Although it is two years since enlargement swelled the EU community by ten extra states, PR groups are still gazing eastwards to the next wave of accession states in central and eastern Europe and the Balkans. Weber Shandwick and Pleon, for example, have expanded aggressively this year, while Mmd last year reached into Istanbul.
But expansion brings serious challenges for consultancies and in-house PROs alike. In markets of varying size, maturity and political and economic stability, it is a challenge to deliver consistent messages across borders, especially when ‘everywhere' can mean Prague to Kazakhstan.
‘We have traditionally been the first international entrant in many markets - Bulgaria, Romania and Serbia are just three,' says Mmd chief operating officer Chris Dobson. ‘We have had the considerable challenge of being first on the scene. The worst mistake a later entrant can make is to assume someone else has already done all the hard work and that your role is one of acquisition and remote management. I have witnessed many messy divorces in our region.'
Dobson says the agency affiliate model is particularly flawed in the CEE and CIS regions: ‘Agencies offering best-in-class in given geographic areas can partner to great effect - on projects or with common clients.
But to run a commercially viable network of affiliate partners across multiple markets under one brand - often with differing objectives and expertise - is virtually impossible.'
As economies across Europe have improved, multinational clients have purchased more PR on a pan-Continental basis. According to Burson-Marsteller president and CEO Europe Heidi Sinclair, multi-country app-roaches are ‘escalating dramatically'.
Trimedia International CEO Michael Murphy says this is borne out by the decision of COLT Telecom to use his agency across 13 countries: ‘Sub-regional purchasing is also a growing phenomenon. Trimedia has structured itself into two sub-regions covering the German-speaking markets of Germany, Austria and Switzerland, and France and Benelux, and is attracting clients using this model.'
Unsurprisingly, the independent networks take a different view. Worldcom, which comprises 22 partner agencies across EMEA, claims clients that stayed with networks during the IT downturn are moving to independents. ‘The technology market has revived and we've seen growth of around 20 per cent,' says Crispin Manners, CEO of tech specialist Kaizo, a Worldcom partner agency. ‘More clients are looking for support on a pan-European basis once more. These are mature businesses. They don't want start-ups entering Europe for the first time. They're really looking for transparency and accountability and find they get this better from an independent network where every partner has to prove its value in every territory.'
Worldcom, historically noted for its B2B, tech and crisis experience, has purposely attracted new partners with consumer expertise. German agency Kom-Passion and Turkey's Stage Communications Consultancy recently joined the network.
Eurocom Worldwide network director Mads Christensen says strong local market presence and locally rooted consultants are an indispensable element in multi-country campaigns. He points out that it is common for global agencies to rely on independents when delivering a pan-regional campaign.
Small agencies with local ownership can be as versed in international campaigns as their global rivals. Christensen says all Eurocom members demonstrate a solid international grasp and are fully capable of handling multi-country campaigns.
‘This holds a couple of advantages, the most obvious being lower fees, compared with large agencies,' says Christensen. ‘More bang for the buck is often the reason why large firms turn to networks rather than enter into a global agreement with a large agency. Our members have proven their ability to create multiple account teams, and small agencies from small countries sometimes act as leaders in agency teams. All have an equal voice in the network, and Eurocom has never been led by a few, dominant members.'
EU enlargement in 2004 resulted in a requirement for pan-European programmes incorporating Hungary, Poland and the Czech Republic, and the independent networks are vying to snap up local agencies as members. ‘ECCO was quick off the mark in getting good members in these territories at the time of enlargement, and those that are waiting until there is greater client demand for representation are going to find it difficult,' says Didier Lagae, MD of Marco De Communication, ECCO's Spanish member.
The tail end of last year saw the birth of network FirstLine Europe, whose nine member companies tend to be run by experienced consultants who have made their names at big agencies. ‘The network was founded based on an identified client need,' says Martin Langford, partner at Kissmann Langford, FirstLine's UK arm. ‘Each agency had found that clients appreciated, and benefited from, a close personalised relationship, particularly when operating in the increasingly challenging realm of stakeholder comms.
Across Europe, technology and healthcare appear of late to have shown the strongest areas of growth. However, as Firefly Communications managing director Mark Mellor points out, while there are opportunities in VoIP, mobile and convergence, not all niche markets within the tech sector are having a ball. ‘There are still weekly layoffs in the thousands, as well as grossly underperforming stocks among many major blue-chip hi-tech names. Increasing PR spend is probably not on the agenda for some of these players.'
