The Economy and Public Relations

I have been waiting for a post like this to comment on, but in PR Squared’s “Cut the PR Agency? Are You *Sure* About That?” — Todd Defren points out his first client casualty due to the economic uncertainly of the bad economy.  Todd writes:

It happened today.  The economic angst whacked our agency upside the head.  We now have our first example of a client who’s asked to terminate our contract “strictly as a precaution driven by economic uncertainty.”

It seems Sequoia Capital’s “Mandatory All-Hands CEO Meeting” last week, with its gloomy slide deck, has tech CEOs skittering for cover.  But folks who rely solely on the VCs’ slideshow to make crucial decisions do their companies a disservice: it seems there was a lot of other valuable conversation happening throughout the Sequoia event.

It goes without saying that if you are chasing dollars in the relations world right now — either internal or external — now is the time to really “sing for your supper” and proactively and consistently ensure that your value is evident to those who control your dollars, yen or scheckels.

Now I am not a CFO, nor can I really even balance my own checkbook, it it often seems that company bean counters take a dim view of public relations in a economic downturn.  Besides cutting back on internal communications, this is about the dumbest thing that you can do.

Todd sums it up pretty well:

“It is well documented that brands that increase (marketing) during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.”

This is a great, succinct argument, but as someone who worked on the agency side for many, many years (the first to be axed in a bad economy), one that often falls of deaf ears.

I’m curious to know others’ thoughts when it comes to the value of public relations in a economic downturn.  How do you establish and promote its value?

Mark

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23 comments
Round Mirror %0B
Round Mirror %0B

there are times that good public relations cannot be always achieved ,"~

Mark Story
Mark Story

These are great comments, guys. Lots of applied learning. Mark

Lindsey Brothers
Lindsey Brothers

To me, cutting PR is like wiping the company's name out of the press, where is the value in that? Today’s economy is a “customer economy” which calls for customer-to-customer communications built on trust, as John Karolefski, formerly the editor-in-chief of Brand Marketing magazine, describes. PR is a major player in this relationship – similar to the person that sets two people up on a blind date (really!). Just like the two people trusting the mutual friend, people value trustworthy organizations and trustworthy outlets before agreeing to buy, vote, act, (and go on the date). If I was told that Marketing would be getting the money PR is losing, first I would try not to roll my eyes, second I would explain that marketing is not based on two way communication and that in order to maintain a relationship with the audience, one must maintain building that brand’s relationship and perception and generate word-of-mouth support (the most effective marketing vehicle). I would also give an example of an organization that invested heavily in their PR department and tracked a specific campaign based on PR efforts. That example would be of Southwest Airlines and its launch of its flights to Philadelphia. Back in 2004 the airline teamed up with SEO-PR in hopes that it could generate ticket sales from revamping how their press releases were written. They determined what words were most important to their audience who were looking for flights to Philadelphia and included key words in the title, first and second paragraphs. They imbedded a special URL and distributed the releases using wire services crawled by news search engines. Over a 15 month period, Southwest Airlines was able to track $2.5 million in ticket sales to the PR department. Take that Marketing. Back to my point, there are plenty of reasons to fight those who look to save some pennies by cutting back in a PR department. I think that this is one of the first things to get cut because the C suite doesn’t fully understand the importance of PR. It is up to the PR department to establish why they are needed; this includes showing ROI and traceable progress.

Aimee Saldivar
Aimee Saldivar

Since I work in a retail store I have noticed the overwhelming amount of promotions that my company is pushing each day to allow customers to afford our brand. I agree with Adriana about when times are touch economically it's a crucial time for creativity. Regarding the comment from Mark and what would I do if the client mentioned they wanted to invest in marketing instead of PR, I would have to say that I would do everything in my power to keep them but also work with them to develop a backup plan. But I would have included this information initially in my strategic plan and my ideas/plans to accomodate them even if they were making cutbacks for their company. I would definintely stress that they would need PR more than marketing since marketing can be costly. Corporations usually cut indirect costs such as marketing and training before anything even though they seem to be the most crucial with advertising the company brand as well as individual development for employees. It seems like times like these will have companies "taking from Peter to pay for Paul" (however that is said). In order for businesses to make a buck, they are willing to cut the cost for their service just to make it.

