Month: August 2006

In the case of Microscope today, you simply re-run an old column. I was reading Steve Shipside’s opinion piece when I had a strange sense of deja vu. And with good reason. The column had a short note at the end:

Steve Shipside is on holiday so this column is a repeat. It initially ran on 17 April 2006.

Hope Steve gets paid for the re-run. But another example of the pressure on editorial resources?

Two recent blog posts from journalists bemoan the general lack of understanding of English language basics – namely spelling and grammar.

First up we have David Neal at IT Week bemoaning that: "With the proliferation of online and mobile blogs, and up-to-the-minute news
reporting it appears that correct spelling in communications is becoming less
and less important."

Then we have the the guys at Getting Ink railing against standards of grammar in PR: "I did some training with a London agency last week, and in a room of eight graduates, not one of them could tell me the definition of a noun, adjective or verb. To be kind, one of them did have a go at defining pronoun, but unfortunately she got it confused with an adverb."

(NB: this post had its fair share of typos).

So – are standards of literacy in such decline they threaten our ability to communicate? You could argue that this lack of language standards belies a more worrying inability to think clearly. Thinking and language are deeply entwined – poor language = poor thinking.

Then again, having the odd typo in a blog post I don’t think constitutes the end of civilisation as we know it.

According to Martin Banks: "If
you promise not to laugh I’ll tell you a little secret: for many years
I have been interested in the ancient art (if art it be) of the Runes
as a guide to life, the universe and everything. Most people use them
as a guide to their personal lives. Some people put far too much faith
in them. But
it recently struck me that people in industry put similar amounts of
faith in the outpourings of the market and technology analysts which,
despite all their talk of models and methodologies are just modern
rune-reading diviners – or should that be guessers? The only difference
is that their runes are made of mangled numbers rather than bits of
wood and bone."

Read the full piece for Martin’s Rune-driven analysis of the IT industry. As he says, some of those analyst companies would have charged $250K for similiar insight.

The discussion sparked by Andy Lark’s recent post set me thinking about PR value propositions.

Back in March, Harvard Business Review ran a piece entitled Customer Value Propositions in Business Markets (its $6 to download the full article).

It contained some pertinent comment on where companies go wrong in trying to develop their value proposition – and highlighted why the PR industry is currently struggling to articulate its own value.

For example:

Most managers, when asked to construct a customer value proposition,
simply list all the benefits they believe that their offering might
deliver to target customers. The more they can think of, the better.
This approach requires the least knowledge about customers and
competitors and, thus, the least amount of work to construct. However,
its relative simplicity has a major potential drawback: benefit
assertion. Managers may claim advantages for features that actually
provide no benefit to target customers.

Take a look at most PR agency websites – if you removed reference to the company name and logo, and asked people to identify the agency simply based on the stated value propostion, most people would be hard pushed to name a single agency. And before anyone starts mentioning pots and kettles, I know we are as guilty of this as anybody – hence why we are spending time on better refining our value propostion.

Favorable points of difference: The second
type of value proposition explicitly recognizes that the customer has
an alternative. "Why should our firm purchase your offering instead of
your competitor’s?" is a more pertinent question than "Why should our
firm purchase your offering?"

Prospects are spoilt for choice at the moment – with such little differentiation in the market at the moment and with PR companies desparate for new business and prepared to offer loss making discounts, the danger is that PR is turning into price-led commodity business. And many clients may soon realise that much of what some agencies offer, they could do themselves, even more cheaply.

Resonating focus: [Customers] want to do
business with suppliers that fully grasp critical issues in their
business and deliver a customer value proposition that’s simple yet
powerfully captivating. Suppliers can provide such a customer value
proposition by making their offerings superior on the few elements that
matter most to target customers, demonstrating and documenting the
value of this superior performance, and communicating it in a way that
conveys a sophisticated understanding of the customer’s business
priorities.

This echoes Andy Lark’s desire for agencies who "get" their clients business. Yet how many PR companies have really developed a value proposition that is "simple yet powerfully captivating?

On the subject of what are the critical issues for tech marketing directors at the moment, a quick straw poll reveals one stand out item – lead generation. The tech industry remains relentlessly driven by quarterly sales targets. Show a marketing director a quick and easy way of increasing qualified sales leads and you have their undivided attention. The problem for PR is that it is the one aspect of the marketing mix that is the most difficult to measure in terms of its true impact on lead generation – it is better suited to the longer term development of a company’s influence and reputation – unfortunately, short terms demands lead prospects to look to those who claim they can offer a short term solution – could it be that PR companies in their desparation to win business are making promises they can’t keep in terms of their ability to make a major impact in a short timeframe? That would explain the price discounting and overservicing.

