Technology: Adapting to the current climate

The tech PR sector has been forced to change the way it works in the downturn. Maja Pawinska assesses the new working methods being adopted as a result

The brief, mad days when tech agencies were able to choose the client and remit they were prepared to work on and to charge fees with mark-ups as high as they could get away with seem nothing but a wry memory today.

Tech PR was the first sector to experience a tremendous boom, and then to suffer a major bust. So great was the bust that last year's Top 50 Tech PR agency rankings (PRWeek, 19 July 2002) showed that of the 40 agencies that appeared in the table the year before, only 20 posted positive growth.

It was the speed at which the market changed that caused most shock.

PR practitioners in the tech sector are claiming that they have reassessed their working practices and that they have since improved their performance in terms of accountability and cost-effectiveness. Sparked by efficiencies demanded by the tech downturn, they claim they are learning from the errors they made during the boom years of the 1990s, and are hoping these lessons will improve working practice in the long term.

Managers on both sides of the equation say the biggest changes are: agencies have been forced to cut fees, tech clients are investing more in evaluation - both in-house and outsourced - agencies are working to broader briefs, and technology is being embraced as a cost-cutting tool.

'The cutting of fees and the increased focus on evaluation is more pronounced in the tech sector because it's a symptom of the very acute changes we have had to face,' says Sally Costerton, managing director, Hill & Knowlton.

Richard Bagnall, joint managing director of media evaluation company Metrica, has noted the trend, saying that IT companies have in the last six months shown a much keener interest in sophisticated evaluation than in former times, driven by the need to prove return on investment.

'The majority of IT clients are maintaining, if not increasing evaluation budgets and we have seen a lot more interest from that sector since the downturn,' he says.

Metrica's largest clients, such as AOL and Microsoft, have been long-term investors in media tracking, he says, and while other tech companies are following their lead, neither of these two clients have cutback evaluation budgets.

Coupled with this concentration on 'serious' PR is a growing requirement for agencies to be able to prove their worth. Return on investment is key, and measuring PR in terms of business results characterises the 'serious' nature of evaluation.

At CIT PR, director Robert Da Costa agrees, saying finance directors are increasingly questioning marketing budgets and the value of PR more than ever before in tech.

'We've tried to be proactive and have made our clients set very specific measurable objectives. Even if they are not worried about proving our worth then their bosses will be,' he says.

Edelman PR technology practice director Imogen Bailey has taken the drive for greater accountability as a cue for the changes in client servicing: 'When companies were moving fast, we had a scattergun approach, but now clients are looking to justify their spend on PR, and it makes us better communications professionals. We go into great detail now about precise objectives and how they will be met.'

Meticulous evaluation is not the only way agencies are being probed for greater accountability. The billing process has been under greater scrutiny than ever, and clients are now asking: what am I getting and how much does it cost?

Costerton says: 'Procurement managers in tech, as in other sectors, are increasingly asking us to deconstruct our day rates'.

As with all shrinking sectors, emergency short-term measures such as budget cuts are implemented first.

But many tech agencies are claiming a long-term approach is dominating their thinking, and there is no longer talk of redundancies, though anecdotal evidence suggests tech PR agency teams have been halved since 2001.

At Burson-Marsteller, global head of technology Heidi Sinclair admits fees have been cut and redundancies made. In Europe, B-M has offered to reduce its rates during lean times to help existing clients. This cutting of rates is something that not all tech PR agencies will admit to, but Miller/Shandwick Technologies, for example, is working on rates set two years ago and Peter Jacob, business development manager at Brands2Life, says the agency does 'try to be flexible if clients request reduced fees'.

Likewise, Costerton says H&K has 'had a more flexible approach to pricing in the past six months', with bespoke pricing arrangements catering to specific tech client demands.

Usually, such measures are seen as dangerous, encouraging a devaluation in PR services, but Sinclair believes this will protect B-M's relationships with clients in the long run. What a number of consultants do believe is damaging to price issues is the astonishing number of direct mailshots floating around in which a 'high percentage' of agencies are offering to work for clients for three months free of charge.

While cutting costs is a short-term imperative, there are other methods of providing value that will have positive long-term impact, in-house managers argue.

But many tech PR managers believe lower fees, a focus on evaluation and adoption of technology in the sector are beginning to create new business models that will probably change working practices permanently.

