A higher perspective

CEOs are increasingly relying on digital media tactics in their marketing plans, finds the 2008 PRWeek/Burson-Marsteller CEO Survey.

A higher perspective

When Sesame Street first debuted on PBS in 1969, it was one of only two programs geared toward preschool-age children; the other was Mister Rogers' Neighborhood. Fast forward nearly 40 years and more than 4,000 episodes, and today Sesame Street is just one of at least 47 programs on six competing networks, including Noggin, Disney Channel, Nickelodeon, and Nick Jr.

But for Sesame Workshop, the nonprofit company that produces Sesame Street, it isn't just about audience numbers; an equally important goal is fundraising. And like nearly every other company these days, to reach those influencers – in this case mothers of preschool-age children – much of the strategy involves digital tactics. This past fall, to coincide with the debut of Sesame Street's 40th season, Sesame Workshop launched a new Web site, just one part of a digital strategy that includes webcasting, YouTube videos, and mobile marketing.

“It gives us the opportunity to create a distribution platform that we never owned before,” says Gary Knell, CEO of Sesame Workshop. “In my opinion, it's a huge opportunity to selectively reach your audiences in much deeper ways by having multiple lines of distribution that you didn't have before.”

Knell isn't alone in his thinking. According to the 2008 PRWeek/Burson-Marsteller CEO Survey, 67% of CEOs plan to spend more on digital marketing in 2009 than they did in 2008. The survey, conducted by Millward Brown, polled 200 corporate CEOs, half of which use an external PR firm.

Mark Penn, CEO of Burson-Marsteller, says the results show a huge opportunity for PR firms.

“Obviously [CEOs have] moved a great deal of their advertising spend,” he says. “Now, I think that CEOs also have to realize that [they] have to move a lot of their public relations spend to online and to word of mouth, in ways that they haven't yet caught up with.”

Specifically, he says, PR firms have to show they are the ones most capable to handle digital communications tactics, given the industry's experience in managing conversations and influencing the influencers.

“What we have to show is the enormous cost benefits... of online public relations, and how you really can be exhausting those benefits before you lay in your advertising spend, rather than laying in the advertising spend and then using what's left over on public relations,” Penn says. “In general, word of mouth and other online activities are becoming so valuable and important to the companies that they're not investing to the full ROI of both online and traditional PR.”

Digital media's role
Tom Kunz, CEO of Century 21, a Burson client, says he expects the role of digital media in the company's marketing mix to increase significantly in the next year.

“This type of media gives us the ability to be proactive about what's going on, especially with a marketplace like we're dealing with right now,” he says. “One of the bigger issues really has to do with consumer confidence. “We've used all [digital] media to be able to go out and communicate with the average consumer.”

Digital media is particularly useful, he says, considering the different demographics the company is trying to reach – from Gen Xers and Millennials to baby boomers.

“As a company that works hand in glove with consumers, we have to be very aware of all the different outlets that we can use to get our message out and/or to respond to questions that potential consumers may have,” he says. “[So digital media] has played a very large part in our communications process.”

Though the largest increase in spending was reserved for digital marketing, 38% of respondents noted that they planned to spend much more on PR in 2009. For PR agencies, it offers an opportunity to seize some of the digital communications work, as PR pros have long argued that they are the most qualified marketers to operate in that space. Penn says over the past three years Burson has increased its digital work for its clients by 400%.

“We are finding more companies receptive to communicating a particular type of message that they should be doing in all types of media, including digital,” he says. “While their online agency is appropriate for the task that the agency was hired for, in the middle of a crisis or dealing with a corporate reputation campaign, it's important for the people who have been working on those messages to do the digital component. I think that we've seen companies be very responsive to that message.”

Social media lag
While CEOs surveyed recognize the value of digital marketing, they are not yet convinced of the power of newer social media campaigns using Twitter, Facebook, and YouTube. Though 23.5% of respondents participate in online social media “a few times a week” and 18.5% do so “daily or almost daily,” the survey indicates that they are not yet comfortable with using social media as a marketing tool.

