In this second year of its Regional Forums, PRWeek will focus on seven top markets: Los Angeles, New York, Chicago, the Bay Area, Washington, DC, Atlanta and Texas.
For each of these regions, leading PR professionals from a variety of agencies, corporations and nonprofits will participate in a roundtable discussion about the PR issues that affect them and their peers. Julia Hood, Elly Trickett and Andrew Gordon were in the Bay Area for the fourth of this year's PRWeek Regional Forums. For the roundtable as it appeared in PRWeek, click here.
Read the unabridged transcript below:
Julia Hood (PRWeek): Let's start with what is going in the economy, following the dot-com burst, and all the clich?s. What is going on in the Bay Area?
Paul Bergevin (Citigate Cunningham): Technology I think was the nose cone of the rocket leading the boom. And it fell the hardest during the downturn. It's starting to come back. But the technology industry as a whole is very skittish about spending still. The last three years there's been a strong sense of caution among corporate decision makers in regards to their coffers. The recovery is beginning to happen but it's spotty and uneven. But there are a lot of signs of renewed vitality in the technology sector, and technology will continue to be a vital part of the economy, and a big spender of PR services. It always has been. It gives me a lot of optimism of where things are hopefully going. But my read of the situation right now is it's uneven, a lot of businesses are proceeding with caution, and no one is getting too giddy.
Don Bartholomew (GCI Group): I think it was Mary Fran Johnson of Computerworld who said the IT recovery looks like the IT recession. No a lot is clear. I think the feeling [is] that this is a recovery and things will get better. There's not a lot of evidence that it is a heck of lot better. The biggest change in my view in technology is that the industry is not going to be like a rocket ship. It's going to be more like the automotive industry. It's getting to be a mature industry. It seems to me like it will be chugging along at five, six, seven percent growth rate.
Dave Samson (Chevron Texaco): There will be continued consolidation.
Kara Wilson (PeopleSoft): Not if we can help it.
Samson (ChevronTexaco): But to the point that the industry is maturing. If you look at the announcement Microsoft made yesterday, they are no longer operating as a growth company. I think the reason spending is coming back slowly is that I don't think corporations saw the value for the money they spent, particularly on enterprise software. So I think you're going to see consolidation, and the software industry is going to have to reestablish credibility with businesses and how it can really add value. And businesses are getting smarter in how they optimize what they paid a lot of money for.
Wilson (PeopleSoft): They're scratching their heads on why they not using what they bought. Usability, maintenance and implementation are all issues.
Bartholomew (GCI): Everybody is trying to prove the value of his or her investment. It's very, very difficult. I remember there was a content management firm and I was going through their product demo, and they said 'we can serve this up 20 milliseconds faster than other companies.' And if you start to think about what is the economic value of getting something 20 milliseconds faster, it's pretty trivial.
Hood (PRWeek): So does tech touch everything in this region? Or is there a good cross-section? What else do we have here?
Doug Michelman (Visa USA): For us, we don't look at issues regionally. Regionally is not important to us. We look at it nationally and globally. And what we know is that consumer spending has been driving the economy the last few years. And that really works to our sweet spot. We've had a couple of good years. But that doesn't mean our owners aren't looking for value. That doesn't mean there isn't pressure to show we're being cost-effective. Even though we've been growing our business we've also been trimming our workforce and looking for efficiencies. But business is still good.
Hood (PRWeek): And how does this affect the communications team?
Michelman (Visa): The communications team is still growing, and our communications resources have held steady. Even though the economy is good and consumers are still spending, that doesn't mean we don't face challenges. So our team has been OK. We've been lucky.
Alan Marks (Gap Inc): I think our business is very similar. It's very national and global in scope. It's consumer driven, not tied to the Bay Area economy. We had a downturn that was concurrent with the tech bust, but it wasn't caused by the tech bust. We had a very difficult couple of years in 2001 and 2002. We had a change in CEO, changes in management, some changes on the board of directors. But 2003 was a very strong year for us. A lot of it for us is that we grew exponentially. In the dot com boom we quickly went from $6 billion to $9 billion to $16 billion today. A lot of what we are doing now is going back and putting the right systems in place. We're focused on optimizing IT systems, and things of that nature to make sure we have the infrastructure in place to support a $16 billion company, because what we've been relying on was designed to support a $6 billion business. So that's been a lot of our focus, going back and bringing discipline back while looking at long-term growth. It's very much driven with the national economy and consumer spending. So we've had a good year.
