|March 23, 2009|
|Are Rate Cuts Hurting the PR Industry?|
|By Greg Hazley|
|Agencies are facing tough choices these days on how to cut costs and survive the tough economic climate that has settle over American business.|
We’ve covered the layoffs, office closings and the rest, but there is no one clear way to get through the rough times. In fact, there are widely divergent opinions on what moves should be made by an agency tightening its belt in order to do as little harm to future business and even the PR industry as a whole.
A study by USC last month estimated that a good number of clients reported PR budgets had been cut by 20 percent over ’08. That’s a lot of revenue to take out of agency coffers, especially considering our PR firm rankings released last week tabulated $1.7 billion in PR fees for 2008.
When I wrote a piece on odwyerpr.com about firms discounting their services and offering “bargain” services a few weeks ago, some readers blasted the idea as harmful to PR. One reader wrote: “I think this is unfortunate and further relegates PR to the realm of tactical, commodity driven vendors. PR is a strategic asset and needs to be valued. Creating "bargains" sends the wrong message.”
Morgan McLintic, an executive VP at Lewis PR based in San Francisco, wrote a blog post yesterday on “low-balling” – basically, when an agency cuts PR fees just to get some money coming in to make ends meet. “For the agency in question, short-term this can help cover fixed costs (mainly the rent),” he wrote. “But as an industry it’s bad practice. If you don’t value your own time, then clients won’t either.”
McLintic says that cutting fees pays the rent and therefore the practice is likely here to stay for the time being.
An Arizona PR firm this week said it was converting nearly its entire staff – 15 of 17 employees – to contract workers, sending them home with computers and office equipment (not to mention consulting jobs), but without health insurance and a place of employment. “We are transforming for the future,” the head of the firm, Leslie Perls, told the Arizona Republic. “You have to adapt or die. We are adapting so we can press forward with more great work.”
That’s clearly a better alternative to shutting down or swinging the ax.
But is it better for the health of the industry to lay off some staff than to cut your fees? Most seem to think so. Incidentally, McLintic's firm was up 30 percent last year, topping the $8M mark.
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