Is the era of the big PR agency coming to an end?
Layoffs ripped through several Boston-based PR agencies this month, according to Mass High Tech. The report said that layoffs have occurred at large regional firms like Schwartz Communications, Lois Paul & Partners and SHIFT Communications. Late last year, Racepoint Group, a mid-sized firm in Waltham, laid off about 25 percent of its staff (I was one of those let go). There were even rumors that Schwartz will no longer employ account coordinators — the entry level agency position (this has not been confirmed).
Most of the senior agency executives I’ve talked to recently said clients have been lowering budgets by as much as 50 percent as the economy continues to worsen.
But something else is at work here. For the last couple of years, clients were already beginning to awaken to the deficiencies of large and mid-sized PR agencies. The problem is that agency consultants are overworked — and inexperienced. As an agency senior executive, I often carried a portfolio of more than 10 clients. Let me say that again: 10 clients. At one point, I had an even dozen.
It’s impossible, of course, to keep more than 10 clients happy. I developed a pattern of ignoring satisfied clients so I could concentrate on clients that were unhappy (or to pitch new business). It was like rotating crops because sooner or later every client became unhappy. I learned to jump from fire to fire. Too many agencies are modeled this way (by the way, you’ll never get an honest answer to the question: “How many clients do you work on?” The answer is always 3-4)
I’ve worked at a few agencies and the pattern is generally the same. The pitch team comes in: Agency principals (the owners), executive vice president, senior vice president and then a VP or director. They pitch all of these wonderful ideas, promise plenty of senior leadership, and lots of strategy. Once the client buys, the principals vanish, the EVP goes back to running the office, and the SVP needs to focus on his nine other clients. What a client is left with is a 26-year-old supervisor (on the verge of a nervous breakdown due to the pressure) and a bunch of recent college graduates who are more concerned about the weekend than helping you increase sales.
Clients are catching on. That’s why they are turning to boutique agencies and solo practitioners. With the advent of social media, word-of-mouth marketing, and relationship-based media relations, it’s even more important to be using PR and marketing services from experts. But you need to be assured that who you hire is experienced and will be the one doing the work. Thus the move to smaller firms. Not to mention, of course, that you save a lot of money (full disclosure: I’m a solo practitioner) .
Large PR agencies are stuck in the 1980s. The business model hasn’t changed in decades. Agencies need to evolve in order to succeed in the 21st century. I predict that successful agencies of the future will be smaller and modeled much like law firms. They will feature several senior partners working on their own smaller portfolios, but able to use and reach into the expertise of every senior leader. There will still be junior folks, only less of them.
This model is better for clients — and, believe it or not, better for PR consultants.