Only 18% of CEOs surveyed have used social media to communicate with stakeholder groups; 30% will “definitely” or “probably” use social media to communicate with stakeholder groups in the next 12 months; and 44.5% identify “lack of relevance to target stakeholder groups” as the key barrier to their company's participation in social media. Yet, 71.5% believe online social media outreach can be effective for corporate communications, indicating perhaps that what is needed most is guidance and counsel, specifically, Penn says, by PR firms.

“What's interesting is the CEOs are using it personally and then not sure that it has an application,” he says. “The fact that so many are using it personally suggests that they're underrating its potential use and how social media has spread to some of the biggest executives personally.

“I think it's going to be our responsibility, as the PR agencies,” he adds, “to... say, ‘If CEOs are using social media, they have a larger role to play as part of the next frontier of where public relations is going.”

For those companies that are still on the precipice of using social media, the concern is crafting the appropriate message.

Scott Colabuono, president and CEO of Fantastic Sams Hair Salons, says the company has yet to embrace social media because of this reason. The company is a franchiser of more than 1,400 locations in the US, as well as a dozen in Canada.

“Social media is a grassroots angle. What we have to determine is the message that we want in our social media initiatives so that it reaches the different strata of customers that we have out there,” he says, noting that while women ages 18 to 54 are the company's primary market, it wants to make sure not to forget men or teens. “We have to make sure that we're putting together a message that appeals to a vast majority of our [customers].”

Even those companies that are heavily involved in digital marketing, however, recognize that there is still room for traditional tactics. Chip Perry, CEO of AutoTrader.com, notes that the site uses a combination of digital and traditional marketing tactics, estimating that it is a 50/50 split. Because of the company's unique position – it is used by dealers who advertise cars for sale and buyers looking for automobiles – it has a vantage point into the overall shift occurring in consumer behavior, which helps its marketing efforts.

“We see our customers shifting dramatically this year to much greater allocation into Internet advertising. Dealers, for instance, grew from 12% to 17% [of their ad dollars] online [from 106 to 107], and we wouldn't be surprised if it's 25% in '08,” he says. “Our customers are making the shift. As an Internet company, we're heavily invested in online media, but we also use offline media for brand building. There aren't many companies that have 50% of their ad dollars online. At 50%, we're putting our money where our mouth is, and we're encouraging our customers to do the same and respond to the... trend of how people consume media.”

Media shift
Yet, for some companies, the growth of digital media in the marketing mix has made traditional media sources less important than they once were. For example, Sesame Workshop's Knell says while traditional media still has its place, finding out where the company's “intermediary” to its intended audience of preschoolers – in most cases, mothers or other caretakers – are congregating online is more important.

“Going to so-called traditional media doesn't guarantee you the kind of exposure you might have had in the past,” he says. “We've got to make sure that we understand where ‘she' is hanging out in a digital world and digital context. That's something that has completely changed in the last five years. Not that it isn't important to get into a newspaper, but it's a lot less important today than it was five years ago.”

One of the things that makes digital media such an important target for companies like Sesame Workshop, which has built a huge community online, is the ability for that outreach to build up word-of-mouth buzz.

According to the survey, 60% of CEOs believe word of mouth has become more influential in terms of a company's business than three years ago. Others included trade media covering their industry (54%), blogs covering their industry (50%), and The Wall Street Journal/ Dow Jones (43.5%).

Similarly, 42% of respondents noted that word of mouth has the most impact on business these days, second only to The Wall Street Journal (51%). It was followed by trade media covering their industry (37.5%), blogs covering their industry (34%), CNN, (31.5%), and national evening news programs (22%).

For companies in industries that are dependent on referrals, word of mouth has always been an important – if not official – part of the marketing mix. But the struggling economy has reaffirmed the importance of word of mouth to CEOs.

Fantastic Sams' Colabuono notes that the beauty industry has always relied on word-of-mouth referrals. He stresses that encouraging word-of-mouth marketing in the current economy is integral to the business' ultimate success.

“We don't cut back in a tough environment,” he says. “In fact, we'll probably be more active in reaching out to our guests, both current and new, because guests are the lifeblood of a retail service company. I believe the mix will change a little bit away from traditional [advertising] toward PR because the return... [is greater].”

Century 21's Kunz echoes the importance of word of mouth in a company's marketing mix.

