August 31, 2007
What Are the Biggest Challenges and Opportunities Facing PR Agencies Now?
In the spotlight this week: Leading agency-side PR execs
The agency business is booming. New opportunities abound. But along with the promise, potential and rewards of running a PR agency these days come significant new challenges and risks. The good news is you're not facing these issues alone. You can learn best (and worst) practices from colleagues and, yes, competitors sometimes just by asking.
That was our thinking behind this and next week's Thought Leader installments. We asked a handful of top agency-side execs for their quick take on the biggest hopes and hurdles they see on the horizon. While these PR vets and others will be delving in greater detail on these (and many more) issues at Bulldog Reporter's NYC PR Agency Management Summit on September 27 and 28, this digest of their responses below should give you a practical peek into what it'll take to prosper in the year(s) ahead:
Cofounder, Managing Partner
Off Madison Ave
The biggest opportunity for PR agencies right now is that the way marketers are marketing is totally changing. The days of using traditional marketing tactics—TV, radio, print ads, outdoor boards—is rapidly changing. Much more emphasis is being put on alternative ways of marketing. This shift has put a renewed evaluation of how public relations can take on a much bigger role in the marketing mix. We are also seeing a major merging of public relations and the Internet. We are seeing a major merging of public relations tactics and the use of internet marketing tactics.
Without a doubt, the biggest challenge is keeping up the rapid pace of change. Another major challenge is finding a skilled and knowledgeable workforce to guide agencies through this transformation.
M Booth & Associates
Marketers are frantically trying to reach their consumers with laser-like precision—attempting to engage them in "intimate" conversations that result in building brand equity, choice and loyalty. Advertising, online, promotion and public relations agencies are all trying to get a piece of the action. There's a huge opportunity for public relations agencies to assume the leadership position in creating innovative, integrated campaigns that start these conversations, keep them going, and result in a measurable up-tick in business for the brand.
The flip side of not stepping up to the plate and becoming engaged in the broader marketing mix is that public relations agencies will be left with smaller budgets, holding only the "media relations" bag. Marketers are looking for a lot more. Public relations agencies must reinvent themselves with the skills, knowledge, and people power to provide broader, more measurable services to stay relevant.
President & Chief Executive Officer
We have the chance for the first time in history to be the primary source of ideas for our clients. For years, ad agencies have been the first stop for creative concepts, but given the changes in the media environment, that is no longer the case. The walls between the various communications functions are crumbling. Clients are looking for new ways to reach their audiences and they don't care where those ideas come from. This is a big opportunity for PR firms to move into the driver's seat and deliver thinking on a scale that transcends the media relations concepts that have always been our purview.
As for challenge, we need bigger brains and bigger b___s. If we are going to seriously challenge the other disciplines for creative leadership, we will need to expand the way we think. To be successful in the future, PR people will have to venture way outside the box we have been in for so long. The focus on creativity must apply to our existing people and those we hire. Like ad agencies before us, we must begin to recognize, nurture and reward creativity the same way we have things like writing and media relations in the past.
We will also have to have more courage—courage to present our clients with truly big ideas that transcend specific disciplines. We can't be afraid to recommend integrated campaigns that include advertising, online, promotion, direct response and, of course, PR. If we can be bolder in our thinking and our approach to communications, we will become the ones that companies turn to for innovation and fresh ideas. PR people are just as creative as advertising folks, we just don't realize it.
PR agencies that are going to grow and succeed will build client confidence in our strategic counsel and our ability to project our clients' voices in an increasingly cluttered environment. As long as we are seen as media-centric, a fair criticism in many cases, our opportunities will be limited. Most firms have an opportunity to expand their capabilities and focus on problem solving for clients rather than media relations as a one-legged stool. Specialization will continue to be the fuel for growth at the most successful firms.
The biggest challenge: Many PR firms—and perhaps professional services firms in other industries, as well—fall short of delivering value because they fail to think strategically and solve problems. They focus on the tactical execution and the "creative" solution when very often they need to ask "why?" We need to understand our clients' businesses, not just their advertising and marketing strategies. We need to reward people for subject matter expertise, not merely media placements or activity. Our focus needs to be on value created to the client.
Public relations firms have an opportunity to be trusted advisors to C-suite executives who don't know what to make of the world of fragmented media. Questions include: "Should I worry about this blog post?" "What about the YouTube video?" "How can the Internet change the way we operate and give us a competitive advantage?" Corporate communications departments may understand these issues. But they are increasingly stretched thin merely responding to internal requests. Agencies can be a step ahead by understanding this new world and being prepared to advise their clients on the threats and opportunities of it.
