NEW YORK: Despite cautiously positive predictions from the industry, PR budgets plummeted by 39% last year, according to the PRWeek/Biz360 Corporate Survey 2003.
The average PR budget among the 1,273 corporations polled fell below $3 million, to $2,298,000. Moreover, PR budget as a percentage of total revenue also dropped from 0.14% last year to 0.08% this year.
Despite the cutbacks in budget, many communicators are also failing to use one of the few powerful weapons available: measurement. Barely half - 53% - of the executives polled had a measurement budget, and of those that did, only 59% have those metrics requested by the executive suite.
You Mon Tsang, CEO of Biz360, directly equated the budget drop with the underuse of measurement. "(Corporate communicators) can't really prove their effect on the organization. If you talk to a sales person, he can come right back and say, 'If you cut five heads out of my department, this is what's going to happen,' and show you figures and proof right there."
Of the measurement tools used, press clippings were by far the most popular - measured for both quality and quantity. Only 51% of respondents "always" or "sometimes" used the tangible end-result metric, sales, to account for success.
Predictably, the tech sector saw the hardest budget declines, with a 61% drop. But two areas that PR firms have held to be a mast to cling to during this rough economy, healthcare and consumer, also fell by 35% and 46%, respectively. The nonprofit sector was the only one to see a budget increase, with a 100% rise.
However, PR agencies can take some solace in the fact that there was a slight increase in the number of companies looking to hire outside firms this year - from 54% to 58%. With the decrease in budget, however, the figures highlight the trend that many firms are eschewing expensive, retainer-based AOR relationships in favor of hiring them on a project basis.
The survey highlights areas that PR firms should be investigating in order to follow the money in 2003. Public affairs and government relations are the hot growth areas, with 23% of communicators expecting to hike their budgets in those areas by more than 10% this year.
Overall, communicators are evenly split over whether budgets for the next year will grow, fall, or stay the same. However, the average increase predicted is only 10% - smaller than the predicted average decrease of 17%.
Click here to see the Corporate Survey in the Reports & Surveys section.