Scott Allison (Allison & Partners): We had a very strong first five months of the year. We felt a bit of a dip in June. I've talked to several people who say there does seem to be a bit of chill in the air. It's such a sensitive economy that even a quarter point rate hike or anything would spook the economy.
Michelman (Visa): I can tell you we look at numbers on a weekly basis on consumer spending. There's no dip. There's good solid double digit spending growth, at least on our cards. And our cards represent 14 cents for every dollar spent in the United States.
Marks (Gap): And I think we've seen if you've got the right product in the store, people will pay regular price for it. Most of retail was coming out of a period of heavy markdown. There was a debate about whether retail had trained consumers to expect lower prices and not buy at the regular price. In 2003 we had better focus on our product design and better focus on our brand positioning.
Patrice Smith (Blue Shield of California): Health care has been doing well. Blue Shield had its best year in the company's history. We've seen lots of growth in different markets, and lots growth with individual plans.
Kevin Elliott (Hill & Knowlton): Health care was the standout area in our business. That's one area that never suffered.
Smith (Blue Shield): There has been lots of consistent growth.
Elliott (H&K): We saw the same thing across the spectrum. But if you wan to put the microscope to health care, there was a bit of a slow down on provider side.
Hood (PRWeek): What are some of the ways agencies diversified in this region?
Kazumi Mechling (Waggener Edstrom): In the last couple of years we've focused more on our bioscience group. It was in response to some degree to the tech downturn, and it has been very good for us. We'd like to see that expand. As for financial services, not so much out here as our New York office. We've expanded more into consumer work, and we acquired a consumer agency in New York. Even in the Bay Area, where traditionally at Waggener Edstrom being a technology agency we didn't think so much about consumer opportunities, out here we're looking at consumer electronics as a next step.
Sharon Sim-Krause (Panache): San Francisco, being where we are, we are susceptible to what is going on outside of where we are. We are part of the Pacific Rim. And a lot of companies use San Francisco as an entry point to the US. When the SARS outbreak hit, San Francisco felt it too. But with that going away, there's definitely been an uptick.
Hood (PRWeek): What impact has the economy had on BART?
Linton Johnson (Bay Area Rapid Transit): We're a trailing indicator. When you guys do well, things start picking up for us. If you look at the freeways and they're packed, we do well. But we're facing a facing $600 million deficit over next 10 years. We're getting growth in passengers right now. But it's slow, and it's not going to cover the exploding health care costs.
Hood (PRWeek): Is anyone hiring right now?
Smith (Blue Shield): In my department, we're integrated with public affairs, government affairs and media relations. And we're hiring.
Michelman (Visa): I hired a VP in December. We just hired another VP now, and I've got a director slot open.
Samson (ChevronTexaco): We're hiring at all levels. I just hired a couple of senior people for my team. And when you hire in this profession, you go to people you know and trust. Because the talent is mixed, and the stakes are getting higher. Expectations for our function are growing from our customers in and outside of our company. And the caliber has to match those expectations.
Elly Trickett (PRWeek): Are there any levels you're finding hard to fill?
Allison (Allison): The middle level.
Bartholomew (GCI): Industry-wide, or at least at our firm, health care is the rocket ship. We're probably growing 20 percent a year, and we're having a very, very hard time finding people at all levels
Samson (ChevronTexaco): You need people with a more sophisticated understanding. They have to understand the political environment, the regulatory environment. They have to understand marketing and product communications.
Smith (Blue Shield): It is very complicated. People work in various aspects of health care, but they don't the provider area expertise. Or they are very specialized, so it's very hard to crossover.
Wilson (PeopleSoft): I know a lot of strong communications professionals out there who can't find writers. We have great PR and media people, but we struggle on the writing.
Samson (ChevronTexaco): I have too many writers who don't understand strategic communications.
Hood (PRWeek): Have standards gotten higher?
Allison (Allison): There's such pressure to turn things around so much faster. You don't have the learning curve. You don't have time to bring people in and give them the training you used to. So you bring people in and they have to deliver quicker. You can't take a risk on people. You can't afford to take a risk.
Sim-Krause (Panache): I think part of the problem is that during the downturn a lot of good people left the industry. I know someone who just went into nursing.