Finding talented employees remains the greatest challenge. We've recently begun reaching out to business schools. Schools of journalism or communication have provided great talent, but we increasingly need employees who have a more seasoned, sophisticated view of the business challenges of our clients.
Roger M. Friedensen
The Catevo Group
As is so often the case, the biggest opportunity we face may well also be among our biggest challenges. The continuing explosion of potential communication channels to reach stakeholders coupled with increasing globalization and diversity in our culture demand that someone help make sense of the clutter. And few are more qualified to help make sense of this chaos than public relations professionals who can assess, analyze and solve complex problems through the careful application of time-tested communications theory and practice.
While it's hard to select just one "biggest challenge" from among the "biggest challenges" we face (let's see, take your pick: globalization, increasing competition, the splintering of traditional mass media, the growing power of procurement departments, misunderstanding of public relations' role, etc.), one of the most serious challenges we face revolves around the need to evolve. None of us likes major change in our lives—at home or the office. The fact is, though, that—just as at every other point in human history—the world is changing and we must evolve to help manage those changes for our clients and ourselves.
As one of my colleagues and mentors, Mike Herman, APR, Fellow PRSA, likes to say, we all need to reinvent ourselves every seven years or so whether we want to or not. That means thinking differently about what we do, how we do it, why we do it, when we do it, where we do it and with whom we do it. We help our clients evolve their businesses through innovative actions that shake up the status quo (mergers, acquisitions, reorganizations, new products/services, strategic partnerships, etc.); we need to do the same.
There are a number of small agencies which have come about in the last few years who are reaching the $2 million-$5 million level in revenues, and their ability to grow and manage the business requires them, in many instances, to look for a partner—more often than not, this means being acquired by mid- to large-sized agencies.
In many cases, their uniqueness lies in their knowledge and expertise of programs involving all things Web 2.0, online and e-PR activities. And most of the large PR agencies are looking to expand or enhance their expertise in these areas. So it can be a win-win situation for both sides. In addition, new concepts in digital delivery of messages is very much a part of the ad world as well, making these same PR boutique firms very attractive to ad agencies looking to incorporate innovative online solutions into the overall marketing mix.
The biggest challenge is getting senior managers, who have been in the business for over ten years, to become fully acquainted with the newest Web 2.0-based tools, strategies and solutions required to handle public relations issues now and in the coming years. Key to this is more psychological than anything else—altering the mind set and attitudes of PR "vets" so that they are fully aware of and open to ideas and techniques to reach target audiences through innovative Web 2.0 approaches. Making it a challenge, not a chore!
This also requires smart hiring of X and Y-generation personnel, who must be pre-disposed to working with senior managers as part of a collaborative process. Only if senior mangers realize the benefits of incorporating new technology and methodology into their agency's new business-initiatives, will they be able to "sell-in" program strategies to current and new clients.
The biggest opportunity facing PR agencies right now is that of becoming true entrepreneurs. With all the wealth of information on benchmarking and financial management, today's CEO has no excuse for not striving toward a minimum of 20 percent profitability. And with tight management, more aggressive billing, control of labor costs and improved productivity, the possibility of a 30 percent operating profit is within reach.
The biggest challenge facing PR agencies is staying up to date with the ever-changing technological and new media advances. This puts additional pressure on the agency to generate a strong bottom line so these major capital costs are affordable.
Today's proliferation of information sources creates new opportunities to build trust in corporations. Any group of people sharing an interest in a company can connect via the Internet. As a result, there is an opportunity for us to help our clients to directly interact with these communities and directly impact our client's business rather than going through the media.
In term of challenges, PR is in a trust crisis—with its audiences and with its buyers. Audiences are feeling overloaded and intruded upon. They look for more relevant information and new technologies empower them to get it, without depending on the media or traditional sources of corporate information. And PR buyers are looking for more return on investment. Getting coverage is not enough when you have the suspicion that your audiences don't listen to the messages you pushed out.
Makovsky & Company
The biggest opportunity is the rise of social media and the resulting new venues for our clients to dialogue with their most important constituencies. We're now operating in what may be the most dynamic and transparent business environment in human history. Institutionalized authority is being replaced with the authority of peers as a valued source of reliable information about a company. In fact, according to a recent study by Intelliseek, people are 50 percent more likely to be influenced by consumer-generated content on the Web—which is perceived as the equivalent of word-of-mouth from peers—than by radio or television. These new "citizen experts" are the wave of the digital future. Their advice is trusted because it is perceived as independent. Our Online Fluency practice, which was established to uncover new uses for the internet, serves as a laboratory for us and our clients in this area on what works and what doesn't.
