Orange County’s public relations firms continue to adjust to a new reality.
The economic downturn a few years ago has forced them to work smarter and be more flexible for budget-conscious clients.
In some cases, that’s meant slashing full-time staff in favor of using freelancers on a project basis. In other cases, it’s meant scrapping long-term retainers and fees and giving clients month-to-month bills.
OC’s firms say they’re optimistic about business despite the challenges.
The Business Journal asked executives for their take on some issues, including their outlook for the rest of 2005 and 2006, and the biggest hurdles they’ve faced during the past year.
Here’s a look at their edited responses.
What is your outlook for the rest of the year and 2006?
RALPH RODHEIM
President
Rodheim Marketing
Costa Mesa
This year I have found a very different business climate from the past several years as it relates to marketing and public relations. And I believe we will continue to see this trend continue through 2006 and into the future. The trend is that companies are shying away from long-term retainers and large fees.
JOAN GLADSTONE
Gladstone International
Laguna Beach
The outlook for the rest of this year and 2006 is very promising. We are experiencing a steady increase in work from long-term and new clients. In addition, our media training business is growing and we have added a presentation skills training program.
HILARY KAYE
President
Hilary Kaye Associates Inc.
Tustin
After a slow start, the 2005 work volume has been increasing steadily and rapidly. I was happy to see that our billings this past month were the highest they’ve been all year and it looks like the coming year will be the best we’ve had in quite a few years.
KIM LONG
Managing principal
Echo Media Group
Echo Media Group has had a stellar year. We expect to realize an increase in gross billings of approximately 30% and an increase in annual profits of about 25% over last year.
STACEY DOHERTY
Public relations director
DGWB Advertising & Communications
Santa Ana
The remainder of 2005 and 2006 look great. The PR group has been in existence for 18 months now, has moved past the startup phase and is really starting to gain momentum.
MADELINE ZUCKERMAN
M. Zuckerman Public Relations & Marketing Newport Beach
My outlook on our business is very positive. The economy is solid and we are seeing companies spend on public relations and marketing again. They have held off for several years, and let their programs lapse, and now they need these PR and marketing programs to drive their businesses.
DAVID PAINE
Chief Executive
PainePR Inc.
Irvine
We expect the economy to continue to be strong. The market for PR services generally is increasing. Clients are continuing to look for alternatives to traditional advertising.
MELINDA MORGAN
President
Morgan Marketing & Public Relations LLC
Morgan Marketing has had another strong year of solid billings. The outlook for 2006 is strong with the acquisition of several key accounts.
BONNIE GOODMAN
Executive vice president, general manager
Hill & Knowlton
Irvine
While the economy still remains relatively unpredictable, our outlook for our Orange County office remains positive.
What’s the biggest hurdle your firm faced in the past year?
Gladstone of Gladstone International
Our client workload grew rapidly this year so our biggest challenge was to find seasoned consultants to add to our team. We asked the members of our existing team of independent consultants to spread the word that we were growing. We nearly doubled in size to the equivalent of 16 consultants in 2005.
Kaye of Hilary Kaye
We were fortunate not to have tremendous hurdles this year. However, earlier in the year, we were challenged by a sudden downturn of work. A small-cap public company that was a long-time client discontinued our relationship and hired an investor relations firm, asking them to concentrate on investor relations and do a little PR, too.
In the same time period, two other clients “downsized” their accounts due to their own internal situations,one was weather-related (prolonged bad weather greatly reduced sales and thus their operating budget) and one was related to insufficient capital for expansion. As a boutique-size firm, having several accounts in flux at once is always a challenge.
However, we always manage to keep a good PR team together and do not rely on layoffs when changes occur. In this case, within a couple of months several new clients replaced the one that left and one of the downsized accounts already has returned to full-strength.
Long of Echo Media
Echo Media’s biggest hurdle this year has been managing the amount of new business leads. Our entire staff has worked together to establish realistic and strategic guidelines for profitable growth, while at the same time making sure we can respond effectively and efficiently to the needs of our existing clients.
Doherty of DGWB
Our PR practice was new, so there was definitely a ramping-up period, which is exciting and challenging at the same time. We were persistent though, and now we have several retainer clients and many project clients. Clients have an increased appreciation for PR and other non-paid elements in their marketing mix. They also are beginning to better understand the importance of having PR executives involved during the strategic planning phase, and not viewed as just tactical executors after the campaign is developed.
Zuckerman at M. Zuckerman
We really did not experience any hurdles, other than finding good, quality applicants to implement the work.
Paine of PainePR
Managing our growth. When you do grow it presents a whole new set of challenges.
Morgan of Morgan Marketing
The biggest hurdle remains the recruiting of experienced, qualified, creative, high energy PR professionals that are solid with their writing and media placement pitching skills. We’ve developed a detailed hiring and selection plan to help identify those who are a good match.
Goodman of Hill & Knowlton
Our business centers on having the best staff and providing them with a strong, productive work environment, which includes cultivating great client opportunities, providing training, opportunities for career development and a sense of culture. While staff changes are a challenge in our business, we were able to quickly turn our transitions into a positive by hiring a number of new players and providing opportunities for a number of staff based in Irvine to take on new responsibilities.
Recent years have made clients more cautious and demanding. How has that changed or impacted the way they view public relations?