Michelman (Visa): At the end of the day, the people on my team have to be able to sit around the table and hold their own. You have to be a business strategist and a communications expert. And if they can't do that then they can't survive.
Hood (PRWeek): On the corporate side, are you seeing good talent from your agencies?
Samson (ChevronTexaco): I think it's inconsistent. There's a lot of good senior talent. You know, having worked at an agency, the hardest part is meeting the needs of your clients, and mentoring and growing people. And in that equation people get slighted. Agencies have pretty good people at the top, but then there's a huge drop-off.
Marks (Gap): I would concur with that. We see good senior talent, and mixed results beneath that.
Bergevin (Cunningham): What happened in the late 1990s was a devaluation of talent. A lot of salaries were out of whack. People got promoted too fast. Standards eroded dramatically in the industry. There was a shakeout, and as we heard, people moved from the area. So there are fewer people around. And there has been a return to a higher level of standard. I think the pendulum is swinging back.
Hood (PRWeek): Do corporate teams have the talent?
Bergevin (Cunningham): I agree with [Samson's] comment, it's a mixed bag. At any company you have legacy hires. I worked at IBM for a bunch of years, and there were many great people there. And also a lot of people who don't have to push themselves really hard. And it's easier for them to hide in crevices at large corporations than it is at an agency.
Samson (ChevronTexaco): I agree 100 percent. At agencies your clients won't let you migrate to path of least resistance. They keep you on your toes.
Mechling (Wag Ed): I would agree with that. I would also agree with what [Michelman] and [Marks] were saying, that the complexity of what is require in communications today is up, coupled with that it's been difficult to find that mid-level person. And when you have a situation where you're meeting with executives from the client side, you can't afford to put a junior person in the room where the conversation could lead to something pretty strategic in nature. That affects the kind of counsel you're giving. But that also leads to the pricing structure of agencies, which make more margin off of more junior folks. And we struggle with that dilemma.
Elliott (H&K): It's hardest when people are moving to the upper strata of the middle. They're talented and smarter at that point. They're also trying to move up faster. That's the hard conversation, to tell them hang with us, that they will move up but it might not happen as fast as they'd like.
Samson (ChevronTexaco): One of the challenges for young people is when you're at an agency or in a corporate environment, you grow based on individual contributions. When you get to a manager level, it's no longer about the individual contribution. And that's a whole different kind of skill set.
Elliott (H&K): And mind set.
Bartholomew (GCI): There's one point I'd like to make about client-agency relationships. A lot of clients don't have the right individual on their team managing the work of the agency. Generally speaking it's one or two levels too low. And they don't have the sophistication. That would be my one request of clients, to get that person managing the relationship at the highest possible level.
Allison (Allison): With smaller organizations, the people are stretched so thin. They're handling communications, and other marketing, and you just don't get the time from them that you need.
Hood (PRWeek): What about training budgets?
Bergevin (Cunningham): It's a steady proportion of revenue.
Elliott (H&K): It's tied to being a proportion of revenue, training is there when it's there. People want it; they want to grow. But they also want to keep their jobs.
Wilson (PeopleSoft): I was going to say when you're in the middle of a hostile takeover with a slipping stock price, you offer up whatever you can to retain people. And while we haven't had complete retention, people felt we had a specific interest in them and what they were doing, even though we couldn't give more money, or we couldn't give stock.
Hood (PRWeek): Let's move on to measurement.
Wilson (PeopleSoft): I wanted to buy the measurement tool [of a particular company]. But their best-kept secret is all the coverage is online. It's like using Google. They don't have access to Factiva. There's no Reuters. There's no Dow Jones. We're getting skewed results. We can get our agency can do it. We're looking at scrapping the entire project.
Bartholomew (GCI): Much of the media list is not available through these services. So they're either going to have fix that and make more available online, or you have to be more comfortable with a sampling, that we're not going to capture every hit we got.
Wilson (PeopleSoft): But it's very costly and time consuming to use your agency to do this. So we having to decide if we're happy with just a sampling.
Bartholomew (GCI): Half of communications does not have media as its main goal. How do you put a value on crisis counseling when you're whispering in the CEOs ear? We're devaluing what we do by just focusing on the media component.
Samson (ChevronTexaco): Inside an organization, you don't work in isolation. You work with customers, partners. So you're driven by business goals, and it is about ROI. You are given so much capital every year, and you have to show how you are adding value, and the way to do that is to link to the business objects.