“[Word of mouth] has been the lifeblood of the real estate business almost since day one,” he says. “Most consumers, when they're ready to buy or sell... property, they have to ask neighbors, friends, or relatives [about who they've used].

“It's always been part of our business,” he adds. “Some of the things that we look at is... helping our agents understand that the best word of mouth you're going to get is from the quality of service you provide to consumers at the time when they're making the biggest financial decision of their life.”

Because Century 21 is a franchise-based business, not only is word of mouth beneficial for the brokers and agents, but it can also impact franchise sales. Kunz was recently at an international meeting of the company's top franchisees from 61 countries and participated in a panel discussion.

“One of them asked, ‘What do you view as our biggest and best franchise sales tool?' I know they were thinking I would say the brand, but I told them, ‘Validation,'” he says. “That's nothing more than word of mouth; it's one peer to another saying, ‘This company is good.'”

Jeff Cohen, CEO of Sylvan Learning, which has more than 1,100 franchise tutoring centers in North America, notes that this propensity toward word of mouth ultimately means an increase in PR.

“Our business is a referral-based business,” he says. “You may see us on TV, you may think about us when you hear that message. But you are going to rely on talking to someone, whether it is a teacher or someone you trust to... confirm that decision to seek educational assistance for your children. That naturally lends itself to more word-of-mouth type campaigns, more public relations activities.”

Part of Sylvan's plan to encourage word of mouth includes an increase in local community events. “When you think about Sylvan Learning Centers, you think about the one in your neighborhood,” Cohen says. “Our franchises are educational resources in their communities. So, community outreach, earned media, [and] public relations are critical for them.”

On March 3, Sylvan educators across the country joined teachers, students, and parents to encourage a love of reading in local communities by creating reading events as part of the National Education Association's 11th annual “Read Across America” campaign, which also fell on Dr. Seuss' 103rd birthday. The company also has a Sylvan Seminar Series, where local Sylvan chapters host free events for parents on a certain educational topic.

“Our business is one that is not recession proof, but it does have characteristics that suggest even in a downturn, the need is always there. We see that... families always put their kids first. If your child is struggling in school, that comes before a discretionary item,” he says. “The demand is there. The challenge for us is to adjust how we communicate with our customers so we meet that demand at a time where they're going to be more careful about disposable income.”

Research value
Certainly the economy is top of mind for every CEO today. And in such an environment, judicious use of marketing dollars becomes even more important, as does ROI. Though tools such as research and measurement have long been at marketers' disposal, the survey shows that they are still not being used enough in terms of PR. When asked how often their company invests in market research to formulate its PR strategy, the largest percentage (29%) responded “sometimes,” while only 10% responded “always,” and 16% responded “usually.” Quite alarmingly, 26% “never” invest in market research to formulate PR strategy, while 19% “rarely” do so.

“Uncertain times really require more research to strategize in terms of the response,” says Burson's Penn. “The kind of research that we believe in helps clients not just measure things, but really pretest the messages and strategies. That kind of research, evidence based, is critical to having an effective public relations program. More and more, companies are now getting used to applying research to their public relations issue the way they have become used to applying it to their marketing issues. But... it's still way behind the curve.”

Fantastic Sams' Colabuono says his company does invest in pre-campaign research, though it's sometimes tough to justify.

“Allocating ad dollars toward research is always, in a franchise business... a tough one,” he says. “The view has always been that if you research that means you're not putting an ad out there, even if you might learn something as a result. We press on the research, if we have a new initiative, to make sure that it's hitting well with the guests.”

He adds that the plethora of online free tools, such as Survey-Monkey, make research an easy, cost-effective thing to do.

Penn says that the resistance is likely because marketers simply aren't used to PR research.

“Often times the advertising budgets are so large compared to the public relations budget that it's hard to find the budget for the early research and strategic research,” he adds. “As corporations become bigger and the issues become global in scope, it's becoming easier to get that kind of research done. Clients that go through the process most often never want to go through a major PR issue again without having applied research as a companion to it.”

Century 21's Kunz says the company conducts a great deal of research to ensure that all of its marketing messages are consistent and effective.