Stephen Waddington’s comment on my earlier post re: the slump in PR new business reminded me of the Plimsoll survey of the UK PR industry. According to Plimsoll: "35% of the Top 1000 companies in the UK Public Relations Consultants industry have spent the last 3 years gradually increasing their levels of debt. These companies are now faced with severe commercial disadvantage: debt is threatening their survival in the industry and exposing them as potential acquisition opportunities."

The report also notes that:

Debt is eroding profits throughout the industry.
235 companies are ranked as Danger.
208 companies are overtrading and selling at a loss
£1.1 billion profit is lost every year.
44 companies are ‘ripe’ for acquisition.
26% of companies are loss making.
92 companies enjoyed over 20% growth.
50 companies are aggressively attacking the market share of others

So here’s another feature that I’m sure we’d all like to see PR Week write – who are the 235 companies in danger? Who are the 208 companies selling at a loss? And which 44 are ripe for acquisition?

As I said in my comment to Stephen, perhaps some of us should club together and pay a journalist to write this story if PR Week won’t?

According to today’s PR Week.

One interesting stat was that overservicing levels in agencies are soaring. Apparently 33pc of agencies have reported an increase in overservicing. This compares with 26pc last year.

Says PR Week: "The new business climate has become increasingly quiet, while overservicing of accounts by its members is at an all time high."

Let us remind ourselves what PR Week said back in April: "the fact that 90pc of the (PR Week) top 150 have seen fee income rises year on year is testament to an ever-more mature and reassuringly vibrant profession.”

As I’ve said many times before, increasing top line revenue is meaningless if there is no corelation with rising profits. The PRCA themselves say: "Overservicing at 33pc is unsustainable for most agency business models." (I’m curious to know under which business model overservicing is sustainable).

So is an industry that tolerates this level of overservicing really "more mature and reassuringly vibrant"? Quite the reverse. Overservicing means either a) services are being mis-priced (which isn’t very mature) or b) agencies are too scared of clients to ask for the renumeration they believe they deserve (ie a lack of confidence).

Hence why the debate now being stirred by Andy Lark and others is so important.

This piece from Forbes magazine answers the question why there is such demand for PR from start ups in Silicon Valley:

"In the second quarter of 2006, venture capitalists invested $6.73
billion–5% higher than last year. More than $2.4 billion of that came
from VC firms in the Bay Area, up 13% over last year." So there you have it.

The article also focussed on the recent AlwaysOn conference – essentially a cattle market for start ups looking for VC money. As Forbes says: "Each would-be  Sergey Brin or  Larry Page had just six minutes each to pitch a roomful of about 100 venture capital investors and potential business partners."
It quoted Woodrow Wilson’s maxim: "If I am to speak ten minutes, I need a week for preparation; if an
hour, I am ready now." (This is of course a variation on Mark Twain’s earlier comment to a friend: "I’m sorry I wrote you such a long letter, I didn’t have time to write you a shorter one").

So how did these start ups fare?:

Some CEOs in the enterprise and information technology services
categories suffered from audience jargon fatigue. The terms
"recentralized infrastructure," "enablement" and "back-end data
services," lulled the audience. Rick Tinsley, CEO of  Silver Peak Systems, even stayed behind his lectern while uttering those words.

"If
you only have six minutes, what VCs really want to know is who you
built your product for and how you’re going to make money," says Tim
Chang, a partner at Gabrial Venture Partners who served as a judge for
11 CEO pitches. At Stanford, a loud beep signaled the passage the first
minute, then the sixth minute.

"Don’t spend your time talking
about your technology and what’s wrong with the world–we already buy
into that and give you the benefit of the doubt."

Chang expressed this sentiment loudly when he asked  Ragnar Kruse, CEO of wireless data delivery company  Smaato,
"Who cares?" after Kruse finished his pitch. "I really didn’t mean it
flippantly," Chang says. "I just literally wanted to know who their
customer base was."

It made me think that this could be applied to the PR pitch process. What if clients had to give agencies on the pitch list a 6 minute presentation on their business and what they wanted PR to achieve? In turn, agencies would have 6 minutes to pitch back to the client.

If this principle was applied more widely, it would certainly help to focus the minds of both prospect and agency. If a start up looking for potentially millions of dollars of investment can do it, why can’t agencies who, mostly, are talking about tens of thousands?

Andy Lark picks up on Tim Dyson’s orignal post about the $10K PR problem.

Stuart Bruce in turn has added his critique of Andy’s views on the matter.

There are a number of issues raised in all of these posts and associated comments – and I disagree with some of the points made in all of them. Here’s my summary:

Andy Lark: "I don’t want $15,000 dollars worth of service. I don’t even know what that is! I want results. I don’t care what it costs or whether an agency has to
under or over service to deliver it. I just want results against the
agreed budget. You commit, I commit, we all commit together."