Joe O
Joe O

Even though, in times of crisis/dramatic change, some PR efforts get the ax; I believe the PR machines must quickly counter by operating with astute relevance. If the theme of the news cycle is economic recession, then move like Wal-Mart did when they announced last week early price drops in toys and electronic goods weeks before holiday shoppers typically see that cut - and move fast! This not only put their name in the headlines for good, but will probably raise profits. Agencies have to do this too - but as Mark just stated, it seems harder for them to justify the retainer in rough economic times such as these. It's a sad realization of the times we're experiencing. Especially knowing that the Wal-Mart move would not be nearly as effective or effectively promoted solely by "marketing" (advertisements, direct sales efforts, anything else?).

Becky Richardson
Becky Richardson

In "Why PR Matters--and What It Can Do for You," Kevin L. Sullivan said that in his "role as a marketer in both large and small organizations, in diverse industries and fields," he "learned firsthand how public relations--when applied creatively and strategically--can be a low-cost but highly effective aspect of a successful marketing program." He said that he has "seen smart PR drive: *Three straight years of more than 60% revenue growth despite a minimal advertising budget. * Recruitment of more talented and experienced employees who otherwise would have gravitated toward larger, better-known firms. * Improved workforce morale and engagement. * An audience reach that would have cost nearly $3 million to achieve via advertising." Sullivan's case study would would strike me as an effective way to argue for "smart PR" in the midst of a very difficult economy.

Mark Story
Mark Story

Here's another one: what if you client came to you and said that they wanted to shift public relations budget away from YOU and into marketing? Mark

Mark Story
Mark Story

Everyone, I think that there are some good comments out there, but what argument would you make -- to your client -- when he/she came to you and said that they are "cutting back?" Would you argue, plead, beg? How? Mark

Heather Lovett
Heather Lovett

Like Todd pointed out when he counted the ways public relations should be the LAST thing you cut, the public relations firm is ALWAYS listenening and responding. At a time where everyone is freaking out and reacting irrationally, who wouldn't want someone to have your back? With all the chaos an inhouse person would be too distracted to clear all the corners. I think it is a horrible idea to cut your public relations agency, but I can also sympathize with their concerns. Todd pointed out this is a time to pound your competitors. They will be hurting and quiet. Promoting your brand at a difficult time would show me, as a consumer, that I won't regret investing in your product.

Mia
Mia

I've always been a firm believer that "your work should speak for itself." So I imagine a Public Relations firm with a reputation that precedes itself, is guaranteed money in the bank despite an economic overturn, right? Maybe not obviously, but eventually...possibly? People will pay for quality and I would think that in the PR world there are no substitutes. That's like buying store brand cereal instead of General Mills because it's cheaper; not that there's anything wrong with that but if you're accustomed to a certain quality it's hard to bend the other way or not bend at all for that matter. My boyfriend and I argue about this all the time. He tells me, "Mia it's the same thing, you're just paying for the name." Well in the case of public relations, is that such a bad thing? If I'm paying for the name and I've been satisfied with the product, why change? Why terminate the "relationship" because of cost? They've (meaning the brand or in this case PR firm) essentially done their job in every aspect; won my business and respect and as long as they continue to deliver the quality I've grown to accept and love, I should and will remain loyal. In regard to Mark's question, if a PR firm has delivered promising results in the past, and there is a need for the services (be they dire or not) money shouldn't be the issue no more than that same PR firm establishing and promoting themselves to gain business. No matter how you slice it, most know but won't readily admit, that PR is very valuable and you just simply can't cut corners.

Mame
Mame

I’m curious to know others’ thoughts when it comes to the value of public relations in a economic downturn. How do you establish and promote its value? Mark Really interesting topic, I've enjoyed reading everyone's responses. I think public relations becomes even more valuable in an economic downturn as people are not sure what and who to depend on and maintaining a consistent relationship offers people the chance to rely on your organization/company no matter what the economic situation is. While I think more conservative efforts should be made (basically, not taking a plunge into brand new strategies), continuing public relations efforts is vital as organizations depend on the relationships that it helps to create. In backing this up, measurement - as Paine would be pleased to hear - is what public realtions practicioners can use to prove the effectiveness of their efforts and the need for continuing to keep the organization's name in the marketplace.

