Dollars and sense: Agency pros prepared for rocky economic times

March 3, 2008

Copyright © 2008 PRSA. All rights reserved.

The following article appears in the March 2008  issue of PR Tactics. (See below for information on a free PRSA webinar, What recession? Nine ways to cut through regardless of the economy.)

By Chris Cobb

Despite the current economic downturn, many agency professionals see an opportunity rather than a potentially career-threatening crisis in the months ahead.

A random Tactics survey of agency professionals across the country reveals that a community spirit emerges when discussing the economic pinch. PR pros are exhibiting enough savvy to either cope with the turbulence of a recessive economy or alter its flight path to avoid it altogether.

The strategies differ but two pieces of advice emerge: Diversify, if you haven’t already, and do some aggressive public relations for public relations among the business community.

“I see this as an opportunity for PR firms to be reminding the corporate world that PR is a much more effective way of branding than advertising,” says Thomas J. Madden, founder and chairman of  TransMedia Group in Boca Raton, Fla.

Madden, who launched TransMedia 26 years ago after retiring from NBC as a senior vice president, says studies have shown that messaging transmitted through the media have more credibility among consumers than advertising.

Kelli Parsons, managing director of the New York office of Hill & Knowlton, says her agency had strong growth last year and at the beginning of 2008. However, like most veteran PR professionals, Parsons has ridden previous economic downturns and learned, especially from the mess caused by the dot-com bubble burst in 2000-2001.

“Things can change quickly but we have reason for our optimism,” she says. “Much of the downturn has been contained to the financial-services sector, which is not a significant outsourcer of public relations and communications services. That could change if the downturn impacts other sectors. If it does, and I think it probably will, we are well-positioned because we have a global footprint and offer diversified services.”

If a trend is growing out of these threatening economic times, it is in smaller firms or solo practitioners seeking to supplement their incomes through virtual partnerships with other PR professionals across the country. This networking is producing temporary teams comprising people with specific expertise. Once a project is done, the team disbands, perhaps coming together again, perhaps not.

Kelly Jackson Davis, APR, president of Davis Public Relations and Marketing in Columbia, S.C., says new business prospects are top of mind for all small or independent practitioners.

“We have a lot of people who are deciding whether to take the risk of giving up the security of a regular paycheck and going out on their own,” says Davis, 2008 chair of PRSA's Independent Practitioners Alliance. “Is there enough of a market out there for them to take that leap? People in different parts of the country are exploring ways of working with each other, so if you’re living in an area that’s experiencing more of the downturn you might partner with people where a specific industry is doing better.”

Here’s what our panel had to say:

Petri Darby,  APR
President, Darby Darnit
Houston
(Solo virtual firm and member of virtual, nationwide PR Consultants Group)

“In a recession you see companies downsizing departments but still needing the work to be done. They aren’t hiring so they are looking for alternative arrangements that get their work done at a fair price. I was at a PRSA lunch here in Houston and talking to two other senior PR professionals who have gone independent and [are] operating virtually. We can compete with the midsize to large-size agencies because we don’t have overhead and can offer senior-level talent for rates some companies would charge for entry-level talent.”

Kelly Jackson Davis,  APR
President, Davis Public Relations and Marketing
Columbia, S.C.
2008 Chair, PRSA’s Independent Practitioners Alliance

“I am always aware of the need for getting new work in the pipeline. The economic downturn hasn’t had an impact on my business just yet but it does have an impact on my planning as projects wrap up. So it’s on my mind. We encourage our fellow PRSA members to work with one another, to collaborate on projects and develop these relationships as part of their overall business plan. If you have some time on your hands and want to work in a particular area, you can tap into that network.”

Lyria Howland, APR
President, Howland PR
Dallas

“Our agency certainly has felt the economic downturn. I have chosen not to replace at this time two [of four] employees who left in December. Diversity communications is our specialty, our brand. There is some argument for staying the course and doing what you do best, but when times are tough do you follow that strategy or do you do other things people need to keep money coming into the firm? We are small and, after 20 years, have a lot invested in our brand. There is a certain risk attached to doing things outside your niche.”

