The race is on for agencies to build their digital assets. Get it right and PR firms will grow faster than they have in decades. Get it wrong and they’ll have a struggle on their hands. So as agency heads look at their talent base and their potential new hires, they have a tough question to answer. Do they hire experienced marketing professionals who have some digital skills or the typically younger, more digitally literate who have only limited experience? Sadly for the more experienced group, the answer appears to be that agencies are trending towards hiring younger digerati, rather than grey hairs. This in turn is reshaping agency structures, product offerings, and pricing. To twist an old saying, we are who we hire. With agencies moving from a classic pyramid model towards something that looks more like a coat hanger, the opportunities for today’s experienced professionals are becoming fewer by the day. Is this fair? Probably not but this drive to hire younger, cheaper talent is in part the result of another force, not just digital. Client procurement departments have acted like sand paper on PR budgets for years and have increasingly made it more desirable to hire doers over strategists.
Most agencies are racing to build a ‘new’agency on top of their existing one. While they do need some experience to prevent the thing from collapsing in heap, what they need most is staff that can get on and ‘do’ at a price point that makes the investments the agencies are making viable. This effectively forces agencies to hire lower cost staff. These of course tend to be kids from college who have no real experience but can tell you anything you want to know about Facebook and Twitter. For this generation, SEO is a form of grammer and html was a choice alongside Spanish and French at school. Given a brand is now defined by the size and strength of its social network, it’s hardly surprising that many agencies will value these skills over someone who has known the editors at a business publication for a decade.
So is it all doom and gloom for us oldies? Far from it. We can start and build these new agencies, they do after all need some adult supervision. We can also explore the boundaries of owned, earned and paid media. These are the places where real value lies and where experience can really come to the fore. But we cannot assume that because we have decades of experience that our futures are secure. We have to bring something of value to the transition to digital. Identifying what this is is crucial and could yet save the careers of many. We are in an era of marketing where the value of experience is trending downward. In years to come that will of course change as digital becomes the norm but for now the digital natives are set to become the new leaders. That may not be what people want to hear but our industry is, like many, Darwinian. In our case the fittest are the digerati.
PR agencies have been people businesses for as long as I can remember. Yet the emergence of digital has created the opportunity for these same agencies to start selling ‘technology based solutions’ (an overused phrase I know). These ‘solutions’ cover areas such as analytics, blogs, email marketing, micro site development… the list goes on. Most agencies outsource this development to… developers. This is largely because most agency heads can write a press release or a blog but wouldn’t have a clue about how to write code. Many agencies can see that if they want to get away from an hourly business model they need to sell technology IP and ideally IP that can be resold to many clients without much additional development effort. Again, though, most agencies simply don’t have the skills in house to develop the technology, or even the skills to effectively manage the development of technology. In other words, if agencies really do want to sell ‘technology solutions’ they are going to have to start hiring developers AND people capable of managing these people. If this happens the idea of a PR agency have a CTO (chief technology officer) that is client facing will become commonplace. Does your agency have a CTO? Should it?
I was asked by someone this week how much they should spend on PR in the US for 2011 (yes it’s that time of year again). They’re a small business with a small budget and they feel they’ve not been getting the results they want. My answer was that they were spending too little with the wrong agency. Now you’d expect me to say that given Next Fifteen is parent to a bunch of PR agencies. But this common question got me thinking and so in order to help prospective marketing heads, here’s a simple scorecard that you could use to try and figure out what you need to spend:
