THE AGENCY BUSINESS: PR firms can find hidden treasure in clients' advertising spend

By setting their sights on the money companies put aside for advertising, PR firms can boost their own budgets and show executives the importance of their services.

By setting their sights on the money companies put aside for advertising, PR firms can boost their own budgets and show executives the importance of their services.

For all the talk one hears about integrated marketing, it is easy to forget that the exact allocation of a client's marketing spend is not set in stone. While every firm should be ready to work alongside and even partner with its advertising brethren, PR firms should realize that a client's advertising budget can represent a potential treasure-trove of fees. That was the experience of Tony Katsulos, who founded his own PR firm, Dallas-based Trinity PR, after years of working as an executive at a top 10 firm. Katsulos knew that targeting a potential client's ad budgets could help give an early boost to his firm. That opportunity eventually revealed itself in the form of software company Emergisoft. Emergisoft, which makes software used in hospital emergency rooms, had been spending nearly all of its marketing spend on advertising. Yet the company's CEO was far from impressed with the results of the investment. "We had been spending boatloads of money with advertising agencies," said Ash Huzenlaub, CEO of Emergisoft. "That included thousands of dollars on mock-ups of ad campaigns - and the company never went forward with many of them. And the ones that did go forward had flopped." Katsulos had worked with Huzenlaub when the PR executive was working for another firm and Huzenlaub was heading another company. Shortly after Katsulos began his agency, he looked up Huzenlaub and found him running Emergisoft, so he inquired about the company's marketing efforts. "He had the ad agency doing a marginal amount of public relations work as part of their ad retainer," say Katsulos. "I agreed to put some PR power behind their marketing efforts for a nominal retainer - to start - until we could get some real traction and prove to his investors and board that the company needed to boost the PR budget." Katsulos quickly proved that his services delivered much more marketing muscle than the company's previous advertising efforts. He then saw that the company make some not so subtle changes in its ledger under the heading "marketing expenses." "Emergisoft technically had no PR budget when we began," Katsulos says. "And within two months of us coming on board, we were moved up to a retainer that annualized at over $100,000. And all those dollars were not incremental [increases in the overall marketing budget]. The company just transferred that money out of its ad budget to PR." Katsulos contends that his experience with Emergisoft is not something that would be difficult for other firms to replicate. He says that clients in burgeoning or niche markets that don't have much existing brand recognition are ripe targets for a PR firm. "What I tell these clients is, 'If no one knows what you are and what you do, advertising that fact gets you nowhere,'" says Katsulos. "What they need is a good media relations program, where they not only get the credibility of a third party endorsement, but it lets them market their business with more depth and introduces them to potential customers in a more complete way than advertising." Even giant PR firms that regularly deal with Fortune 500 clients and their giant commercial brands say that targeting a client's ad spend can be the key to a windfall for PR firms. "What percentage of a client's overall marketing budget does PR represent? It's probably around 2% in many cases," explains Richard Edelman, CEO of Edelman, the world's largest independent PR firm. "Now can you imagine if it was 4%?" Still there's little doubt that the massive marketing firm consolidation, which has combined advertising firms and PR firms under one parent company, has caused the industry to lose some potentially valuable soldiers in this fight. As many of the world's largest firms now reside alongside ad firms, many PR execs live in a world where a client's ad spend might be feeding their shareholders' bottom line. In many cases, the ad firms are feeding them at a higher rate than PR firms would. "It's hard to make a play for that [adverting] money," says one executive at a large firm. "Because the PR firm's margins are lower than the ad margins, it wouldn't make sense from the holding company's perspective." ----- Targeting ad dollars
  • Be willing to go head-to-head with an ad firm to demonstrate the value of PR, even if only for a nominal fee at first
  • Bring concrete examples of how PR success has pushed other clients to change their marketing spend
  • For smaller and start-up clients, it might make sense to begin a pitch by pointing out that advertising is expensive, and results are questionable for newer brands
  • Don't discount the power of advertising entirely. Keep your argument focused on the client's situation

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