Shilpika Das
Shilpika Das

I think Todd Defren makes a compelling argument. I'm not sure if I agree that agency PR is more cost-effective than in-house PR. Not all companies have the resources to afford a big PR agency and sometimes an effective mix of internal and external resources works just as well. Eliminating all public relations functions entirely, though, is definitely not the solution. Perhaps, the company can start by re-evaluating its goals and public relations objectives. The main objective, I guess, would be to maximize exposure in the most cost-effective way. I think Defren makes an important point about SEO – an important resource, which is often overlooked and underutilized. SEO is both cost-effective and measurable, which makes its an important tool in the current financial climate. I think more companies should be using it to their advantage. PR specialist Anthony Mora makes an important point about using the downturn to your advantage: "You have media outlets that are looking for stories, particularly some good non-doom and-gloom stories. If you're a savvy business person you know this and understand that this is precisely the time you can have a greater impact and get a bigger bang for your buck." Also, with the economy spiraling south, companies are increasingly reluctant to pay a PR agency for a campaign that may or may not result in measurable results. Martha Friedman, CEO of Event Management Services Inc. has developed a different business model to tackle the issue – one that may be an alternative to being axed completely. Friedman says, "While most PR firms want to be paid for the entire campaign procedure, the philosophy of our firm is to only get paid for the media exposure we obtain. We developed a fee structure based on the delivery of radio and TV appearances, which forces daily focus on the end result instead of the process. Let's face it. In this economy, when it comes to PR, clients are hungry for tangible results." What do you think?

Mark Story
Mark Story

Adriana, I love your anology. Would you mind sharing the article (if it's online) with the rest of us? Thanks.

Claire C
Claire C

Todd's reprinted quote from HBR is pretty provocative. Such financial crisis is arousing fear, laid-offs and cutbacks, PR, which doesn't achieve immediate results compared to other sections, became one of the first victims as sacrifice under the economic downturn. First of all, it's certainly dumb to slack PR like that without serious contemplation. Such "solution" might help out with current or short-term financial deficit, the damage behind such act is yet long-term and hard to be fixed. PR should be considered a required vehicle for a more successful business. rather than an "extra" that could be excluded when on a tighter budget. Secondly, what we've been learning, the measurement of PR, is definitely a solid proof for PR professionals to persuade these CEOs. It's time to make a good use of the accomplishment that could takes a few years of efforts. Third, it's also critical to let these CEOs know that we're aware of the economic situation and we're willing to make alterations to our PR plans based on our affordability. By the way, just a thought; since crisis communication is an important element of PR, I'm thinking PR should be playing a even more relevant role during this tough time as some other side-effects caused by this economic downturn might occur.

Emily H
Emily H

Apparently we all agree that Mamie had a very important point about how PR agencies have to prove that they are relevant. Agencies can use many of Paine's measurement tools and tactics. They need to be proactive in showing their importance, especially in a time of crisis. On another note, I recently read that a few "gutsy marketers" were successful in building their brand and market share during the Great Depression. Their competitors were struggling but since a handful of them were proactive in creating new business, they turned out to be very succesful; in the hardest of times. In the process, iconic brands were created. That is proof that even during the Great Depression, people relied on PR agencies and they were still relevant and important. It is important to step up both marketing and PR efforts during an economic downturn. If clients do have a large budget cut, there are ways to be creative but still keep a PR agency. In my opinion, if clients cut their PR agencies and do everything in-house, they will not have the man power or time to have a sucessful PR program.

Mike Rupert
Mike Rupert

Is any public relations professional really going to say "No, you're right. Fire me now. Thank you."? But while new campaigns may be out, branding and other pr-type functions remain alive and well. And even during down times, brand value can be priceless. Take Bank of America which could have bought Merrill Lynch for $10-$20 billion if they had waited less than 48 hours for the company to go bankrupt. Instead, per the CEO, they paid $50 billion to avoid the bankruptcy publicity and negative affects on the brand. That's a $30 billion weekend PR campaign. I think the agencies who do the less "heavy" PR can be cut for a short period. And the focus needs to be on grass roots, "sweat equity" PR. It's easy to say spend during down times, but sometimes the cash just isn't there.

