Reasons for Optimism

by Richard Edelman, President and CEO
  • Statements
31. August 2017

It has been a bleak summer for the PR industry. The layoffs of senior executives at Hill+Knowlton focused on regional and practice leaders, moving toward a single U.S. P&L. Ketchum did its own layoff across North American offices in mid-July, with cuts at all levels, as the PR sector at Omnicom shrank by .3 percent in the second quarter. Put this on top of the Omnicom decision to combine leadership in each geography in Europe (thereby eliminating local CEOs in two of three agencies), the Ogilvy merger of all of its units into a single brand thereby doing away with Ogilvy PR and MSLGroup moving under the Publicis brand (or other advertising agency lead) in key markets.

The malaise extends to the broader marketing services sector. WPP CEO Sir Martin Sorrell reduced his 2017 revenue projection to 1 percent growth. He took aim at his competitors, contending that they are cutting prices and offering extended payment terms to retain clients. This led to stories in both The Wall Street Journal and Financial Times about the sector, which pointed to reduced spending by consumer package goods companies such as P&G, which are under pressure from hedge funds for better performance.

When the wind blows in my face when I am out riding my bike, I pedal harder to maintain speed. I deal with the pain because at some point I will turn around and the wind will be at my back. That is exactly where we are in the PR business. The mid-sized firms such as Zeno and W20 are prospering. The specialist agencies such as Sard Verbinnen and Joele Frank are busier than ever. And within the broader agency business, firms such as Droga5 are expanding apace.

There are several reasons for optimism for those of us in PR who are willing to play the long game.

1. The Clients Need Us More Than Ever - The complexity of the CEO role has been underlined in just the past month with questions around interaction with government and responsibility to speak out on issues of our day in order to retain your best employees. At the same time, the brands are trying to accommodate a new expectation of activism and social media accountability.

2. Clients Are Open for Business - If you have the right resources and best ideas, the clients are willing to make us the agency of record. This is particularly true of companies that are mid-sized, in B-to-B categories or in markets far from the center.

3. The Re-ordering of Stakeholders - Consumers and employees come first, shareholders and regulators can follow.

4. The New Axis of Communications - We have moved from a vertical, talk at and controlled mode to one that relies on the horizontal, peer-to-peer discussion that allows participation by consumers.

5. Actions Well Planned and Expressed - Brands and reputation are built on substance, not image. The proper sequence is Evolve (take action), Promote (tell your story, in part via enthusiastic consumers and also through employees) and Protect (defend against competitors and critics).

6. The Right Team for Today - Our senior people can counsel clients. We are not just creative engines or media relations experts. We can think, dream and execute.

7. We are the Local and Global Players - We can work with companies to understand the trends of populism or rise of local social media, especially in markets such as China. We do not produce global campaigns that require simply local placement. Our work is local because that is increasingly the nature of culture.

Like many of our competitors we experienced minimal growth this past year. But we are starting to see the tide turn for the reasons mentioned above.

As an industry we need to square our shoulders and ride into the wind. We have to explain to clients that PR has morphed into management strategy and modern communications which is earned at the core and social by design. We must project our hero campaigns. And we need to differentiate ourselves from other entrants in the marketing services category which are being forced by financial constraints to limit their offering in order to make short term numbers. Now is our time.