Commercial Integration
Traditionally PR agencies make their money in a fairly standard way, charging varying levels of fee per hour for a consultant’s time based on their experience and/or ability, add mark-ups to out of pocket costs and charge some kind of flat rate for doing the basic necessities that all accounts need in order to run smoothly.
I know a few agencies manage a model which works without timesheets and charge for ‘value’, but for most of us we’ve gone about things in the same way for a long time now, allowing for the occasional, sometimes seen as adventurous, ‘value’ sell. Bigger agencies tend to charge more per hour to cover higher infrastructure and fixed costs, smaller agencies tend charge less but employ greater numbers of younger (cheaper) employees and mid-sized agencies try to balance between the two. Healthcare tends to charge more than consumer. Crisis charges more than anyone and so it should.
By and large this has allowed an industry average margin of probably somewhere around the 15% – 20% mark for the majority when evened out across big and small, feast and famine.
But the PR industry is changing more rapidly than ever, certainly within our worlds of technology, healthcare and consumer.
We have a wider range of talent within our walls than ever. Ten years ago we had AEs, AMs, ADs and directors… now, while we still have those, we also have creatives, planners, data analysts, digital strategists, writers, app builders and designers.
As the social/technological landscape has evolved, these new skills and positions have arisen causing a fundamental change in what constitutes ‘public relations’. Where once this was essentially media relations – brainstorm, angles, releases, sell-ins, coverage – now the answer to a brief from a client requires a fundamentally different response and therefore a broader set of new and traditional skills within our teams.
It starts with research into the appropriate market sector, into audiences, into competitors, into brand history, into paths to purchase to try and find a compelling insight. This then needs to be turned into a genuinely big idea which needs time, massaging and layering. Once the idea has been solidified, it needs to be turned into a host of different individual bits of content suitable for yes, traditional media, but also for a host of social media platforms, maybe a piece of experiential and maybe some internal comms. Under a paid, earned, owned approach sometimes buying the space is the right answer. We regularly create content subsequently pushed out through programmatic advertising which, while a hell of a lot more cost effective than traditional advertising, is still money out of the agency door.
What we do is changing. The people we employ to do it is changing. The breadth of our activity is changing. The time we need to do it is changing. The numbers of partners we need is changing.
These changes mean the old fee/cost model needs to evolve and evolve fast. The speed at which the market and offer is changing means we need to be just as nimble in how derive our profitable income streams, whilst making sure we are continuing to drive value for our clients.
When a client says they have a £100k budget, where once the response internally was ‘how do we maximise our fee?’, now the response is ‘how do we maximise the value of this spend for the client? If that means taking only £25k in fee and spending £75k on 3rd party content delivery, the long-view says it’s the right thing to do, but what does that mean for margins?
As we do more and more integrated communications work, this is one of our biggest challenges. This isn’t a challenge unique to WE, but to the industry at large. Some agencies will stay in the old, comfortable world, where media relations is the only relations they can do… we call them the flat world agencies. Their work will remain of value but decreasingly so as the way people are influenced changes. Will those businesses thrive and grow in the future, get eaten up, or worse still go out of business, I know what my money is on and it’s not the former.
WE are evolving and evolving fast because we’re moving with the times. Scrap that, we are reading the times, understanding the changing shape and nature of influence, investing in new tools, new technologies and new skills and that’s why we are getting better by the day.
These are exciting times for the industry and more importantly for all of those at WE. Will we continue to thrive, becoming a group of more rounded business savvy people, who provide a broader range of smart consultancy than many of our competitors, you’d better believe it! Why do I say that though, it’s simple, we are already doing it!
