When I talk to my PR industry colleagues, there’s a fair bit of trepidation about all the economic woes.
We’ve been here before. We’ve seen the bloodletting. We’ve seen corporations slash marketing budgets at the exact moment when they should be pushing more of their chips into outbound efforts.
In fact, the Harvard Business Review noted earlier this year:
“It is well documented that brands that increase (marketing) during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.”
Still, sure, we all worry about the headlines. Even the marketers who know better can’t seem to resist cutting their budgets (as seen in the graphic above). No one will be immune from a truly vicious economic hit.
Smart agencies took a hint from the last downturn. For our part, having been founded in the fiery ashes of the Dot-Com Debacle, much of our own strategic planning has gone into hardening ourselves for the next recession. And meanwhile, I can’t help but wonder:
Perhaps Social Media will provide some additional protection for forward-looking PR agencies?
A recent CMO Study by Epsilon (covered in MarketingVox) provided some insights that support this hypothesis. While 2/3rds of the CMOs acknowledged that the recession will ding their budgets, “digital marketing” was a bright spot:
- Social computing (including word of mouth, social networking sites, viral advertising, etc.) was the most popular emerging channel with 42% of marketing executives expressing interest in adding it to their marketing mix.
When the going gets tough, the tough start talking. Despite the recessionary climate, most of the marketers surveyed viewed Social Media as a worthwhile addition to the mix. They know that now is the time to rally and reassure customers and prospects.
That’s the critical factor to remember about Social Media: it is not only helping brands spread the word; it also helps the brand to shore up support among its current customers.
The agencies that survive the coming crapfest will be actively helping their own clients realize the benefits of socializing through the recession.
How about you? How are YOU feeling about the economic news? Do you expect it to affect you and/or your agency?
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End of the day Social Media is just a tool, how it is used is what makes the difference. There are good campaigns and there are bad. The storm will be weathered by agencies that understand how to deliver value to brands and their clients.
Agencies who offer corporate reputation repair should do pretty well. Litigation PR should also do well.
Excellent work Todd! Those companies who intentionally pull themselves from the radar screens of their existing and prospective customers will find themselves absent from the decision making process.
Reducing or eliminating costs on strategic marketing, whether it’s traditional and/or social, fills a void that prevents competitors from enjoying a frictionless insertion into the decision making process. Industry leaders are forged during economic downturn as these conditions create new opportunities to cost effectively earn market share and cultivate new relationships - using the tools and channels that mirror their customer’s activity.
Todd — I think that a solid expertise in social media will be an advantage to any agency during the current and future financial crisis. The more you know and can do, the better of you will be.
However, I honestly do not think it will make that big of a difference. From all appearances, we are headed for an economic decline the likes of which none of us have ever seen. Because of that, social media expertise or no social media expertise, I think we are all in for one rough, tough ride.
Todd
do you have any examples of companies using social media to shore up their customers?
Social media is cost effective; question is where will PR agency role be related to their ability to get a profitable price for their services.
Great ROI today on social media for CMOs is the tens of thousands of dollars of free advice they can get just from participating in social media. Ah Ha! now that’s a cold slap in the face I tell ya.
On the less controversial side, social media allows companies to navigate around general news cycles and topics if necessary to their brand.
Given further divisive nature of news camps, especially in cable, social media can supplement coverage through back channels.
All the best Todd. See you at SNCR Nov 14 I hope
It’s now more important than ever for PR/Marketing firms to prove value and make themselves completely indispensable. All PR/Marketing efforts should directly relate to increasing the bottom line and tracking this will prove great value.
@Dave - I am not sure I agree that Social Media is “just” a tool; I think it represents a change in mindset and strategy that is too little understood my many marketers … thus, smart agencies can - as you say - offer real value on this front.
@Mel - I hope you are wrong!
@Mark - Off the top of my head I would point to Dell, Comcast, H&R Block, RealNetworks, etc. And these are brands whose primary approach is to engage in-house community managers. There are other who take a more creative, outbound approach as well.
Todd
I started a similar discussion on LinkedIn, with some interesting responses.
http://www.linkedin.com/answers/marketing-sales/public-relations/MAR_PRR/333850-26769689?browseIdx=0&sik=1223309874221&goback=%2Eamq
I agree with those in the comments section about it not making a difference. What matters is the relationship and the quality of your work.
