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.