Anca Bilegan
Anca Bilegan

In my opinion, during an economic crisis it is better for PR to focus on maintaining its value among present costumers as getting new ones seems to be difficult at a time when everyone tries to cut expenses. Keeping your costumers satisfied during this time it’s a safe way of securing new clients in the future. When it comes to establish PR’s value during economic downturns, I also believe it can be done by making use of past accomplishments. If we can show how PR helped to overcome a past crisis, we can argue that it can do it again.

Adriana Gallegos
Adriana Gallegos

I was just reading an article about advertising during the Great Depression and I was surprised to find out that some companies advertising strategies worked out really well. Some of the text of the article said, "It was a time when several companies benefited from aggressive marketing while their rivals cut back. A good example of that would be Kellogg besting C.W. Post during that time. Consumers didn't stop spending during the Depression; most just looked for better deals, and the companies providing those better deals came out stronger after the Depression ended. When spending picked up, consumer loyalty to those companies remained." If you can launch a campaign about how consumers can save money I'm sure you'll have great success. I think one lesson we can all learn from this crisis is that we need to learn how to budget and cutback on things that are unecessary. We need to carry that philosophy into pr. For example instead of spending millions on press conferences maybe you can be more creative and do something online which is free. This is a time to be creative!!

Carol
Carol

I agree with Mamie, it is improtant to have a measurement established in the begining in order to have evidence of its success in the past and to show that it is the best option for the company in a time of crisis as Katie Delahaye states throuout her book. I feel that PR is most needed in a time of economic downturn because it can help the company keep its customers informed and give them confidence that they will not be let down. Specially in a time like this people want to be kept informed to keep an eye in their investments. Allowing to have good PR and keep the customers informed of the situation will keep them a bit calm and build confidence in the company. In the long term affects as Katie also talks about; building trust.

Becky Richardson
Becky Richardson

Todd Defren’s points about the importance of PR are effective and compelling (1. Agency PR is more cost-effective than in-house PR. 2. The PR firm is always listening and responding. 3. A PR agency also grants access to the wickedly expensive media databases (Cision, Profnet, etc.). 4. PR “feeds the beast” of SEO by ensuring your company’s content shows up in both Social Media and Mainstream Media channels. 5. PR provides air-cover for the Sales team.). Importantly, I think Mamie hits the nail right on the head—-measurement is a critical (complementary) component for making the case for PR in a difficult economy. K.D. Paine touches on this point in her book while comparing her client with three other companies (“competitors”) during a two-year time frame—the companies had been on relatively equal footing. She said, “But at a certain point the client’s results took a dive; all of a sudden its share of ink dropped to about 2 percent. I presented the results and asked the audience what happened. The answer: ‘That was when we reorganized and eliminated our PR effort.’ I replied by demonstrating that, in the months following the reorganization, the market had had about nine time more opportunities to see news about the competition’s products than their own. That seemed to do the trick; the last time I was in touch, the PR staff had grown to about ten people and their budget was increasing every year.” K.D. Paine used measurement to prove the value of PR to her client.

Thira Sannikorn
Thira Sannikorn

I don't think that cutting PR on economy uncertainly of the bad economic is the solution for improving market share or investment. PR is about measuring the value which it is very important to reach the objective for every company. As Paine says that PR is the process of building and enhancing relationships with key constituencies, I do believe that good relationship with each client can benefit the organization. Therefore, I would say without PR team, companies cannot build strong relationship with others. As its definition said Public Relation is about recipacal relationship, so it can tell that PR is important to every company.

Mamie L.
Mamie L.

This goes to show how corporate executives view the value of public relations. I think that it is important for any PR rep or agency to always be proactive about establishing and promoting its value to companies. This is why K.D. Paine's measurement is so important. If measurement is used early on in all PR efforts, then all documentation and numbers can be used proactively, especially when your agency is about to be axed, to prove the value PR, and therefore the agency, has to the company. If we can argue the impact that PR has had, both in the past for the company and in economic downturns for other companies, then it is easier to prove that keeping PR is important, especially in the long-term.