is that as fast as Ogilvy wins work, it can't plug the leaks from

clients that have either cut back PR programs, pulled the plug on PR, or

simply gone out of business.

Another strange phenomenon of this market is that, as Weber Shandwick

CEO Larry Weber notes, there are contracts out there ranging from

dollars 10 million to dollars 60 million - the sort of figures that

would have been unthinkable even three years ago. Nonetheless, PR

agencies must be concerned by the implications of reviews such as the

IBM one. With other corporate communications chiefs reportedly glancing

jealously at IBM's move, such client consolidation (mirroring what has

happened in the advertising world), will widen the gap still further

between the haves and have-nots.

But we have an even greater concern: are agency leaders placing too much

emphasis on business development and not enough on cost management and

client service? A survey by the Council of PR Firms (PRWeek, June 4)

showed that "new business efforts" were the No. 1 priority for 68% of

all respondents; while only for 22% was "cost reduction" the top

concern. Meanwhile, only 12% wanted to initially measure the

effectiveness of account work; and only 7% reported an interest in

starting by "over-servicing clients." It stands to reason that in a

market where the pot is shrinking, if 68% are focused primarily on

business development rather than cost control or client service, there

are going to be a lot of losers.

And there's another area in which agencies are not adapting. A survey by

Pierpont PR (see p. 5) showed that many agencies haven't adjusted their

policies to reflect the new economy. More than 70% are still offering

pay bonuses for recruiting new employees; while fewer than 25% receive

compensation for securing new business. The market's changed. It's time

to adapt or die.

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