Much of the tech sector has consolidated, commoditised and ‘consumerised'. Nevertheless, the fast-growing economies of eastern Europe will provide new opportunities.
This is one of the reasons why Weber Shandwick has expanded its European footprint for the first time in several years. Chairman, Europe, Tim Sutton did not want to grow the agency through acquisition, or risk local start-ups. So expansion has been achieved partly through a ‘third way' - piggybacking on the presence of Interpublic sister ad agency McCann-Erickson, in markets such as Poland and Croatia, to open WS offices.
‘There's no simple template for international PR,' says Sutton. ‘Our big obsession is to help clients think through their comms strategies, because they remain intellectually and practically challenging.'
Pleon takes the stance that international integration can only be achieved through specific pan-European training, and ensuring all staff are competent on the agency's global account management practices.
Over the past year, five per cent of Pleon staff have worked for at least three months in a Pleon office outside their home nation.
This has helped support clients such as Nortel, for which Pleon is working across 15 countries. Porter Novelli also runs an Achieving Excellence Across Borders training academy. To read PN account director Andrew Mildren's experience of it, click here.
‘The CEE and Russian markets are sizzling,' says Pleon chairman Alex Schoep. ‘Companies talk the talk about China, but walk the walk in CEE. Despite the fact that China dominates the headlines, European and US companies focus most of their investments on the CEE region.
‘There is no international assignment in which at least one or two CEE countries are not involved; most notably Russia, Poland and Hungary, but the Czech Republic, Romania, Ukraine and the Balkans are all definitely on the up.'
AB Electrolux sells more than 40 million home appliances to customers in 150 countries every year. Its products include refrigerators, dishwashers, washing machines, vacuum cleaners and cookers, sold under brand names such as Electrolux and Zanussi.
Stockholm-based vice-president of communications Europe Ulrich Gartner manages PR in 36 markets, using a mixture of internal resources and agency support. Responsibilities include brand and product PR, crisis communication and corporate reputation management.
A central ‘Publicity Factory' creates and produces materials for local adaptation and implementation. In order for this to function efficiently, the firm has set up global intranet ‘PRWeb', a media monitoring and analysis system, and a web-based translator.
These enable the company to send bespoke information to certain media simultaneously. Electrolux claims this ‘make it once, use it many times' approach delivers efficiency. Instead of budgets being ‘wasted' on local agencies coming up with lots of ‘conceptions', the focus is on creative adaptation and local sell-in of pre-produced material.
‘One of the most obvious trends in PR in Europe is the move towards electronic media,' says Gartner. ‘Consumers don't want to be informed, they want to be involved. They are creating their own media and expressing their own opinions. We are trying to create news that triggers opinions. Even if it's a negative opinion, sometimes that's good because it triggers discussion.'
Gartner believes that while some differences in national media persist, the interests of consumers across Europe are becoming ever more similar.
Prospects for the PR industry in Germany remain good. Last year was very positive, with an average increase in gross income among leading agencies of 12.4 per cent. The indications are that this welcome trend is continuing in 2006.
‘Strategic counselling is the major task and PR is taking the lead in the communication mix,' says GPRA president Dieter Schulze van Loon. ‘There are some major fields showing considerable growth. Besides internal communication and public affairs, growth sectors are healthcare, life sciences and corporate communication, while nutrition, one of last year's strong sectors, is slightly declining.'
Favourable business expectations have boosted employment. The country's top 20 agencies report an average 11.4 per cent rise in staff numbers across all levels, from trainees to top consultants. Staff costs are also rising but agencies cannot always easily justify passing these on to clients via higher fees.
PR spend in Italy, through both agencies and in-house departments, is estimated at €1.7bn annually. Spend during 2005 is believed to have risen by about three to four per cent.
‘As far as market segmentations by professional area is concerned, media relations is keeping up its leadership, followed by product communication and corporate communication.
But the market rise is also due to growing appeal for PR as a tool for strategic, consultant communication and issues management,' says Furio Garbagnati, president of PR association Assorel, whose ranks have grown from 30 to 50 members in the past couple of years.
Corporate social responsibility and customer related marketing programmes are on the rise, and there appears to be a less pronounced rise in demand for internal communication campaigns. Financial communication is showing signs of recovery, meanwhile.
FMCGs, pharmaceutical, healthcare, IT and the financial sector represent the largest arenas for PR. Activity in telecommunications is expected to increase, but remain significantly behind the other segments.
‘Local and central public authorities are increasingly including PR activities in their comms programmes and relevant tenders. But this trend should be affected by a new financial law that will see the slashing of communication investments for public authorities,' says Garbagnati.
