EDITORIAL: Downturn bites into PR budgets

Solid evidence that the economic downturn has had an impact on PR is revealed for the first time this week in the PRWeek/Dynamic Markets PR Industry Budget Report. The survey offers few positive signs for the year ahead but it does offer guidance on strategic directions to take.

It highlights major PR cuts across many sectors. But the downturn is not evenly spread. Most striking is the difference in the way large and small agencies have been affected. Small consultancies have remained largely unscathed by the slowdown, most likely because they are least exposed to global brands, many of which are based in the US where a recession is affecting confidence. Healthcare agencies, a sector that has proved recession-proof in the past, have also largely escaped the downturn to date.

But one positive aspect of the report for the whole industry is the value client companies appear to place upon PR. The long-established view that PR is a first choice option when making cuts in marketing spend has been turned on its head by the results.

In the process of rationalising investment in marketing on a discipline-by-discipline basis, PR is not necessarily the most likely to be cut.

When clients were asked which activities they would prefer to cut first when the marketing budget is under pressure, only five per cent of respondents chose PR.

WPP's annual results this week show an underlying decline in ad revenues - reflecting the survey's findings that advertising was selected as the first marketing discipline to be cut by 44 per cent of respondents.

This was followed by market research, literature and direct mail. In line with the findings of the survey, WPP predicts that ad revenue will fall by a further three per cent this year.

The survey shows that the perceived value of PR is holding its ground against other marketing disciplines, particularly in lobbying, public affairs and crisis management, where cuts were not due to economic reasons.

PR executives will draw much hope from this when the economy is clearly affecting so much of the industry in less positive ways.

Hope for a recovery this year is mixed, but in general, the smaller the agency, the higher the confidence. Half of the large agencies exposed to US-based clients foresee another six months of poor performance, and clients in the B2B sector (suffering poor investor confidence and slow financial performance) are very negative about a recovery before Q3.

But while PR budgets are naturally under pressure, the report also highlights an opportunity for agencies to spark the process of recovery themselves.

PR consultants need to spend more time selling more PR services to their clients - who say this is not being done - to improve their chances of driving a recovery.

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