1. Are you:
A. A start-up
B. A mid sized
C. A very large company that has an atrium at its head office big enough to house five startups
2. Is your business:
A. Doing really well
B. Making it but not flying
C. Struggling. I know my friends wonder why I stay at the company.
3. Is your senior management:
A. Really engaged in PR
B. Does it when asked
C. Too busy talking to customers/playing golf
4. Is your management:
A. Good at talking to the media and always gives great perspective and quotes
B. OK at talking to the media but sometimes over complicates things
C. They’re too busy playing golf – they don’t give interviews
5. Is your company:
A. The market leader in a recognized space
B. The business that is trying to catch the market leader
C. A business trying to create a new category so that it doesn’t have to compare itself with the market leader
6. If someone reviewed your product would they give it:
A. 5 stars (out of five)
B. 3.5 stars
C. We definitely wouldn’t let them review it but we’d direct them to a real cool demo on our web site
7. Does your CEO:
A. Have a really great blog that everyone reads
B. Have a blog but they are poor about maintaining it
C. Think blogging is just a fad and that newspapers will rise again to push them out of existence
8. Does your business have something genuinely interesting to say/announce:
A. Every few days
B. Every month
C. Interesting to say? Can you give me a bit more detail on what you mean by interesting?
9. Does your company:
A. Put out news, links etc on Twitter every day
B. Put out news and links etc on Twitter every week
C. What’s Twitter?
Now, for every question you answered A to give yourself 10 points. For B’s score zero and C’s score -10. When you have the answer you are then ready to calculate your spend. So, if you answered all As, then you would have scored 80. In this instance you would be a startup and should spend $15,000 per month plus 90%. In other words you should spend $28,500 a month. If you answered A to question one and Cs for the rest, then you’d have a score of -70. This means you should spend $4.5k a month. Given this is a stupidly small amount to spend with an agency you shouldn’t bother. If you answered B to everything you would be a mid sized business that turns the handle. In this instance your PR spend should be around 5% of revenues. If you answered C to the first question and all the rest, then you are about become a B company. You are probably looking for a new job so I suspect PR spend is pretty low on your list of priorities. If, by some miracle, you are interested in PR spend, you should be aware that your company doesn’t care about PR and it seems highly likely PR isn’t going to solve the issues it faces (note your CEO is too busy playing golf to worry about PR, so you should be too busy interviewing to worry about the PR budget).
As I hope you can tell, the point I’m trying to make here (somewhat lightheartedly), is that there are some normal amounts that companies should spend on PR and that they relate to their revenues AND their ability to fully leverage what PR is capable of doing for them. Spokespeople that aren’t willing to commit the time, crappy products and a business that is struggling don’t make for a great PR campaign. Struggling companies can make a great story IF the management is seen to be engaged and has a plan etc. but they also need to believe that PR is a key part of the plan to get the business going and invest in it properly both with time and money. Some of you might feel that you need to spend more if you have an average company with average products etc. You can but in this instance, you need to demonstrate PR’s potential and get management to embrace it before asking for more money. If they believe, you’ll get every dollar you need. You may also question, why companies that believe in PR and use it well, need to spend more. I’d argue that when a company makes full use of PR and is getting good results, it should spend all it can and then some.
Good luck with the budget games for 2011!
I’ve been reading Change by Deign written by Tim Brown, IDEOs CEO. It’s a good read and really gets you thinking. Relatively early in the book he quotes Henry Ford who, when talking about his first car said: “If I asked my customers what they wanted, they’d have said a faster horse.” His point being that real innovation requires people to think beyond the current way of doing things. He goes on to say that you can actually learn more from the people at the fringes than you can from the masses. What he’s saying is that the people who are distorting the use of a product can tell you more about how to improve it than those that are simply using it in the way it was intended.
All this got me thinking about innovation and PR and I quickly concluded that our industry has been focused for years on incremental innovation. Indeed, it’s hard to think of any true game changing innovation. Press releases, product reviews, profile pieces, consumer stunts etc etc. When the Internet started to play a role in PR, the email pitch got developed and we discovered how to create micro sites. When social media came along we developed (or Todd Defren’s guys did) the Social Media Press Release and we learned about Facebook communities and Tweeting. In short there was some good innovation but it wasn’t innovation in the way Tim Brown would use the word. It wasn’t someone dreaming up a car, when there used to be horses. It’s my belief that the industry is at a point in its history where that kind of innovation is really needed and the opportunity for it really exists.
I’m afraid I don’t come to you with the answer here but hopefully someone out there has figured out that in the same way as the stagecoach business was a transport business and thus could have transformed into an airline business, the PR business is a reputation business and can be transformed from a largely influence based model to a business that actually manages reputations far more directly. The person who really figures this out has the chance to completely reconfigure the market. When they do, the list of major PR firms will look a lot different.
Big companies need big agencies. Right? Wrong. Big companies THINK they need big agencies. Why? Because they need access to the ‘big brains’ that sit in big agencies and the army of staff that can be brought to the task when needed. Now of course the reality is that in 99.99999% of situations the client doesn’t work with anyone else but their appointed account lead and the team at their disposal. In most cases that means a pretty small team are working day to day with the client. Such a workload doesn’t require a big agency. It requires an agency with talent. So the answer to the question: ‘does size matter?’ is “No.’ Of course it doesn’t really matter what the answer to the question is because, like all things, human nature gets involved in the decision. Big companies (and even small ones who want to be big) don’t need big agencies. But, they WANT a big agency, just like they want a car that costs $100,000 even though it does the same thing a car that cost $30,000. In other words clients (at a certain level) want to appoint an agency that makes a statement just like they do with all purchasing decisions. On that basis being small isn’t the problem. On that basis giving them a reason to tell everyone why you are such an amazing firm is. Confused? You should be.