Wilson (PeopleSoft): The key is education. You need to have your agency help teach the executive management team that a cover does not mean success. You need to educate them that it's all about relationships. A lot of these guys don't understand PR. So you need to explain how it's about building relationships and tying into business goals.
Samson (ChevronTexaco): And we bypass the media a lot these days.
Bartholomew (GCI): PR is about building relationships, so you measure relationships in the context of business goals.
Samson (ChevronTexaco): In our industry, relationships are everything.
Sim-Krause (Panache): But that's still hard for clients to understand. There's a private university launching a new program, and they asked if we could guarantee a certain a certain number of students with PR.
Bartholomew (GCI): The "g" word.
Allison (Allison): We got a nice placement in the Los Angeles Times for a client. We got a call the next day from that client saying they didn't see impact in Los Angeles that day.
Mechling (Wag Ed): Consumer clients are still trying to measure directly to in-store sales.
Bergevin (Cunningham): It's always hard to prove direct causality with PR. Are you generating sales leads? How long does it take to generate those leads? It's a tough thing to establishing a direct causal relationship. But I hope we get to the point in our business where we are able to establish firmer causal links.
Bartholomew (GCI): You also have to take a look at the marketing mix issue. PR rarely works in a vacuum. If you have PR, advertising, direct marketing, outdoor advertising, web marketing, all at the same time, it's hard to isolate on a causal basis what PR has done.
Michelman (Visa): That's the kind of challenge we face, coming up with new ideas, or how do we get that story in the media. It's a challenge. And how you do it well is even harder to come by.
Elliott (H&K): The hard part is staying away from shtick, and doing something that really makes a difference. And what frustrates us is seeing competitors doing shtick. So the best ideas have to be reserved for the clients and prospects you can really capitalize on.
Hood (PRWeek): But the productizing and branding of products from agencies, maybe it's too much.
Samson (ChevronTexaco): But if [a measurement company] really doesn't meet your needs, then you want people to throw ideas around about how you can meet those needs. Thinking from a client's perspective, you want to get access to that small number of people at the top of the agency, who has a broad client list, and they are all wanting a piece of you.
Allison (Allison): Productizing is risky. No one wants a cookie cutter approach. They all want something unique.
Mechling (Wag Ed): They don't want a formula. You have to look at it from a process standpoint. How are you targeting this market segment, or the person who will purchase my product? That's why we have a think tank internally, and allow for our clients to tap into that talent and those resources. There's still the team who works on the business, but this team is another instigator of ideas and can bring fresh perspective.
Johnson (BART): Every now and then we work with agencies on projects. We usually need them for more of the grunt work. We just don't have the staff to do it. It's hard to find the bandwidth in my organization. Right now I'm trying to replace myself after being promoted. So there will be four of us once we hire someone. But my life is spent answering media calls all day long. I'm answering my pager 24/7. So to get something done and do a campaign is tough. We also have a marketing department, but they're strapped too.
Samson (Chevron Texaco): By productizing, that's to say everyone is the same.
Bergevin (Cunningham): I think I read in PRWeek that one agency had a homeland security practice. This is our industry's equivalent of ambulance chasing. It's fundamentally at odds with being a consulting business.
Bartholomew (GCI): A lot of companies want very good counsel and want flawless execution. But they're not always willing to pay for that.
Michelman (Visa): I'm willing to pay for excellent writing and strategic counsel. But if you don't deliver, you aren't going to work with us for very long. But I'm willing to pay for it.
Hood (PRWeek): What about integration of communications? That is the next generation we are seeing, and we're recognizing it much more clearly.
Marks (Gap): A lot of it is internal education. Before, a lot of our people dealt with the fashion press, and didn't pay attention to business press. Someone in Old Navy would only be focused on Old Navy, not Gap Inc. But now you have Women's Wear Daily asking about [financial information]. So we're seeing a lot of crossover. We formed a global communications council to bring everyone together. We've had a couple of media calls recently that came in to prove the point. They start as fashion stories and segue into business stories. So there has to be some awareness of what we are doing on the corporate level. As we are now more tightly integrated, we're looking for more strategic thinking from our agencies. We're looking for you to challenge us. Don't let us be insular, but also don't sell us something off the shelf.
Smith (Blue Shield): We have no agency of record. We have worked with agencies. But out staff has been growing for a year and a half. We are very integrated with marketing; Blue Shield is a not-for-profit health care company, so we always want to talk about the great things that we do and how we are able to do those great things.