Rodheim of Rodheim Marketing
Companies still realize the importance of marketing and differentiating their products and services from the competition. However, they are looking for PR/marketing companies who can offer expertise in their business sector. They are (also) looking for experienced senior level professionals who will work on projects.
We listened to our clients and have adopted a new business model where we are using 25 to 50 preferred professionals. These are the best and brightest in their fields and are willing to work on projects. So far our clients have accepted this model, they are getting even better service and most importantly results. We have reduced full-time staff that comes to the office eight hours a day and greatly increased preferred professionals who come to the office on an as needed basis, but do a lot of the work from remote locations. This has enabled Rodheim Marketing Group to expand our services nationwide.
When I founded Gladstone International in 1989 I found that our early clients preferred working with us on a project versus a retainer basis. We have continued to work on a project basis since then. What this means is that we bill for actual time incurred, not a monthly retainer. Today, more public relations firms are adopting project-based billing. Public relations activities tend to ebb and flow, with peak periods around special events, community outreach and especially crisis communications. I believe this trend will continue regardless of economic factors because project based billing offers clients greater flexibility and accountability.
Many companies certainly are cautious with their budgets but this has actually worked in our favor in some cases. Several new clients were thinking about using more expensive marketing strategies but decided on public relations as a more cost-effective method of achieving both visibility and credibility at the same time.
Looking back on the year, I can think of several situations where clients decided to focus on PR because of this cautious attitude. We can make a lot happen, using modest budgets, compared to many other marketing techniques.
I think in the post-dot-com, post-2001 economy, clients are more aware of the impact a successful public relations/media relations program can have on quite literally every aspect of their business. Established PR practitioners have become trusted and respected confidants and advisers to the executive management level of many companies, public and private.
While “business” may be facing a tighter economy and more restrictive budgets, I think executives who are knowledgeable about corporate communications are finally realizing that public and media relations can be as, if not more, effective than traditional forms of advertising and marketing.
Clients seem to have a general understanding that PR offers tremendous value and a benefit that no other marketing communications element offers: third-party credibility. They also see it as cost-effective compared to other marketing options.
The ability to measure results is critical. We work with our client before a campaign begins to determine what variables will be measured and will determine success. Clients also have a better understanding of the importance of integrating all of their marketing communications efforts, including PR, into one cohesive campaign.
Public relations always needs to be accountable. We have systems in place that make my agency very accountable to the clients. They see on paper what the public relations is doing for their business, products and services monthly.
Generally speaking clients tend to be more open to PR, not less so. They understand the value of it. As PR matures as a discipline, clients are understanding it better and appreciate it more.
At the same time they’re challenging PR firms to offer more innovative services than they’ve done in the past. PR firms aren’t going to be able to survive by just offering media relations and publicity. That’s becoming a commodity.
The majority of our clients have long-standing relationships with us,so they continue to be demanding with high expectations and deliverable results. Our continual challenge with our creative responsibility is to move the mark and provide new ideas to support our clients’ growing businesses.
We continue to work closely with our clients and their communications teams to determine the best and most cost-effective solutions for them. In some cases, we have seen budget increases, particularly as campaigns are integrated into a larger whole and are able to be measured in a way that helps evaluate the company’s return on investment.
Are you seeing an increase in clients’ PR budgets?
Gladstone of Gladstone International
Most of our work is related to issues and crisis management. Clients are more sophisticated today and are willing to allocate budget to developing and implementing plans to manage issues and crises.
They know that how they handle an issue or crisis will impact their reputation with employees, customers, shareholders and others for many years to come. As a result, organizations are more willing than ever to make a commitment to fund strategic public relations programs.
Kaye of Hilary Kaye
We work with clients from the emerging growth stage up to established, midsize companies. And, regardless of the year or the state of the economy, I am still looking for the company with the extravagant PR budget.
However, when we demonstrate that the right kind of media coverage produces the right kind of results for them, they often maintain or even increase their PR expenditures.
Doherty of DGWB
Yes, there seems to have been a slight increase in PR budgets in the past year. I think more companies are making investments in PR as they start to realize the powerful role it can play in the overall marketing mix.
Zuckerman at M. Zuckerman
We are seeing a definite increase in budgets. Clients several years ago pulled some of their budgets back, and eliminated doing some PR and marketing activities because they preferred to be cautious. Now, we are finding that they know in order to drive their business and sales they must do some public relations and marketing.
A fair number of my clients have also decided to take budgets away from advertising and put these extra dollars into public relations.
Paine of PainePR
Clients have generally been a little more willing to spend money on public relations. I’m not certain if it’s because PR budgets are being increased or if we’re getting more of the marketing dollars.
The other reality is in OC the market has changed dramatically. If you look at the top agencies today, most are owned by publicly traded companies. Twenty years ago none of them were. It’s become more challenging for smaller independent firms here to win and hold onto accounts.
Goodman of Hill & Knowlton
It’s true that companies remain cautious about the economy. Their ability to increase or sustain current spending levels clearly is related to their overall performance. However, some companies have shown an interest in investing dollars in outreach,particularly on the consumer side,in order to maintain market share and stave off competitive influences.
This is particularly true in certain industry sectors key to Southern California, including digital entertainment, mobile communications, sportswear/sporting goods among others. Again, many of these companies are looking to public relations as part of an approach to building brands and building share in a way that navigates clutter and puts the power of information more directly into the hands of the consumer, in ways that traditional advertising has not been able to do.
