How much should you spend on PR?

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!

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Is the PR recession over?

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.


Is the PR industry still in recession?

PR people tend to be glass is half full people.  This means that when the recession started they tended to put a very brave face on it and were almost in a north African river (denial).  Indeed it was only when things had hit the bottom that many PR heads would really talk about how bad it had been.  But has the industry really started a recovery?  Here are some arguments for and against:

FOR:

1.  Clients have released project dollars that had otherwise been held on to

2.  Budgets cuts are no longer taking place and in some cases clients are modestly increasing their spend

3.  Staff are starting to get recruited as agencies feel more confident of their revenue streams

4.  Staff who are moving are starting to look at agency work rather than in-house.  In-house is often considered the safe place to be in a recession (relatively)

5.  New business opportunities have improved for agencies and the process has become more normal (number of agencies involved and budgets are back to normal)

AGAINST

1.  The release of project dollars is potentially just a year end phenomena.  Many clients have calendar fiscal years and so they are now starting to think about their budgets for 2010.  If they don’t spend their ’09 budgets they will have a challenge getting $$ in 2010.

2.  PR budgets are generally linked to the sales of companies.  Given sales are still sluggish, across the board rises in PR spend are unlikely for quite some time.

3.  While the new business environment is much improved it is still very tough relative to a non-recessionary environment.  Procurement departments have used the recession to sharpen their teeth and get better deals.  It will be some time before agencies can get back the concessions made during the recession – if ever

The above would suggest that as an industry we are still in the early stages of the recovery (assuming you are still a glass is half full person).  But what it really says to me is that we should not be looking at the recovery as a chance to get back to where we were but rather as a reminder that we need to innovate and come out of the recession offering a better solution to the one we did going in.  This is easier said than done and I suspect that many agencies will look at progress in social media and feel that they can tick the box called innovation.  I’d urge them to think again.  The shift towards digital is important but every part of the industry has embarked on that mission.  Real innovation is spotting the less obvious challenges and embracing them along with the obvious.  Good luck in that challenge.  Oh, and if you figure it out, do let me know!


The uneven nature of a downturn

All recessions are not created equal that’s for sure. While it is pretty clear that many businesses are feeling the effects of the global recession that is upon us, some are feeling it more than others. Sector to sector comparisons are obvious. I’d rather be in the technology business than the car business for example. However, even within sectors there are businesses that seem to be doing relatively well, while others in the same sector are crashing and burning. Some are losing because they are selling the wrong product and some are losing because they have the wrong customer base. Some are losing because they do all their business in one country, while others are winning for the same reason, they simply operate in a different country. The reasons why people are winning and losing can be due to good or bad management, or down to history. The physical markets people are in were decided a long time ago in many cases – long before the financial markets crashed and took the economy with them.

All of this unevenness (is there really such a word?) makes for some interesting management challenges. For example the cost of leaving a market can be higher than the short term savings achieved by getting out. Equally, changing your customer base isn’t easy when markets are like they are right now. Put another way it is hard for executives to marry the short term financial goals of a business, with the right long term business goals. As a result, I would expect some pretty lumpy performance from companies in the next year or two. This isn’t what financial markets like but for many companies it will be unavoidable. The most important thing is that businesses run their businesses profitably and conserve their cash during a period like this. It is then also important that they learn from this recession. Recessions expose the weaknesses of a business. Ignoring those weaknesses is perhaps the worst mistake a management team can make. All business leaders hate recessions but they are a great test of you and your team and of the business you are running. How well you do is interesting. How much you learn from the test and apply to your business is really important.


Why doing PR in a recession is more difficult and what you can do to help

Here are some quick observations and recommendations. If people have others please comment and I’ll update the entry.

1. Clients are more careful with their marketing spend, which means they are both more cautious in the risks they are prepared to take and less willing to spend on potentially expensive ideas even if the long term returns are worth it. Recommendations: Think carefully about the ideas you are giving to your clients and about the way these ideas are presented. In difficult times clients want to feel that approaches are going to work and are therefore less worried about ideas being new or innovative.