My boss just wrote a post on being visible during economic hardships. He knows a thing or two as he came to set up shop in the 80’s during the downturn then. http://www.piercom.com/now-is-the-time.html
But it’s true. The little you do during a hard economic time for everyone, can pay off. While others hold their PR spending, some use it.
Even still, PR firms that keep a good relationship with a client that go away during the lean times should feel confident that they’ll come back when things pick up again.
As the owner of my own boutique PR agency, and someone who has been extolling the virtues of why PR agencies need to embrace social media for a long time now, the current financial climate hasn’t affected me.
I very rarely conduct what would be classed as “offline PR” now - my work is predominantly with the online field, and this continues to see me through situations like the one we are currently in.
That’s not to say that I will ignore offline branding - but at the same time, the very fact that online PR and social media opens up a truly international client base cannot be ignored either.
http://dannybrown.me/social-media-pr/
Good work, Todd. I agree with most comments, particularly re: demonstrating ROI and that SM is a way to supplement coverage through traditional media channels. I would just add that SPEED is now important. We need to get together with clients and C-suite execs NOW to introduce the SM discussion and position ourselves as part of the indespensable “survival” team. We’re in an econ crisis - not the time to ditch the PR partner. Perhaps scale back the program, yes, but not ditch.
Jen
If anything I think the economic downturn will force agencies to demonstrate a real and measurable return on their marketing efforts, particularly on the digital and social media front. In the end we may see a “weeding out” of agencies that can’t make those connections and prove real value to their clients. Those that do will weather this storm and prove to their customers why a recession necessitates a strong communications and marketing plan, not a budget cut.
The biggest challenge for agencies/consultants: we can offer strategy for a client, but can’t implement all aspects of a social media program for them. They need some in-house ownership.
Proving the balance makes sense (that they need to invest in-house but still rely on an outside expert) gets more interesting in the current economic environment. Way too easy for companies to drop the agency (or the in-house resources), and for the program to fail.
While many SM tools are free, the time to manage them is not, and ROI is less defined than in traditional marketing.
During the dot com bust, I was busy building websites for corporations that still had millions to burn on their online presence. The big projects were fewer and farther between, but they didn’t go away. Meanwhile, the firm I worked for, Sapient, shrunk to a shadow of its former self. They are still on the comeback trail as far as I can tell.
This time around, I expect to see budgets shrink, but the marketing mix will change to include a higher proportion of more cost effective forms of communication. For example, sparking an information cascade among bloggers has been proven (at least to me) to be exceedingly cost effective. I hope my clients see it that way, too.
I also take heart in corporate layoffs. Marketing departments are often eviscerated at times like this, yet campaigns still have to be conducted. That’s typically a boon for agencies and free-lancers (former employees).
Smart agencies should steer clients towards Social Media not as an experiment, but as a proven tactic.
Do I think that Social Media can save agencies? No, not at all. It’s just another service to be sold and that decision is in the hands of the buyer.
@Anya is right, it’s about measurability… traditional PR agencies should get their hands on the best SEO (specifically off-page link building) and social media marketers and bring them in-house.
SEO and PR are merging anyway and SEO is going to be less prone to cuts because you can demonstrate measurable ROI and extremely low customer acquisition costs.
If I owned an PR agency, I’d be looking at acquiring an SEO agency ASAP. I don’t think you have time to build this…
Social Media is both a tool and a mindset, and conflating the two tends to lead to poor budget decisions.
Used correctly, social media provides a great return on investment when added to traditional online marketing means.
That’s where the opportunity lies for the client. Cutting a $100,000 budget to $50,000 and adding $20,000 worth of social media can provide the same or better results to a client.
That’s still $30,000 less than was spent for the vendor and for advertisers.
Our struggle will be finding/training enough people skilled in social media who understand how to create and track those results.
Most “consultants” already struggle with selling projects, because they lack metrics or a solid background in integrated marketing.
Expect small agencies and individuals to do very well, and big agencies and single channel firms to make big cuts/go under.
The only ones who will use social media to whether the storm are the ones who get it. In the PR field, that’s not many. Sad, but true.
Social media won’t help PR weather the storm any more than having a Cision media database account will help PR weather the storm.
The smart people who can use social media to deliver cost-effective results will weather the storm. The hucksters who push the “next big thing” will hopefully be shaken out by the turbulence.
