• by July 26, 2004

STUDY PUTS A NEW SPIN ON AN OLD MARKETING PRACTICE -- Everyone knows that Madison Avenue is really good at making ads and placing media buys, but over the years, the Riff has come to appreciate ad agencies for another marketing discipline altogether: public relations. It's not something the outside world gets to see all that often, but take it from some veteran ad trade journalists, agencies are really good at the art of spin. The only problem is that they tend to reserve that art for themselves, not for their clients. Sure, the big agency holding companies and most sizeable independents have a PR unit that's dedicated to handling public relations for PR-only clients, but decades after the Y&R's "whole egg," Saatchi's "umbrella" and the popularization of integrated marketing communications, PR remains the stepchild of the full-service agency business. Most shops offer PR services, or at the very least manage the outsourcing of it for their clients, but they still regard it as a subordinate service. How do we know this? Because Kipp Cheng, the chief PR executive for the American Association of Advertising Agencies, told us so. In fact, he passed along a new AAAA study that proves it.

While 77 percent of member agencies do offer public relations services, they treat it as a second class service because it generally is a less stable source of revenues than advertising, and because it generally represents paltry fees, according to findings of a just-released AAAA survey on the topic. The study, which polled 264 agencies in December 2003, found that nearly two-thirds (61 percent) described the average PR budget per client as being under $100,000. Only 29 percent said client PR budgets ranged up to $250,000.

Agency executives were divided on the stability of the two types of business. Forty-four percent of the respondents said advertising was a more stable revenue source, while 44 percent cited PR as being just as stable.

Nonetheless, agencies may have another incentive for cultivating more PR business: profits. More than two thirds (68 percent) of agency executives said that PR has higher profit margins than advertising, while 21 percent said it is roughly the same as advertising's. In this era of shrinking advertising commissions, PR fees seem like a logical diversification strategy for traditional ad shops. More importantly, we sense another push toward integrated marketing communications. And this time, it's not coming from big, agency holding companies, or from professors of marketing. This time the drive is coming from marketers themselves who recognize that integrated marketing communications no longer is a goal, but an imperative. Witness Procter & Gamble's recent communication planning review. It may be some time before we see the results of those efforts, but we would assume that PR - in all of its manifestations - will play a more central role in the process.

Right now, according to the AAAA survey, many agencies are offering PR more as an "accommodation to clients," but others "have just started the practice and are seeing its benefits."

Not surprisingly, agencies identified many barriers to increasing their role in public relations, including:

New business: 31 percent

Measuring results: 23 percent

ROI is difficult to quantify

But those sound like issues that could be applied equally to advertising, as well as PR. The biggest issues, we suspect, are cultural ones.