From the editor-in-chief: Industry will be 'rebooted' with flexibility, loyalty and humanity

There is a definite sense, in the seventh week of this blog, that we are at least approaching the end of the beginning.

March was shocking, April was devastating, but the advent of May brings more talk of recovery.

While the death rate remains frighteningly high in the UK and many other western countries, the virus infection rate appears to be slowing. Government communication is now focused around the relaxation of lockdown, which at least switches the narrative to some sort of return to normal.

So business leaders, including PR bosses, are thinking hard about what this looks like, both in practical terms – when and how they re-open their offices – and in philosophical terms.

This is what I’ve found encouraging about this crisis from day one. Despite the enduring tragedy and fear, most people I’ve talked to remain optimistic, thoughtful, loyal and human. There is a growing sense that the crisis will have changed all of us going forward, and often in a positive way.

The founder-owner of one of the UK’s biggest and best-known consultancies tells me: “The mood is generally upbeat, but it’s hard to know what’s on the other side of this. It’s not going back to how it was in 2019. And it’s not going to be like it is now. I think it’s going to be a hybrid of both – and involve a complete reboot. Any industries that are clinging on to outdated business models have the opportunity to restart in a different direction.”

In the shorter term, however, the hard commercial truth is that most managers of businesses – both client-side and agency – are still coming to terms with just how big a hit they will have taken when the second quarter of 2020 concludes. Obviously this depends on what sector you operate in.

A report by the Advertising Association/WARC predicts that advertising spend in April will have slumped by 40-50 per cent. Indeed, the hit on any business heavily reliant on consumer brand promotion campaigns will have been close to this.

And, of course, in travel and leisure it has been far worse, as we were reminded yesterday when British Airways announced up to 12,000 job cuts.

The owner of a small- to medium-sized PR agency serving this sector admits a slump in revenues of “somewhere between 75 and 85 per cent in April”, but she says she hasn’t furloughed any staff so far, rather reduced hours and salaries. “I’m trusting clients who have paused their spend to resume when they can. I’m doing the right thing by my staff and believe clients will stay loyal to us.”

The CEO of a mid-sized public and corporate affairs shop agrees: “I’ve been really impressed by client flexibility. Only one of our many clients has sacked us; most have been really loyal and open.”

As noted here previously, bigger consultancies, and those with a decent proportion of corporate and public affairs work, are better insulated against this short-term hit, but even these predict a dip in revenues of between 15 per cent and 30 per cent in Q2 this year. And there is a growing sense that the rest of the year will remain difficult.

“There’s no V-shaped bounce from this,” says a leading specialist in public affairs. “Our full-year target is to recover our revenues to 15 per cent down. In public affairs terms we’re looking at a 2008/9-type scenario. There’s plenty of work getting clients back to working normally, dealing with new approaches to corporate tax and impending Brexit, but the world has just got smaller, economically. This is more the case than at any time since the Second World War.”

WPP CEO Mark Read, ultimately responsible for comms agencies such as BCW, Ogilvy and Hill + Knowlton, said yesterday he was “very cautious” about the pace of any recovery in the second half of 2020 because of the risk of a second spike in coronavirus cases in some parts of the world.

Talking to leading consultants over the past week, the management focus over the coming months will be on breaking even, preserving cash flow and, ultimately, jobs.

One large PR agency boss told me: “The message I’m getting and the one I’m giving to managers is ‘don’t lose money in Q2’ and push/hope for an H2 recovery.”

The real challenge facing agencies is that while most are reporting client loyalty thanks to “deep and trusting relationships” with their paymasters, winning new business is the real problem at the moment.

Another large agency CEO says: “Before this crisis we were forecasting significant new business growth in 2020 – and this is not going to happen now. The trouble is that this growth was required for payouts and salary rises.”

The public affairs agency chief agrees: “I believe we have deep strength in existing client relationships, but it’s much harder to build new relationships in this age of Zoom calls. The project stuff has also dried up. We’ve always had 80 per cent retained business, which is a relief.”

Indeed this may be one of the major, enduring changes to the PR industry after all this.

In recent years there has been a shift from classic retainer public relations to an array of project work. But this is now under threat as client organisations pare back their activity to core communications programmes.

Over the past few days, agency bosses have reported to me that new business has picked up a little and clients are increasing their “strategic and creative planning”, so the seeds of recovery are there if one looks hard enough.

The founder-owner of the famous agency again: “On the other side of this we’ll see accelerated change. It was obvious to me ten years’ ago that what I did needed to shift dramatically and now that’s more the case than ever. I’ve learned from this crisis that we’re actually surprisingly effective still launching a new campaign each day throughout the crisis. And we’ve only managed this because we’ve been flexible and adaptable.”

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