“There's no sense having any of your marketing, advertising, or PR having different messaging,” he says. “It confuses the public, and more importantly, it confuses our franchisees and confuses our employees. We try as much as we possibly can to ensure that communications is consistent.”

According to the survey, 62.5% of CEOs will be more concerned with ROI from PR activities in 2009 than they were in 2008. It is surprising then, that 25.5% of CEOs surveyed “rarely” or “never” attempt to measure the success of their PR activities. The survey also shows that 55.5% of respondents “always” or “usually” attempt to measure the success of PR.

“PR falls along with everything else,” Kunz says. “ If we're going to spend the dollar, we need to have a return on investment.”

Penn says he has seen some clients invest more in research and measurement during the current economic turmoil.

“During difficult times, people will look to more strategic research,” he says. “In an odd way, when it gets to good times, the first thing they cut out is their measurement because they say they don't need it anymore.

“We've seen a number of people going through the current crisis now have put in additional research to understand how their customers are affected,” he adds. “Because research is most useful in these situations when you're trying to understand what customers and stakeholders are really thinking.”

CSR benefits
Though media coverage continues to be a standard measure of PR success, Kunz says he also values the internal rewards PR can bring.

“We also look at the amount of good will that we get from our franchisees,” he says, adding that the PR team will share media coverage with franchise owners. “It gives them pride and gives... something for them to talk to their agents about.”

Engendering good will among employees and other stakeholders has typically been the main argument for participating in CSR initiatives. According to the survey, 72% of respondents believe the most important reason to participate in CSR activities is because “it's the right thing to do”; other reasons included, “it can build good will in the community” (65%), “it can increase consumer loyalty” (49.5%), “it improves recruitment/retention in employees “(27%), and “it reduces risks to reputation” (21%).

Fantastic Sams' Colabuono says on a national level, the company has had a longtime relationship with Locks of Love. In addition, local franchise owners are encouraged to participate in community events.

“Especially when people know they have to spend money to go into a repetitive service, they want to know that the company they work with is going to give something back,” he says. “It burnishes the image. It's not the only thing we're about, but it does add a little bit of polish to what we do.”

Kunz cites the company's longtime support of the Easter Seals Association as something that is not only the right thing to do, but also something that the company sees value in from a business standpoint.

“I think it does drive business,” he says. “For myself, if I know that I'm dealing with a company that is doing something else in addition to whatever product or service they have... I'm more apt to want to refer them or use them, and I think that's the same way with Easter Seals and us. I know it is, because I've had customers tell us that they appreciate our efforts.”

Good will among customers and other stakeholders can be especially useful during a crisis, something that has become all-too common in the current financial market. While respondents differed vastly in their experience and preparedness for crises, overwhelmingly the survey showed that even in a crisis situation, digital rules. When asked which is the most effective means to communicate with consumers during a crisis, 70.5% cited the company Web site; 38.5% cited a word-of-mouth viral campaign; 37% chose customer service representatives; 31% cited the company blog; and 27% said television.

“The most important thing in the middle of a crisis is to get the facts, act very fast, and tell the truth,” says Century 21's Kunz, adding that executives and franchisees undergo crisis training. “You have to be very responsive to your customers and their customers.”

Obviously, in the current marketplace, companies in certain industries are more vulnerable to crises. Yet Penn says that having a plan set in place is essential for all companies.

“You have to have a crisis plan in effect so that you know who to call to change things and get out the information, and getting it online and do things quickly and efficiently,” he says.

“For those companies on the outside, right now [they] are preparing for potential downturn,” Penn adds. “Now is the time to think through the implications and not precipitously cut back on public relations when public relations may be your most effective media, both online and traditional, in communicating with customers throughout the unexpected. The unexpected is becoming the norm.”

The PRWeek CEO Survey was conducted by PRWeek and Millward Brown using the ERI panel. E-mail notification was sent to approximately 53,180 corporate professionals and a total of 200 CEOs (100 CEOs who have one or more employees at the company who are responsible and/or take on full responsibility of all PR activities and 100 CEOs that work with an external PR consultant or firm) completed the survey online between September 24 and September 29, 2008. The results are statistically tested at a confidence level of 90%. Results aren't weighted. Complete survey results can be purchased for $150 by contacting Beth.Krietsch@prweek.com.

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