Feature: Strategies for selling more services

Traditional PR agencies must diversify to better compete with ad firms, claim many industry watchers. Steve Hemsley considers three business models.

As clients demand a more media-neutral approach to their marketing and communications, the question facing many agencies is not if, but how, they should diversify their services.

The challenge is becoming more acute as above-the-line agencies encroach on traditional PR consultants' territory.

As Institute of Practitioners in Advertising director-general Hamish Pringle points out, "more advertising agencies have their own PR operations as the magic of PR is incorporated in the logic of total campaign planning and delivery".

If PR agencies are to fight back, they must convince clients to spend money through them, rather than their ATL rivals. This means convincing clients that PR is the lead discipline and other services can be bought via their agency.

The right combination
"Most campaigns flow across the traditional below-the-line and above-the-line divisions," says Howard Paster, WPP board member and executive V-P of the group's PR and public affairs businesses. "The secret is to offer the right combination of services, either in-house or outsourced."

To meet this requirement, PR agencies are always trying to move into services such as brand consultancy, event work and design, creative briefs and media planning and buying. But agencies must still decide whether to supply these in-house, build affiliate arrangements with specialist agencies, or out-source to third-party suppliers as and when a brief comes their way.

PRWeek looks at some of the business models available to consultancies to expand their offering (below).

the AFFILIATE MODEL: LDR london
Agencies that want to focus solely on their core PR abilities can still offer clients additional services by nurturing on-going business relationships with specialist companies across different disciplines.

The strength of these reciprocal affiliate agreements is crucial, however, because clients need reassuring that quality is not being compromised.

These formal partnerships usually come about via traditional networking or through a recommendation by a client. It may even be the case that a director at the PR agency has a personal or working association with a senior executive at a suitable marketing company.

Mike King, managing director at technology PR firm Johnson King, feels it is important to stick to what you know. "It can be hard to convince clients that you can offer them everything in-house, and they like the fact we are introducing them to experts in other disciplines who we know and trust to do a good job," he says.

King formed an affiliate agreement with advertising, media and marketing company DWA Media because he had known its managing director, David Wood, 'for years' and admired the company's work. The agency also collaborates with marketing services and events company Blue Snapper. When US software vendor Ace*Com  launched in Europe, Johnson King ran the PR campaign and arranged for Blue Snapper to organise telesales support and 'customer prospect' events.

Another agency taking the affiliate route is LDR London, set up 18 months ago by Louis de Rohan. He works with SME brands such as New Zealand vodka drink 42 Below, and organised the 2005 Cocktail Championships with affiliate Pead PR in New Zealand.

"I see Europe as a whole; there are huge opportunities to exchange creative ideas with specialist marketing and media companies, and I am trying to formalise international partnerships," says de Rohan.

LDR's affiliate arrangements in the UK include one with retail consultancy Lighthouse Retail Group. The pair attempt to increase sales for shops by combining PR skills with 'retail solutions'.

But Lesley Allman, director of comm­uni­cation at Coors Brewers, believes there could be a move away from
one-stop shops. "Each media channel is becoming more niche. I think it will get tricky for 'we do everything' consultancies to sell-in a package of services and get on clients' radar for different assignments."

the OUTSOURCE MODEL: finn communications
Another option for agencies wanting to offer more than PR is to outsource requests for other marketing services while closely managing each project.

This approach allows consultancies to dip into a large network of specialist firms and freelancers depending on the discipline required and the specific brief.

It also gives the PR agency the flexibility to negotiate the best terms and to work with a client's preferred marketing company without creating tension within the in-house team or with a favoured affiliate.

The PR companies choosing this route can build up a large database of suitable specialists but, as with the affiliate model, personal recommendation can be critical. If a third-party supplier does not deliver, it is the PR team's reputation which is damaged. It is also advisable to have confidentiality and conflicting-interest agreements with any supplier.

HSD Communications outsources marketing services on behalf of its clients but keeps control of the work. When client Forest Laboratories wanted help promoting babycare brands Sudocrem and Infacol, HSD asked event company Lizard Productions to devise a roadshow to tour shopping centres.

Throughout the campaign the Lizard team had to report to the HSD account director who had originally devised the brief.

Finn Communications managing director Richard Rawlins prefers to out-source, saying it gives him the freedom to chose specialists and to get the best deal and results for his clients.

"This approach is ideal when it comes to design work where briefs often need to be handled by different specialists," he says. "Some design agencies are better at corporate work while others are more suited to creative consumer campaigns."

Some clients want to be more involved than others in the selection of a supplier. Leadership consultancy SFL, for instance, wanted a say in the appointment of Bradford-based design company Pure Creative Marketing when it asked Finn Communications to redefine its brand identity.

While some clients enjoy the flexibility that outsourcing provides, others remain sceptical. "With outsourcing it can be difficult to keep a handle on the quality and experience we demand. Quality control is crucial here, especially if budgets are tight," says John Grounds, director of communications at children's charity NSPCC.

the IN-HOUSE MODEL: the bank
A desire to control the quality of different marketing services is usually behind an agency's decision to offer a range of disciplines in-house.

At leisure sector consultancy Davies Tanner, 80 per cent of the company's work is core PR, but it has created a separate internal marketing team to handle brand consultancy work, direct marketing, media buying and creative briefs.

"It was getting harder to find reliable third-party suppliers and we decided this was a way to grow our business," says managing director Robert Wright.

Whichever service a client is buying, it deals only with its Davies Tanner PR account manager, who oversees the entire process. "This arrangement adds to the comfort factor because clients know we employ specialists in other areas," adds Wright.

One client, Westminster conference centre Church House, uses the Kent agency for event management, print advertising design and data management. 2As an SME it would be impossible to co-ordinate three or four specialist agencies and it would cost a fortune in fees. This way we get consistency and can react quickly across different marketing disciplines," says director Lacy Curtis-Ward.

Another agency offering in-house brand consultancy and event work is Taylor Herring. Justin Crosby, director of its  brand communications division, warns there are many pitfalls. "Any PR agency offering brand consultancy must employ people with marketing experience. You must ensure your PR service is nailed, in the eyes of the client, before moving into anything else," he says.

Elsewhere, more than 60 per cent of Cake's work is PR, but it is also well known for providing a range of other services, such as design and digital and viral marketing. CEO Mike Mathieson says PR agencies can earn respect from clients by offering different products.

"Consultancies need to embrace new areas such as digital. It is also crucial that clients are aware they must pay for specific services and do not view any extra work as part of the PR fee."

Richard McHardy, MD of The Bank, which combines event management, internal comms and guerrilla PR, says the skill is to persuade clients you are a specialist in all areas covered. The Bank's most recent work includes promoting Italian beer brand Peroni. Mobile 'Cinema Peroni' events gained national press coverage.

McHardy says such events give clients the confidence to risk putting all their eggs in one basket.

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