It’s encouraging to know that this economic downturn is forcing companies to re-evaluate the way they are marketing themselves. It will pay off big time for those willing to “go there.”
@Todd: On a personal level I’m not letting these tough times get the best of me. In fact myself and a few friends are launching a web startup called Nectar http://tastynectar.com/blog in 27 days. We’re praying for the best.
It’s definitely a matter of how well versed a company/agency is with their social-media understanding and practices.
It’ll be easy for companies who are cutting back to say “oh, we’ll work our sm/word of mouth strategies”. But it depends on what % of those companies can do it effectively that will tell who can actually weather this storm.
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Great post.
Many here have mentioned the ROI of social media, although I don’t see that as settled dogma at all. Even with Radian6 and its ilk, true ROI calculations of social media are fuzzy at best. Nowhere near what you can do with PPC, email, organic SEO, even banner ads.
I also don’t believe that social media programs in the contest, user generated content, and promotions area will be the life raft for PR.
Instead, I believe it’s the very granular, immediate, opportunistic nature of PR 2.0 (find a relevant blog, comment on it, etc.) that will help PR firms prove to their dubious clients that they are actually making progress on a daily (if incremental) basis.
In that way, I believe social media and the “new PR” can very much help agencies demonstrate that public relations is blocking and tackling, not Hail Mary passes.
Jason Baer
Convince & Convert - Internet consulting for agencies
BLOG: http://www.convinceandconvert.com
Only if they get the difference between marketing and conversations - and that social media are there for social reasons, not a shooting gallery.
In short - if they have already made the transition from marketing to joining in on the conversation, then they will prosper.
But if they are in the marketing game, it’s unlikely that they will ever get it - until they get out of marketing and into real conversations.
Like finding the real temperature of the water by jumping in - not by canvassing other swimmers on their opinions of watter temperature.
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I’m feeling ill about the fact that the economy is struggling and worried about a few friends, but I think that PR firms might weather this one rather well as companies turn to low cost ways of marketing their products/services/etc.
Additionally I think that small web 2.0 companies are going to be a better investment at the moment than stock markets so we’re likely to see an increase in funding those versus trading stocks.
It’ll be interesting to watch either way.
Great post, thanks!
I agree social media is a tool. Whether it weathers the storm or not depends on whether or not it’s used and how. Think of the many ways you could use a hammer…
At the same time, social media only exists when in use, when we participate, contribute, share. In short, cultivate relationships. Consistency at any time, recession or not, can go a long way. Drop out and you shall be dropped.
Funny you should mention it… I just participated in a panel discussion with downtown Frederick, MD business owners about using social media to reach their customers effectively and inexpensively. Smart companies will use and even exploit the tools available.
It’s also worth noting that, in previous significant economic downturns, a significant number of companies shifted dollars out of advertising and into PR because it’s less expense and easier to quantify results. PR generally tends to do well in bad economic times, social media or not.
Thanks Todd for sparking an illuminating discussion here. I’m with Mike McGrath: social media is cost effective, and at times like this, I think, an increasingly important part of the mix. Why? Because the financial climate has changed; consumers have new concerns, and will behave differently than they have in the past.
If there’s ever a time to listen to consumers, it’s now. And social media can be useful not only in cost-effective access to consumers, but in learning from them also. It will be critical that brands understand how to communicate to consumers in a changed marketplace — communicating and listening, particularly, are how that gets started.
Todd
During the last downturn, SEO, PPC and PR were the only areas marketing budgets were being focused on. Why? They are considered
to be “cheaper” - unfortunate, but true.
I think the ROI portion of social media albeit important, becomes a secondary discussion during a recession. It becomes all about cost containment towards achieving the goal. So lets say the CEO says our goal is to go from 23% marketshare to 29% next year, the marketing folks are told to get there with the least possible money.
For them at that point the question of ROI is less important than making the goal at that budget.
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I agree that the introduction of social media is helping keep the importance of PR at the forefront. Just because there’s a recession in the economy, doesn’t mean that there’s a recession in the amount of people using social media tools. In fact, I’d venture to guess that an economic recession may be DRIVING people to social media as a way to vent frustrations/thoughts/opinions etc. Who better to tap into these outlets than PR practitioners? We already know the trends and we’re already trained in using this tool. How silly would it be for companies to cut this valuable resource?