Editorial: Global strategies aid small players

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.

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

clients.



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

services.



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.



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