I think Andy is being disingenous here – he knows what service is – its just that there is a big difference between service and value delivered. Any agency can show you they delivered $15,000 worth of "service" (here’s the timesheets and the list of deliverables). However, can an agency show they have delivered $15,000 worth of value to the client business? And of course, every client wants more (much more) than a simple cost to value eqiuvalence. Part of the problem is that most clients have an expectation that the value delivered will be far in excess of the cost of service. But what constitutes an acceptable ratio of cost to value – 10 to 1, 100 to 1? There are no accepted benchmarks of what is a good return on service (ROS). So clients have a vague, unmeasurable notion that PR should be able to deliver value far in excess of the service required to deliver – so we end up with the usual attempts at trying to demonstrate that value – which many clients either don’t understand or choose not to.  As an aside, I’ve always found it curious that most marketing directors accept that out of all the elements of the marketing mix, PR is the one that potentially can deliver the greatest value to the business – and yet they resolutely refuse to invest more in it compared to advertising et al. Then again, perhaps the inability to demonstrate value lies at the heart of this.

Andy Lark again: "Finding a great agency is bloody hard work. They are few and far
between. At any billing rate. Few CMOs I know get the value of PR or
AR, let alone the value of a good agency… I accept we are part of the
problem, but…
finding an agency that gets your business and has a real
enthusiasm for contributing to the growth of the business – harder
still".

My issue here is with concept of "great agency". What constitutes "great"? They have a number of big name clients and a big client list? Just because an agency represents a Microsoft or a Dell, does that mean they are "great" for the prospect sitting in front of you? Companies that hire an agency based on hoping they’ll do for them what they do for their big name clients are probably in for a disappointment. Indeed, if the subject is a start up, then the job they need doing is very different to that for a well established brand. I’d hazard what prospects are really looking for are the "right" or "appropriate" agency for them ie the teams that has the right combination of brains, grey hair, personal chemistry and executional ability to deliver what they need. Of course, how prospects goes about trying to find the "right" agency is no easy task – but might be made easier if they used a different selection criteria.

On the subject of "getting" a client’s business, it must be said that some client’s don’t even "get" their own business – which makes the job even harder of persuading them of the right course of action.

Andy again: "Finding an agency that understands that great ideas get funded –
near impossible. They are caught in the conundrum or belief that ideas
require budget prior to being generated. Bullshit. (and I am talking
about real ideas, not those regurgitated from the last pitch)."

This is the old "opening the kimono" problem – what level of opportunity cost is the agency prepared to stomach in order to win the business. And with start ups, the level of risk involved for the agency is  always greater (witness the agencies that got stung in the dot com boom by businesses that tanked owing thousands in unpaid PR bills). I’m sure most agencies would have no problem with coming up with fantastic ideas for prospects if they felt there was a reasonable expectation that they would get paid for their effort (eventually) or at least some kind of commitment that they’d get more business in return for overservicing in the early days. (How many prospects offer the agency the lure of more work down the line in return for "more for less" in the early days – but when pressed to put that into some kind of binding contractual agreement, run a mile?)

Andy: "What is needed is a new kind of agency. One not built on billable hours
and 10k budgets. Maybe one built on the power of ideas to drive a
startup’s growth curve? One with the courage and conviction to
articulate a value proposition that resonates with the CMO of a
start-up and ability to explain what the budget should be."

I agree that the billable hours model for many clients is definitely past its sell by date – but until the value question is solved (see above), the demand for "a new kind of agency" as described by Andy sounds like code for "I want an agency that will do more for me, but I have to pay them less."

And finally, Stuart Bruce: "During the dot-com boom I achieved massive international media
coverage for a client because I had a great idea. The whole project
took just one and a half days and cost the client less than £1,000. The
objective was to attract the attention of about a dozen specific
organisations in order to secure meetings with their senior people.
Direct approaches had previously failed. The result was that eight of
the 12 actually approached the client and meetings were eventually
secured with all 12. Should I have charged them more just because it
achieved fantastic results? Of course not, that would have been
dishonest."

I don’t see why Stuart couldn’t have gone back to the client and pointed out the far greater than anticipated ROI – and ask for more money. Whether he got it or not is another matter – but I don’t see that as a dishonest action. Again, if PR agencies got better at defining what constitutes sucessful outcomes and the value they deliver, perhaps there might be a tighter correlation between the work they do and the reward they receive. And no, I don’t have all the answers to any of this – but good to see that people are at least trying to grapple with these meaty problems and do something about it.

Or rather, the legendary Troy Club – as detailed here: Rupert Goodwins’ Diary – ZDNet UK Comment.

Even if many of the beer soaked nights spent there can’t be recalled clearly, the place itself will not be forgotten.

Hacks and PRs looking for a late night drink in SoHo must now look elsewhere.