Many companies are now paying the price for following bad counsel during the 1999-2000 tech gold rush. While entrepreneurs and VCs vaguely understood that a strong marketing communications (marcom) and PR campaign is needed to create awareness, build brands, and drive sales, too many were ignorant when it came to deciding how to select the right agency to help maximize the return in investment.
Using a rationale that paralleled the old adage, “nobody ever got fired for picking IBM,” companies were often advised by VCs and investors to retain a large, “brand name” PR agency with a posh downtown address. These agencies often came with a premium price and inexperienced junior staffs. There was no emphasis on value. Of course many of these larger agencies were often “friends” of the VCs, with referrals and finders fees – often a conflict of interest — being the rule rather than the exception.
Despite the current recession economy, massive layoffs, and dismal earnings announcements, many tech companies are remaining in business, doing their best within a labor market where top producers are still in demand. Because they have been reluctant to cut highly sought technical personnel, their public relations and marketing departments are often the first to be downsized or last to be built up, often to the point of counter-productivity.
Some companies cutting back or just starting to build their marcom efforts have begun looking outside their organizations and “outside the box” for value from PR and other marcom services. They are learning that they can get more for less, particularly in tough times. It’s a new concept to VCs.
As funding has dried up, companies have cut their PR and marketing communications budgets. These companies — along with the VCs and investors — are becoming better-educated buyers of marcom services. The same marcom/PR agencies that once commanded a monthly retainer of $30,000 are suddenly offering the same services for much less. They’ve also been downsizing, and PR staff turnover may lead to new, inexperienced members of the account team. While the investors and tech companies are still scratching their heads trying to figure out what all the extra costs were for, they’re finding that traditional tech PR agencies still insist upon selling more services than necessary, and require retainers in excess of $15,000 per month. This is frequently beyond what a pared-down budget can afford, especially when a company is simply looking to maintain visibility or beef up its own efforts.
Whether downsizing or ramping up responsibly, economically-astute investors and companies are discovering the option of outsourcing marketing communications and PR to providers who can pick up the slack and provide services on a smaller, flexible scale, often on a project-basis. Smaller (“boutique”) agencies, virtual PR teams, and individual practitioners are a growing alternative for companies of all sizes, particularly those with monthly marcom budgets well under $10,000. Like their clients, these alternatives have to work smarter, faster, and cheaper in a slowing economy.
Working on a project basis usually goes against the grain of the business models of larger agencies. Downtown offices with skyline views, employee salaries, benefits, and equipment are all overhead costs that must be passed along to the client. Large agencies need steady retainers to make sure financial goals and obligations are met. They may offer prestigious addresses and a recognizable CEO, universal PR but who is the day to day contact performing the actual account work? Is retaining the services of a large agency really a prudent investment or just a “C.Y.A.” maneuver?
In adapting to market changes, smaller clients are again desirable as alternative marcom providers find ways to profitably service them and produce a desirable return in the capital invested in marcom. Embracing the free agent economy, senior marcom practitioners living in the suburbs (better schools and affordable housing) are starting to “just say no” to adding two hours of daily commute time — departing downtown agencies (or being let go in favor of cheaper, junior staff) to work for their own clients and smaller agencies closer to home. This is creating more affordable, project-based PR/marcom options for many tech companies with refined, controlled budgets.
For many clients, outsourced and project-based marketing communications has an economic rationale that works even in a strong economy, leading VCs to rethink their original big agency bias. It makes sense to find a marcom outsource that will work on a project basis, or adapt to a flexible, needs-based budget that allows clients to pay for resources and counsel on an “as-used” basis. It allows companies to do more short-term activities without a large commitment. If a project proves successful, they certainly can lead to longer-term relationships. Projects are a great “test drive” for both the agency and the client – a way to see if they enjoy working together.
Advice for companies looking to outsource marketing communications:
* Location, location, location – NOT! A prestigious address does not make an agency do better work or increase the chances of media coverage. Are you paying for the view from your agency’s conference room instead of results?
* Agencies love to drop names of contacts, but these may not be the right reporters, editors, and analysts for your company. Experienced pros develop new relationships as needed.
* Look at their clip book, but don’t be too impressed, especially by clips for big name clients. See what they’ve accomplished for clients that are about your size and budget. The people showing you past results should be the same people who will do the actual work on your account.
* Your needs and budget may vary from month to month. Your agency should be able to work with a flexible budget. Many agencies now require prepayment of fees. All time spent ramping up for a project is considered billable time.
* Make sure that your agency has a conceptual understanding of your company, the technology, and your marketplace. Have them visit your Web site on their own time before the first meeting.
* You can find a marcom alternatives through networking, referrals, online searches (use key words such as PR, tech PR, outsourced PR, marcom, etc.), or look at press release – my.wobbjobs.com blog post, releases from similar-sized tech companies in industries related to yours. Agencies that advertise or attend trade association meetings will recoup those costs in their fees.
* Pay attention to the “structure” of the first meeting. Does the agency listen to you, PR or are they in “sell” mode? If they don’t listen, can they really understand and meet your needs?
* Outsourced providers are a limited resource, often working simultaneously for several clients. Make sure they have the bandwidth to take on additional work for your account and can meet your deadlines.
* Chemistry counts – you’ll have regular contact with your agency. Nobody will ever provide a bad reference, so trust your gut instinct. Marketing communications is an investment. Selecting a source that matches your company’s culture/personality is likely to give you the best return.