ANALYSIS <b>The Agency Business</b>: Additional marketing services boost PR firms' all-around value

Whether through new departments or partnerships, PR firms are expanding their marketing offerings to meet both their own and their clients' economic goals.

Whether through new departments or partnerships, PR firms are expanding their marketing offerings to meet both their own and their clients' economic goals.

PR can be a more economical marketing tool than advertising or direct mail. But clients turning to PR may still need some level of other types of marketing to meet their goals, and they may have more money to spend on such services as the economy improves. So going against the tradition of ad agencies hiring a few PR people to serve their accounts, a number of predominantly PR firms are adding additional disciplines. Just as PR can add new revenue streams to an advertising operation, offering other disciplines gives PR firms the chance to cross-sell additional services to existing clients. "Looking at the corporate base in San Antonio, in order for us to continue growing economically and geographically, we had to expand our services," says Katie Harvey, founder and president of KGB Texas Public Relations-Advertising. Her firm formally added an advertising arm last year. For the Shelton Group, a tech marketing firm in Dallas, creative capabilities helped the agency reach into new markets during the tech slump. While PR and IR still focus on core technology clients, other service offerings have branched out into the beauty, real estate, and entertainment industries. "It makes sense for creative and marketing to venture outside of technology," says VP of PR Katie Olivier. "Tech was hit hard in the downturn. In order to continue to grow those departments, there were other markets that made more sense for them to [enter]." Commonly, PR firms begin offering added services less formally, using existing staff, freelancers, or agency partnerships before formally carving out and promoting new service offerings. For example, Porter Novelli didn't add much extra staff when it consolidated various services under the PN2 brand, explains Wendy Hagen, SVP and director of planning and integration. Launched late last year, PN2 offers advertising, interactive, creative, broadcast, research, integration, and account-planning services. KGB Texas did hire new ad specialists, however, most notably veteran San Antonio ad man Chuck Leifeste as director of advertising strategy. Harvey wanted someone to lead the new division as a profit center and build the department. Now seven of KGB Texas' 24 employees work on the ad side, and Harvey assigns separate PR and advertising AEs to integrated accounts. "You can't be an expert at everything," she says. "I'm not going to take somebody who is a fantastic writer and try to make her produce a video. You're going to get a mediocre video." PR firms often don't peddle advertising as a standalone service, preferring instead to use expanded capabilities to deepen relationships with existing clients and to increase billings. "I'm a firm believer in not being all things to all people," says Jon Bloom, CEO of McGrath/Power Public Relations in Santa Clara, CA. He feels offering too many services outside the PR realm waters down a firm's core expertise. McGrath/Power is actively marketing ShowGun, a just-launched new venture with Minneapolis' Padilla Speer Beardsley which offers event communications for trade shows. Larger agencies face the challenge of marketing new services internally, Hagen notes. She describes PN2 as "independent of practices." It makes its services available to Porter Novelli's various practices and its success depends in part on making sure employees in other parts of the agency know what PN2 has to offer. Marketing additions at agencies Three agencies that recently added other marketing disciplines:
  • KGB Texas Public Relations-Advertising, San Antonio When: 2003 Why: To expand services and compete in a market dominated by integrated agencies How: The firm hired an ad strategy director to operate the division as a separate profit center and added the word "Advertising" to its name. KGB Texas hasn't sought ad-only accounts, but has accepted a few such referrals
  • PN2, Washington, DC When: 2003 Why: To strengthen Porter Novelli's competitive position, particularly in planning and integration How: The new entity consolidated functions outside the traditional PR mold within a Washington office. It doesn't seek standalone clients, but concentrates on supporting existing PN accounts
  • ShowGun, Silicon Valley and Minneapolis When: June 2004 Why: Santa Clara, CA-based McGrath/Power PR and Minneapolis' Padilla Speer Beardsley worked together promoting trade shows for several years. Passing out two sets of business cards became unwieldy and the two firms recognized they could brand this specialty How: Each agency devoted one executive and one junior staff member to ShowGun. McGrath/Power coordinates billing. ShowGun operates as a profit center for both agencies and has already nabbed one client

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