PR Agencies – under resourced and under priced?

Link: ANALYST EQUITY: PR: Opportunities, obstacles and solutions.

A forthright post from Duncan Chapple on the subject of PR.

Some quick excerpts:

"PR’s inability to produce valuable results is reflected in underresourcing and underpricing by agencies. Most agencies’ pre-tax margins are a miserable 3.6%. Twenty percent of agencies price below cost. Their sales growth conceals forthcoming ruin. A further 44% of PR companies barely break even. The remaining one-third of agencies deliver real value, but their profitability is also threatened by consultancies that price below cost."

I was curious to know where these figures were derived from – if Duncan has his hands on a decent size sample analysis of PR company’s financial peformance, then I’m sure many others would like to investigate further too. 3.6pc pre-tax margin is indeed miserable – and of course, post-tax margin is what really matters – and that means the real margins are even slimmer. Have to say the claim that "most" agencies are making these margins suggests that the PR industry isn’t really the best way to get rich…

And as for those 20pc of agencies apparently pricing at below cost, it beggars belief. Or perhaps they think they’ll make up the difference on volume 😉

"Advertising failed when it drifted from its scientific roots. It became a creative art form."

Not sure advertising ever had scientific roots – though certainly the data available on which to plan campaigns has been more detailed than that for PR. Having said that, good PR companies will always have the numbers on which to justify an approach.

"PR seems so easy. Almost anyone can do it and, if journalists’ complaints are heard, it seems almost anyone does. Most leading PR consultancies are perpetrators of catastrophic errors. Their industry is seen as an ethical wasteland."

I’m sure we’d all like to know more about those catastrophic errors!

"The reality is that few PR managers even align their campaigns to the corporate marketing plan, let alone aligning their campaigns to customers: in-house PR managers know how few agencies ask for the marketing plan; PR agencies know how few clients offer it."

Few clients may offer it, but any PR company worth its salt should always ask for it –  PR in isolation is indeed a wasted effort.