Our biggest opportunity is also our biggest challenge. It's up to us to educate our clients in the executive suite about the potential of the new social media to help—and to harm. But first we need to educate ourselves. Not enough of us have the expertise needed to provide client education; the opportunity to champion the social media territory is open for the taking. With our content orientation, we are the logical ones to lead this.
Providing limitless choices, the Internet enables people to gravitate towards the niches that best satisfy their idiosyncratic interests, so it's a great place to reach them with the messages that matter to them. Shockingly, the vast majority of executives of the biggest corporations don't understand this! For example, our "Makovsky 2006 State of Corporate Blogging Survey" revealed that barely five percent of top Fortune 1000 executives were convinced to "a great extent" that corporate blogging is growing in credibility as a communications medium.
The second biggest challenge facing PR agencies: Recruiting, retaining and energizing the very best professionals. It's a fundamental, ongoing task, because ours is a talent-driven industry.
The biggest opportunity across the board is leveraging the enormous impact of the Google revolution on the practice of PR. This is also the biggest challenge. Agencies run the risk of losing control of information flow about their clients at the same time that consumers—both B2C and B2B are enthusiastically adopting the tools of search engine-based information gathering. When did the balance in information management decisively tip to the consumers of the information? The first time your grandmother said, "Let me Google that."
Partner and Director, NY
Ketchum Public Relations
As the media landscape changes, the "authentic voice" public relations speak with has elevated the discipline's status. Marketers today are looking for the best ideas and most effective means to influence a consumer's opinion no matter which discipline they come from. We are poised for growth if we adapt our capabilities to capture online media and word-of-mouth and effectively expand our ability to create effective surround sound for consumers. The marketing world is becoming consumer driven and the power of influence is no longer one way communication, but must become a two-way dialog. Public relations is poised to lead the dialog.
The biggest challenges facing the industry today is that competition is coming from all sides. The advertising, interactive and marketing disciplines are all looking for new ways to reach the consumer and claiming expertise in the public relations space. We seeded website development which would have been a natural extension to corporate public relations years ago, and the key question is will we adapt fast enough or seed some of our capabilities to other disciplines.
Davis & Gilbert, LLP
There is presently a tremendous amount of M&A activity in the PR industry, and owners of PR firms should realize that they have a tremendous opportunity to cash out, expand their own company through acquisitions or find a good merger partner to take their company to the next level. As for challenges: retaining and attracting talent.
For the past two years, industry leaders and influencers have utilized every available platform—conferences, seminars, award ceremonies, roundtable discussions—to articulate their thoughts and opinions on opportunities facing the public relations discipline. The significant growth our industry has experienced during this period would have you believe we're all visionaries.
The truth is, however, there are many reasons for this growth and opportunities are clearly abound for all agencies willing to make a significant strategic investment in key areas such as digital and emerging media, proprietary research and competitive intelligence. With the proverbial door wide open and the industry properly seated at the table, there needs to be a greater commitment and reliance on preparation for the discipline to sustain this growth.
The playing field has gradually been leveled amongst all marketing disciplines and therein lies the challenge for all public relations practitioners. Agencies must take a more strategic approach to counsel and program development to ensure every value-laden solution is rooted in thorough insight into the client's key constituents. In order to advance a strategic vision, management must be prepared to deal with the challenges associated with building and leveraging intellectual capital. This involves a significant commitment to develop a deep and diverse staff, be it through professional development or recruiting new talent. This level of commitment will advance an agency's strategic performance and result in the achievement of a measurable and positive impact.
Vice Chair & Chief Creative Officer
Biggest opportunity: The rise of Web 2.0 and its impact on PR. This new source of consumer-generated news and information both competes with and complements traditional media. Related to the rise of Web 2.0 and the advent of consumer-generated content is the notion of treating consumers as "co-brand managers" and engaging them directly with the brand as part of brand-building efforts. PR agencies should be leading clients in helping them to embrace the Web as a platform for achieving their business goals and objectives.
The biggest challenge: Again, related to the rise of Web 2.0 is the need for PR agencies to insinuate/position themselves strongly as the lead resource to help clients embrace and leverage the Web as a platform to communicate directly and efficiently with all of their many stakeholder audiences. PR firms are now jockeying with advertising agencies, interactive firms, media buying firms, direct marketing firms, among others, for this lead agency role with clients.
President and CEO
5W Public Relations
The complete changing nature of the media business is our biggest opportunity. Whether it's MySpace or YouTube, which have now become media outlets, or the death of the traditional advertising model, PR agencies have a huge unique opportunity at this time to fill that gap. I expect PR will continue to grow tremendously quickly.
Our biggest challenge is the lack of talent—smart, focused strategic counselors are at a premium, and more talent is needed in this industry. We need better folks representing us throughout the industry.