Some experts estimate growth in Russia to be 30-40 per cent a year.
The demand comes both from Russian and international companies increasingly outsourcing their communication requirements and raising budgets. Especially hot now is advice on corporate social responsibility programmes, crisis and issues management, public affairs and investor relations, though media relations and event management still account for the lion's share of most agencies' business.
The favourable market conditions and increasing budgets have compelled large international firms to take a closer look at Russia - Ogilvy signed up a local affiliate early last year, and this year the PR community is waiting for the arrival of Pleon and Fleishman-Hillard - the latter interviewed firms this spring and was rumoured to appoint a local partner soon.
‘Demand is higher than good agencies can digest, which means that better firms have to occasionally say "no" to some of the prospects,' says Michael Maslov, senior partner at Ketchum affiliate Maslov PR and IPRA national co-chair for Russia.
‘The Polish public relations market has entered a new stage of development: a stage of stabilisation and maturity,' says Pawe Trochimiuk, president of the management board, Polish Public Relations Consultancies Association.
‘As a result of an agreement between three industry organisations, the PR Ethics Council has been established. The council, an opinion-making institution that is supposed to solve the problems of the market, is the next step towards the PR industry's self-regulation.'
Stabilisation can also be seen in the fact that small PR agencies, with one or two employees are not flooding into the market with cut-price, low-service offers. Increasingly, Polish PR specialists are faced with the challenge of creating communication strategies for the whole CEE region, into which Polish and multinational companies are expanding.
Many Austrian companies have seized the opportunities presented by European Union Enlargement and are active in the new member states. The country has been successfully building up relations with its neighbours, with whom it has always had good contacts, but who were cut off for many years due to the political situation. As a result, there is a need for local PR work. Austrian agencies now face the challenge of either working directly in the new countries themselves or establishing solid relationships with local agencies.
‘Quality is becoming one of the most important criteria when choosing a PR agency. Certification according to CMS II has been considered as a criterion in a tender by an Austrian Ministry for the first time, in addition to price, presentation, experience etc,' says Brigitte Mühlbauer, joint CEO of Vienna-based Menedetter PR. ‘The PR Group Austria consistently pursues the goal of convincing Austrian companies that CMS should play an important role in choosing a PR agency.
‘The Austrian government puts a lot of effort into promoting research and development to achieve the "Lisbon Goals," together with the other EU members. In that process, it is attempting to widen peoples' awareness of this field. PR agencies are coming across a growing market here.'
Another trend in Austria, which has been continuing for some years, is growing demand for lobbying and public affairs services.
Specialisation of services is a trend in Spain. Clients are increasingly looking for PR agencies with sector expertise that know and understand their business in depth. This is seen as an opportunity for agencies to offer added value to clients: by being the best experts in the market.
Strong rotation of clients is another issue. Several years ago, a client might typically work with the same agency for seven years or so. Recently there has been a discernible shift to hiring PR services for specific projects.
‘The Spanish PR market is mature and highly professionalised,' says José Antonio Lisbona Martín, President of ADECEC and Chairman & CEO of Trimedia/Citigate Sanchis, Spain and Portugal. ‘Companies have realised the need to manage communication as one of the strategic points of their business plans. The crisis suffered by the Spanish PR market in 2001 led many companies to reduce their PR budgets. But the PR market grew stronger by setting new challenges and improving and increasing the type of services offered, leading to a greater level of satisfaction among the clients.'
Most of the leading Spanish communications consultancies now belong to big multinational communication groups, which has resulted in better training and increased services. Corporate Social Responsibility programmes are increasingly forming part of companies' strategic communication plans. There has been a rise in demand for Crisis Communication services due to the delocalisation of industries and the shut down of businesses.
AGENCIES ON THE MARCH
December 2005 Waggener Edstrom Worldwide expands its global Public Affairs Practice to Brussels under the leadership of Christina Kaul.
January 2006 Pleon unveils six offices in CEE and Russia, taking to 31 the number of Pleon-branded offices in 15 European countries.
February Huntsworth acquires the 25-strong Paris-based Eurotandem SAS, whose clients include BT, merging it with Trimedia France.
March JKL Group, a Nordic PR network, becomes part of Manning Selvage & Lee.
April Weber Shandwick announces it has opened offices in Poland, Croatia and Bosnia and Herzegovina. The group also unveils affiliates in seven further central and eastern European and Balkan markets - Romania, Slovakia, Slovenia, Serbia and Montenegro, and the three Baltic republics: Latvia, Lithuania and Estonia.