Allison (Allison): It goes back to the talent. PR people have to understand the sales process, and the business. It's not just about promotions. The agency sector is rushing to catch up, but agencies aren't up to speed yet.
Mechling (Wag Ed): We've seen more integrated marketing experience in our last couple of senior hires. Sim-
Krause (Panache): We've had more requests to do more integrated work. Since budgets are smaller, we're hearing from clients that they want to work with just one agency.
Bartholomew (GCI): Across our practices, we've found that we can bring a much higher level of value if you can bring in different disciplines.
Samson (ChevronTexaco): We manage relationships with stakeholders. And you can be in a product driven company, but if your customers hate your sales practices, it doesn't matter how good your product is. The role of good communications people is to draw those linkages between different parts of the business, which can tend to be siloed. To [Marks'] point, his investors invest in Gap Inc, not Old Navy.
Michelman (Visa): Audiences are not siloed. You have to deliver a consistent set of messages. There have to be some themes we are trying to get across the board. To work in silos diminishes your reputation management efforts.
Hood (PRWeek): What about media in the Bay Area? What's the local business media like?
Bergevin (Cunningham): In general, we are looking nationally rather than locally. In 1999, the amount of news coverage for technology was enormous. And not surprisingly, ads from tech companies were front and center. A lot of those specialist publications went under, so the size of the news holes has gotten smaller. If you talk to your friends in the media, the overall size of the opportunity into which you are pitching is smaller. There's a more finite set of opportunities than there used to be. You have to be able to package the news in new and interesting ways. In the early days, it was "tell me about the application." Now it's about the business value. News today is much more likely to be about the value the company brings. The local media here is a mixed bag. There are very strong national outlets with very strong bureaus. We have some strong local papers that do a pretty good job, but some could do better.
Johnson (BART): I just left the media. I was at NBC 11 for four years. One thing people talk about here is the negativity. But this is one of the best markets if you are a true journalist, compared to Los Angeles or Miami. But if you look at how the market has changed, [local Fox affiliate] Channel Two would never lead with a crime story. Now they do. When profits dip, the media follows the saying "if it bleeds, it leads." They have new management and consultants and are going the way other media outlets are going. With news holes shrinking, stations are asking, "what do we have to do fill the black holes between the commercial breaks?" It's amazing what the folks will do. Ratings are based on how many five minutes segments they you can get you to watch, so it's all tease tease tease. Fortunately, I've been in the trenches, so I know what they are after. But one of the points I want to make is that stations have profit margins at 40%. If you dip below that, they start laying people off. Grocery stores are lucky if they make a 2% profit margin. So you feel it when you are reporter. You are under pressure to see what can you do to fill a minute. So if need to get a message out, depends on how sensational it is, or how slow of a news day it is.
Samson (ChevronTexaco): The point you raised is a good one. The local media is important. We have a large staff that reads that media. But the challenge of being a reporter today is that they are understaffed and overworked, so it's hard to develop an understanding of the companies they are assigned to cover. Today, who is the media? Anybody could be the media with a PDA and good digital camera. It's hard to define. But we have some good papers here. We have the San Jose Mercury News, the Oakland Tribune, and the Contra Costa Times. But San Francisco is a world-class city that doesn't have a world-class publication.
Smith (Blue Shield): We have good reporters at local papers that are well versed in health care, managed care, HMOs. We see good coverage. I tend to push the envelope, and go beyond media that might want to look at us just as a not-for-profit. I'm also not going to focus on media just in this state. There are lots of avenues to get information out there.
Sim-Krause (Panache): The Asian media here is very community minded. They are very open to you pitching stories. The mainstream media wants controversy, or the latest scoop. The Asian media is much more interested in stories that affect the community.
Mechling (Wag Ed): We've had success with publications covering companies here for the homeland in Japan or China
Bergevin (Cunningham): I'm curious, if anyone is seeing a trend for companies to do more of their PR work inhouse.
Michelman (Visa): No.
Marks (Gap): We've expanded our use of agencies.
Samson (ChevronTexaco): We believe we need agency support.
Michelman (Visa): But if you work with more than one agency, you need to make sure they aren't competitive at your expense. They need to act like teammates.
Samson (ChevronTexaco): An agency is only as good as its clients. And the ability to scale only works if you leverage it on behalf of a client.