Does Size Matter in the PR Industry? You Bet!

I heard it again today on the radio: small businesses have been hurt most by the Great Recession in the United States. It makes sense.  I also read a statistic about the cost per employee for meeting all the governmental bureaucratic paperwork requirements: it’s twice as high for small businesses as for large ones. Rent per square foot is more expensive for smaller spaces than for larger ones. Employer health care costs are much higher for small companies than for large ones.  Add to these higher small business costs an attitude by some (misguided) people that “you never get fired for hiring IBM” – an unwillingness to stick their necks out to select a smaller service company that isn’t well-known to top management.

Why is it, then, that despite all of these disadvantages, boutique PR companies have survived, and in some cases thrived, throughout this recession? The answer is that the clients who hire boutiques know they will receive personal, hands-on service from senior professionals. As a rule of thumb, the smaller the firm, the more experience the staff will have.

During the past few years, big communications companies have had to do whatever they could to make quarterly earnings projections.  The large multinational PR firms owned by ad agencies have been particularly under pressure due to declining ad revenues.  The PR companies in these big conglomerates have had to pull in their belts and lay off large numbers of staff to bring down overall company costs.  (I don’t think most of them will admit this – the PR subsidiaries of these conglomerates won’t separate out their annual revenues.)  To meet their earnings goals, they’ve taken on very small clients – much, much smaller PR accounts than they would ordinarily agree to handle. I’ve heard about numerous instances over the last couple of years when the mega communications companies took on $5,000 per month clients. This is lower than the level that my boutique firm will usually consider; it is unprofitable for us.  With the much higher overhead of bigger firms, their minimums are usually more like $20,000 per month. There’s no way they can make a profit on $5,000 per month business.  Very young 20-somethings are given the responsibility for this kind of work with little or no oversight, and after six months or so the clients wise up and leave. But in the meantime, the big agency has collected some fees.

We hear about this kind of unfortunate neglect often when we talk to smaller company marketing executives.  Those who aren’t very experienced in working with public relations agencies sometimes become very cynical after this kind of experience and hesitate to ever use external public relations services again.

By contrast, some corporate communications and marketing executives with the wisdom of experience have turned to boutique PR firms as a solution to their needs during these tough times.

Inc magazine columnist Norm Brodsky wrote in a recent column that during a recession, companies should increase expenditures for sales and marketing.  This is sound advice, because you have to concentrate even more on building your customer base when customers are spending less.  Brodsky says the companies that follow that strategy are the ones that will come out on top when there’s a turn-around.

Finding the budget to increase expenditures for sales and marketing (or to increase expenditures for anything) isn’t easy. One way to do it is to turn to smaller suppliers with lower overheads, suppliers that can provide more service for a lower portion of the budget.

I expect to see faster growth now throughout the PR industry for both boutiques and the larger firms.  As the economy turns around, the large firms won’t even look at the really small client accounts, leaving more on the table for the small firms. Meanwhile, the companies (some of them large ones) that have turned to boutique agencies looking for cost savings have now realized that they get a much better bang for the buck  and more experienced professionals working with them when they hire boutiques.

Over the past few years most industry non-profit membership organizations have suffered financially and lost members.  However, the new PR industry group for boutique PR firms that I helped found about three years ago has grown each year. When it was launched in 2008, PR Boutiques International had 12 members in five countries. It now has nearly 30 members in nine countries (about to jump to 13 countries with new members in process).

There’s been a lot of talk lately about the growing importance of public relations due to the ascendency of social media, which fits best into a public relations framework.  For us small boutique PR firm owners, who have to put up with the same hassles and expenses as other small businesses, it’s a very heady feeling to realize that our industry’s day, and our day as boutique owners, has arrived.

Lucy Siegel

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5 Responses to “Does Size Matter in the PR Industry? You Bet!”

  1. Maryanne Caruso Says:

    Great post, Lucy. I agree 100% about the pressure to forecast. Having worked in this environment for many years, I also saw creativity fall under this model. To that end I see small/boutique firms turning out a better work product for the client than larger firms. The boutique firms are more about transparency and results; rather than the bells and whistles of the larger firms.

  2. Ikuji Nakaya Says:

    I agree with you – small is not only beautiful, but also makes sense in many cases. Having been on the both sides (corporate and consultancy), I feel that what primarily matters is the person or the team who are capable of offering personalized consultancy. Just like when we get sick, it’s better to go see an experienced home doctor who knows us personally and well, instead of going straight to heavily equipped major hospitals. I’m not against big names at all, but I think the roles are different.

  3. Joan Rothman Says:

    Having been with two “Big Blues” and now being head of marketing for a samll, thriving company, I totally agree with your observations. The pressures and excitement levels are completely different.

  4. Joan Rothman Says:

    I totally agree. I spent many years with two different “Big Blues” and several years with small companies. The pressures and excitement are completely different. I vote for the small companies!

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