Wendy Lane
President, Lane PR
Portland, Ore.

“The global economy is increasingly competitive, so despite the economic situation, companies know they can’t stop marketing, and public relations is a very cost-effective marketing tool. Our firm has a diverse industry base and that’s key. During the dot-com boom, I had wanted to go pure technology because it was exciting and there was a great deal of money in it. But my staff — we have 25 — didn’t want to. They convinced me to stay diverse and they were right.”

Thomas J. Madden
Founder and Chairman, TransMedia Group
Boca Raton, Fla.

“When there is a slowing in the economy the sector that gets hit hardest is advertising because it’s a large chunk of the marketing budget of most companies. When advertising is curtailed, companies are forced to look for more cost-effective ways to get their products and services before the public. So they look to public relations as a very effective substitute that is less expensive, more targeted and more credible. I see this period as an opportunity for PR firms to remind the corporate world that PR is a much more effective way of branding than advertising.”

Michelle Olson
President, Olson Communications, Phoenix
2008 chair, PRSA’s Counselors Academy

“As a smaller firm, we are able to be more nimble and change our offerings as the market economy changes.  And we are growing. Many firms aren’t just focused on traditional public relations but have broadened their expertise based on what the market is looking for. The theme of our Counselors Academy Conference in May is ‘Survival of the Fleetest:  Anticipate.  Adapt.  Act.’ My company was largely a real estate-focused firm. The real estate downturn hit hard and started in this region because it was such a high-growth market. So about a year and a half ago we started diversifying and took what we learned and turned it into hospitality expertise. Now, for example, we represent hotels and spas.  A lot of firms are relying more on temporary freelance help instead of adding full-time staff because it means you don’t have the overhead and in a downturn you don’t have to lay off staff. I have built that into my business plan. Much depends on where you live and the state of the local economy but you can’t put your head in the sand. You have to see it coming, make the changes and act on them. I’m really optimistic not just for my own firm but for the whole PR profession.”

Kelli Parsons
Managing Director
Hill & Knowlton, New York

“We remain optimistic, but that doesn’t mean we aren’t vigilant. Things can change quickly. We continue to hire aggressively. This type of situation can make great talent available, so, while we watch our bottom line, one area we will continue to invest in is attracting young talent and training. We learned that in a downturn, when money is tight, the firm with the best talent wins.”

Daniel Spelling,
CEO, Spelling Communications
Los Angeles

“All the fervor in the news about oncoming recession slows down purchase decisions. You probably still get the clients you were going to get, though the process is slower. Economic woe is a psychological animal. To me, you should always act as if you’re in an economic crisis because typically you will be. Every time you get a new client, it’s just a matter of time before you lose that client — when you achieve their goal, or they run out of money or decide they want a new flavor of the month. Customer loyalty is hard fought and rare so you should always anticipate turnover. Uncertainty is the bane of business so keeping an influx of new business is important. You should have the urgency of new business development all the time. It’s good to have specialties but don’t get too narrow.  Among the lessons we learned from the last recessions were to maximize resources and be thoughtful about expansion. It’s also advisable to broaden your services if you can do it competently.”

Henry Stimpson,  APR
President, Stimpson Communications
Wayland, Mass.

“Economic downturns can work in favor of the smaller agencies because we have lower overheads and, for the most part, lower retainer fees. I had my worst year during the peak of the dot.com boom when there were millions of dollars in venture capital money flying around and companies were looking to hire big PR agencies. If you have a PR budget of several hundred thousand dollars you aren’t going to go to a smaller agency or solo practitioner. It can also be kind of random. There could be a tremendous recession going on, but, if you can get one large retainer client, you can still do well.”

Author and journalist Chris Cobb is a senior writer at the Ottawa Citizen newspaper in Canada’s capital where he specializes in reporting on media and government communication. He is a frequent contributor to Tactics.

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