2. Clients become even more focused on the current quarter and results that will impact their bottom line. This is understandable but all the best practice studies show that the brands that remain committees to long term goals tend to do the better than those who simply worry about the current market. Recommendations: Understand the sales process and sales cycle of your client’s business and marry programs to that cycle. This is a god discipline in any environment but in a downturn it becomes vital.

3. Competitors typically have more opportunities to highlight a client’s deficiencies as typically companies in a recession are struggling to be successful and are therefore losing customers, letting staff go etc. Recommendations: When competitors highlight your client’s short comings talk about the strategies that your client is using and the success it is having. However, don’t overstate the situation and don’t keep repeating the bad news that is at the heart of the issue as this will only reinforce the point your competitor has highlighted.

4. During tough times it is tempting to say as little as possible on the basis that the media are likely to make a bad story out of anything your client does. Indeed it is all too common for companies to try and hide during recessions and then reappear when they finally have good news to tell. Recommendations: Don’t let your clients go completely silent. They must maintain an active dialog with the media to ensure a trusted relationship continues. The same goes for the blogosphere. When companies hide they make themselves an even bigger target.

5. In a downturn PR departments can sometimes see PR agencies as the competition. By that I mean that they fear that with budgets likely to be reduced they either need to cut the agency fees or risk losing their jobs. This is understandable but clearly unhealthy. Recommendations: Instead of spending hours trying to justify your existence, talk openly with your clients about the roles each party is going to play and the metrics upon which you will be measured. Ultimately you may still be a victim but professionalism goes a long way and will serve you well once a downturn has ended.


The new PR economy

Not long ago PR Week carried a news piece on the growth of the PR industry. This was based on a survey by the private equity firm Veronis Suhler Stevenson (VSS). VSS’s survey says that US PR industry produced revenues of $3.41Bn in 2004, a 12% growth over the $3.05Bn in 2003. The survey went on to say that Technology remained the largest sector, with 27.4% share. Tech PR posting its first growth of any year since 2000, with a 5.8% rise over 2003. Meanwhile the consumer sector posted a hefty 20.7% increase over 2003 now accounting for 25.5% of the PR market. The last, and perhaps most interesting point in the survey, was the view that the PR industry has a relatively bright future, forecasting a 10.1% growth rate in 2005 and an 8.9% growth rate for the next five years, on average.

At first glance this is great to read. It certainly matches what I think most agency heads are experiencing when it comes to market opportunity. In our case we far exceeded these growth levels in our last year, with our US business posting a 23% gain in revenues. These kinds of growth numbers are of course reminiscent of the dot com boom years and we all know what happened after that. While I’m still seeing a great climate for PR in the US I wonder if the growth curve is even. I suspect it is not. I suspect that what we are seeing is some agencies growing rapidly while others are in decline. The net effect being solid industry growth. I also suspect that within sectors we are seeing some very uneven growth.

The good news overall is that our industry is growing though. That growth is sparking new firms to appear, for example I noticed a new Tech firm being launched in Boston last week. The emergence of new firms is also a sign that people are seeing an opportunity to capitalize on a weakness in the market for a certain type of service. The current ‘weakness’ that seems to be on the lips of the founders of these new firms is ‘senior counsel.’ I’ll be blunt here, I think the real weakness is not senior counsel but value for money. Of course it doesn’t sound as appealing to say you are launching a new firm based around value for money but that is where the market is. The growth of the PR market post the dot com boom is different. In the boom it was a simple supply and demand problem. Now we have the same problem BUT we have both an experienced client base and the procurement factor. By procurement factor I mean that for most large clients that agencies not only have to convince marketing communications professionals of their credentials but they also have to persuade procurement departments of their value.

Welcome to the new PR economy.