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.
As the economy continues to struggle forward I was reminded today on two occasions how easy it is for a company to lose customers through poor service. The first came when a technician came to ‘fix’ our washing machine at home which is all of six months old. He left after an hour saying he needed a part to be shipped and would return in 10 days!!! Now he could have handled this well but he laughed when asked if he could perhaps come back sooner given we have three young kids and rather need a machine. So lesson one here was don’t buy a Whirlpool Duet washing machine and expect it to last and lesson number two was you can expect lousy service when it does break.
My second encounter with poor service was with WalMart. I want to buy my son a Star Wars chess set. Searching online I noticed WalMart has them in ‘Limited stores’ but not online (odd I know). I called our local store with the WalMart product number in hand. First they put me through to Toys where the first person I talked to had no clue what I was talking about. The second person said I needed to talk to customer service and that he’d put me through. After three rings the line went dead and I was cut off… I called back and asked for customer service. This time the lady asked me for the product number (she actually did this twice) and then put me on hold for twenty minutes, after which I hung up and gave up. My son will have to wait I decided.
In both cases I could have come away feeling people were doing their best and I would have been OK with the outcome. Yet in both cases I encountered people that never once put themselves in the shoes of the customer. Doing this in times when the economy is doing well isn’t good but you may survive. Doing this when times are tough is asking for trouble. Customers will walk away and never come back. For PROs this is something to consider. You will quite often be dealing with less than good news in the next year BUT you can make the experience of dealing with that news a whole lot better if you for a moment put yourself in the shoes of the person you are dealing with and imagine how they may react. Think customer service.
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.