According to conventional PR industry wisdom, the next few years
will see medium-sized full service agencies suffering as the larger
players with international networks and the growing band of niche
agencies operating in specialist sectors take an increasingly large
share of the market.
However, quite a different picture has emerged in this year’s survey of
the Top 150 PR agencies. Many medium-sized agencies are thriving in a
market which grew overall by a modest five per cent last year.
Among the factors ensuring that middle ranking agencies will continue to
flourish is an emerging trend among the big agencies to focus on the
bigger and more lucrative international clients, thus allowing allowing
agencies in the medium-sized bracket to use their size and reach as a
genuine competitive advantage.
At the same time, many of the larger agencies are divesting themselves
of smaller, less profitable accounts - either through natural wastage,
or by actively weeding them out. For example, Burson-Marsteller offices
across Europe have been told to refuse clients which bring in fees of
less than USdollars 50,000 and which are unlikely to develop into
cross-border, multi-disciplinary accounts. Shandwick too has been
focusing its attention on major global and regional clients - two years
ago it shed a clutch of its less profitable UK accounts.
Fewer clients does not mean less revenue, however. At Hill and Knowlton,
fee income has increased by 16 per cent to nearly pounds 19 million,
despite a one-third drop in retained and project clients. The agency is
carefully nurturing the accounts it already handles, so that half of all
new business won last year was additional business from existing
Shedding unprofitable clients is not just a strategy which applies to
big agencies. Small agencies should look long and hard at their own
client lists too, and be particularly ruthless about accounts which only
bring in a profit through the mark-up on rechargeables, such as printing
Key Communications, for example, has decided to move towards strategic
consultancy and away from the implementation of PR campaigns which tend
to be labour-intensive, but low value. As a result, its fee income only
grew by two per cent last year and staff numbers also dropped. But over
time the agency expects the strategy to pay off as its accounts become
correspondingly more profitable.
However the rush to provide strategic advice does not negate the need
for solid professional implementation. Nor have the needs of smaller
clients declined. All of this bodes well for medium-sized agencies.