Economists seem to agree that by and large the major economies of the world are no longer in recession. But it’s clear that while some industries are back to growth, others are still mired in there very own recession. So, is the PR industry one of the growth industries or is it still in recession? The answer is potentially ‘yes’ to both of these questions. I’d argue that the PR industry has emerged from the recession as a different business. It’s had to.
Pre recession, the PR industry was drifting towards digital and in particular social media/networks. The recession accelerated PR down that path in ways that will change the industry forever. Put another way the deliverables that clients rightly expect post recession are different. Very different. Post recession clients expect to understand communities and the conversations taking place in those communities. They also want to take part in these conversations, or at the very least influence them. They may also want to create their own communities. This is real ‘public relations’ and it’s a huge opportunity for the industry. Yet some agencies still view the world the old way. They view PR as a process that drivcs headlines and creates events. They think that a blog entry is effectively another headline. In other words they are not measuring communities and conversations, they are measuring the volume a client can talk at. These agencies are going to have to adapt and fast, or their recession will last a long time. A very long time.
The agencies that are embracing a new way of measuring success are coming out of this recession with a great opportunity. They are speaking the new language of marketing and delivering services to match. They are not confined by what media or events exist. Instead they create and influence communities and the conversations that are taking place using the best available tools. Truth is the agencies that are on this path don’t really think of themselves as PR agencies anymore and they certainly don’t fear agencies that still deliver ‘old style PR.’ This is because the approaches they are taking require skills from a wider range of disciplines. It’s also because they don’t measure success like they used to.
So, if you want to know if your agency is still in recession, ask yourself how you define success for a client. The answer to that will tell you a lot about your prospects for the next few years.
PR Week today announced that Chegg.com, an interesting startup, has hired Weber Shandwick for its PR. According to the article they didn’t go through an RFP process. Instead they were hired because they’d worked with the head of comms before at Match.com. Some will argue that this is no way to make such an important decision. Others will argue that the person who hired them knew what she was going to get and saved the company a lot of time and trouble. She also, saved various agencies a lot of time as she clearly knew who she wanted.
Just about every agency head I know complains about the pitch process for the following reasons:
2. Agencies are forced to give away a lot of free ideas in the pitch process. This is frustrating when those ideas get used by another agency that wins the account.
3. Procurement departments are using pitch processes to drive a bargain and rarely are they focused on getting the best consultants to help a company.
4. Every process is different so agencies have to reinvent the wheel each time.
5. Some agencies don’t play fair. In other words they make promises they have no intention of keeping – such as staffing
6. Some clients don’t play fair. They suggest they’ll be a great client and have a great budget. They then reduce the budget and change the role of the agency.
7. There are at least another three common complaints but I won’t bore you.
Given all these complaints should agencies have to pitch or should there just be a standard process by which agencies get hired? While the latter would save everyone time, it’s sadly impractical. Every client is different and has different needs. A standard process denies agencies who really want to invest a pitch the opportunity to show how much they really want the business. Also, some agencies use the current process to show innovation. Make the process standard and that chance goes away.
I for one would love to see the current process improved but I fully suspect I’ll hear the same complaints in five years that I hear today. Instead, clients need to be reminded of the best way to handle the pitch process so they get the right agency without putting the agency world through the mill in the process.
Now that the US and many other major economies are officially in recession it is tempting to believe that 2009 is going to be a horrid year for PR agencies. I suspect for some it will be. There will be plenty of lay offs as smaller clients cut back and larger clients become more cautious with their marketing spend. But it needn’t be all bad news. Agencies may well end up with limited if any financial growth but they can grow their business in plenty of other ways. Agencies can finally embrace good measurement techniques, social media and other related digital services. They can explore ways to extend their services so they better integrate with other marketing services. Put another way, consultants can increase the skills they are able to offer clients and therefore increase the return the clients get from their investment.
I think it is also worth noting that not all PR agencies are the same (I know how obvious that statement is). I say this to remind consultants that the fortunes of agencies lie in the skills of the management at the agency, the strength of their client relationships, the products they offer, the ability of the agency to demonstrate value and of course a little luck. This means that some well run agencies that are also lucky may well grow in the next year or two. For PROs wondering if their firm will be one of them they need to evaluate the management, product offering and client base. They then need to ask themselves how their agency scores. The luck part is of course impossible to measure but its is worth noting that the better agencies are likely to also be the luckiest. Indeed I think it was the golfer Gary Player that said the more I practice the luckier I get.
Don’t ask why Ketchum thinks I’d be of help or interested but they emailed me (spammed me) twice today about the vacancy they have in San Francisco for someone to run their consumer tech business. If anyone knows anyone that wants the job do call Nabil Khatib at 415-984-6123.