Is PR heading into a downturn? Some survival strategies


Article for March issue of PR Report 2012

According to most economic commentators, Australia has a two speed economy and the outlook is one of moderate but uneven growth.  There are several factors at play: persistently high Aussie dollar, cautious consumers, edging up of unemployment and growth of e-commerce.

In other words, we are in for a bumpy ride, and if the European sovereign debt crisis worsens or commodity prices fall, well, things could really go pear-shaped.

What does this mean for the PR market?  It depends.  Those consultancies with resource or infrastructure clients are probably trying to hire people.  Those with retail clients or exporters may be feeling some pain.

Anecdotally, there has been some contraction in the PR market in Sydney and Melbourne already.  Many clients are unsure whether the economy is going to improve or worsen so they are sitting on budgets, waiting to see what will happen.

The old adage of PR being the first to be cut when the economy turns down doesn’t apply the way it used to.  During the GFC, PR budgets turned down but not as dramatically as they did when the tech bubble burst in 2001.

So, what’s likely to happen if there’s a downturn?

  1. 1.    A flight to quality: clients will seek out agencies that are proven performers
  2. 2.    Play it safe: clients become more risk averse and less likely to fund “big ideas”.
  3. 3.    Price cutting:  some consultancies will cut margins to keep or win business
  4. 4.    Focus on value: clients will want more out of budgets.  More creativity, better results, more cut through.
  5. 5.    Less to go around:  clients spend less, budgets are cut, and other consultancies come after your quality clients.
  6. 6.    Staff stay put: staff turnover in buoyant times is around 33 per cent, in other words the average length of stay is 3 years. Last year’s PRIA Registered Consultancy Group Benchmarking Survey revealed a turnover rate of 25 per cent; (average tenure of four years). Good news if you have a good team, bad news if you are trying to hire.


What are the strategies that agencies can use to protect their business in a downturn?

  1. Do great work, get results and show the value:  This is always true but even more so in tight economic conditions. And the best way to show value is to know what “value” means to the client in the first place.  Ask what success looks like and what the business impact of a successful pr campaign will be.
  2. Talk up PR: In the GFC client budgets flowed from advertising to PR.  Now budgets are flowing to digital agencies. As an industry, we need to defend and promote the value of PR to brands and organisations.
  3. Trim costs but don’t be cheap: Be cost efficient but don’t take work you’ll lose money on.  Let someone else lose that money.
  4. Pitch less:  Not as crazy as it sounds. Responding to an RFP can cost an agency $15- 20k in time with only a 25 to 33% chance of a win. Say no to the pitches where you have don’t a good chance and use this time to surprise, delight and grow existing clients.
  5. Specialise and do some thought leadership:  Blair Enns in his ‘Win Without Pitching Manifesto’ says that, expertise is the only valid basis for differentiating from the competition. How can your agency get even more specialised in what you do? What’s the thought leadership plan for the next six months?
  6. Add/deepen skills: when an agency is flat out there’s no time for training. With all the time you saved from saying no from the pitch you were going to lose anyway, what skills can the agency add or sharpen?.  For my money, the answer would be social media, social media and social media.
  7. Rightsize/Reshape:  take a hard look at the structure of the agency; a downturn is a good time to review staffing structure and client portfolio.
  8. Be ready for the upswing!  When things pick up you’ll need to be ready to hire and step things up a gear.
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