Fujitsu Services marketing director Derek Hardman says: 'Scarce resources are shaping these new working practices. Whereas before we might have had a quite formal dialogue (with agencies), there's no time for that anymore. We are expanding the traditional boundaries of what we might ask a pure PR agency to do.'

On Fujitsu's behalf, agency Firefly has been venturing into new activities and working to a broader brief.

'Agencies will fall by the wayside if they haven't got the maturity to deal with new relationships,' says Hardman.

T-Mobile head of international press relations Elaine Devereux says the company has taken several initiatives in working with its agencies, and they include increased accountability and a shift towards measurable targets as the basis for agency fees, instead of retainers. But as budgets shrink, so the focus on what the available cash is spent on has intensified.

Devereux says: 'In corporate communications in the past 18 months there has been a swing from light consumer PR to more robust campaigns focusing on shareholder value, the profile of the board and customer benefits.

'The connection between communications and the bottom line needs to be clearer now than ever,' she added.

At HP, which announced it had consolidated 50 agencies down to just H&K, Porter Novelli and B-M this month, executive comms manager Dr Ralf Leinemann says the balance of power has shifted: 'Clients are more in the driving seat than in the past. I've also seen agencies reduce their rates for some tasks recently, without me asking, by passing on reduced costs from outside suppliers. Having said that, the agencies that can deliver have been more empowered and tightly connected to what we are doing.'

There's a similar sentiment at Cisco Systems, where EMEA corporate PR manager David Cook says the company's agencies are being asked to take on wider ranging roles, but to also reduce risk in their strategies: 'The challenge for agencies is to keep staff motivated when they might feel the work they are doing is a bit dull.'

This has been an experience shared by many in-house managers, where the balance between conservative approach and high quality work has been tenuous. At Macromedia, Northern Europe PR manager Sarah Mowatt says: 'It has been a great exercise in taking grassroots PR to a new dimension using creativity and new technologies to deliver a more succinct message.

Clients need agencies to be more adaptive and resourceful in their working practises.'

Firefly has brought its creative approach to the challenge of managing clients and staff in the downturn. It has put in place a six-month review framework including thorough client interviews which culminate in a PowerPoint-free workshop on achievements and targets, and has tried to add value by running free networking events and dinners for client CEOs and marketing directors.

Boutique Brands2Life, which was set up in 2000 and so has only existed in a tough market, has been keenly aware of the stresses and strains on staff and clients. Co-founder Giles Fraser says: 'It's about coming up with ideas, solutions and tactics without waiting to be briefed. It's a tough market to get results and so it's also about managing expectations and keeping staff motivated. They get coaching, training and the right tools and software so they feel supported.'

Dealing with staff training when funds are tight has also been on the agenda. Lewis CEO Chris Lewis says the agency has tried 'to create a model where we can train people without spending as much', having recently brought in a mentoring scheme.

Firefly MD Claire Walker has put a number of measures in place to support staff, including a series of in-house knowledge and management training courses, including role-playing tough negotiations. A shadowing scheme, where staff shadow non-marketing personnel at the client or one of its other marketing and advertising agencies, is also now in place.

Efficiencies in training are being matched by many agencies with efficiencies of communication using technology. Intranets and extranets are being used more as a quick, cost-effective and transparent way of managing administration and documents - H&K, for one, is aiming for a zero per cent cost on administration through the use of technology. Costerton says one of the long-term changes in the way tech agencies work will be the use of tech-based tools such as online intelligence monitoring and proprietary evaluation software.

These have already proved so valuable to the tech sector, she says, that tech PR will lead the way in its adoption by other sectors.

'There are pressures on pricing. Technology-based tools are allowing us to take the costs out of the non-critical parts of the relationship with (tech) clients,' she says.

The question arises often: How long will such measures be necessary?

Predictions for a recovery in the tech sector are too varied to be reliable, but some see historical context as key to accepting that the current downturn is part of a recurrent cycle.

Lewis believes today's market conditions are almost a mirror of the scenario ten years ago: 'We're rounding up the corporate crooks, we're on the verge of war in the Gulf, there's a house price boom. The PR industry is again kicking out the people who shouldn't be there and going back to basic values and becoming more professional and organised.'

If his reading of the global economy is right, the tech sector boom that followed in the wake of such conditions could be likely. But those who enjoyed the boom will also be wondering if the PR sector will have learned the lessons of the downturn and created permanent business models capable of bringing maturity to the industry.

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