As the recession shows few signs of receding, machine tool manufacturer Makino plans to cut portions of its marketing budget for fiscal 2009, which starts in April. But the company's marketing manager, Mark Rentschler, said that at least one marketing budget line item will remain intact.
“We're going to continue our PR efforts,” he said. “I don't see a significant downturn in our investment in public relations in 2009.”
Rentschler said case studies, which Makino uses in its PR efforts, remain central to the company's sales process. “In our industry, people research more than ever before in this type of economic climate before they make a purchase decision,” he said.
MAKING UP FOR CUT BUDGETS
Many b-to-b marketers are turning to PR as their budgets are slashed and they struggle to maintain a marketing presence in their industries. “In a recession, people who take a meek approach to marketing, they're not going to inherit the earth,” said Nick Ludlum, VP of Ogilvy Public Relations Worldwide. “They are going to be buried six feet underground.”
Ludlum pointed out that the umbrella of PR now includes more than press releases and media relations. The discipline also includes, among other things, presenting companies as thought leaders, making the best use of new media, helping marketers develop useful content for prospects and communicating with employees.
EthicsPoint, a provider of software that enables employees to report fraud or harassment where they work without fear of reprisal, is boosting its PR efforts despite the economic climate. It helps that the company's business grew more than 30% last year, said Bill Piwonka, who joined EthicsPoint as senior director of marketing last September.
Piwonka plans to cut trade show expenditures and maintain ad spending, while boosting investment in PR. EthicsPoint hired PR firm Edelman last month.
PR is the best tactic to communicate the company's strengths, which include a healthy customer retention rate, Piwonka said. “Having customers who are happy and see value is one of the best ways to drive business,” he said.
Piwonka hopes to drive media coverage with case studies. “We have over 2,000 customers, but we had just four case studies we could talk about,” he said. The company now has 20 new case studies approved by customers. Additionally, Piwonka has Edelman working to raise EthicsPoint's profile with analysts.
Piwonka believes EthicsPoint can gain an advantage by increasing PR spending in the recession. “You want to use this as an opportunity not to hunker down so much that we're weaker when [the recession] is all over,” he said.
The particular nature of the current recession may make PR efforts even more effective. First, there's the changing character of media, driven by the Internet's rise and the related decline of print advertising. Even if falling ad pages have shrunk the news holes at magazines and newspapers, new-media outlets from blogs to YouTube crave content.
With reduced reporting staffs, print publications are looking for help generating content and are often more willing to turn to PR people than in the past.
“I don't like to admit this, but I think reporters are grateful when PR people act as a partner versus a pitcher. ... Unfortunately, reporters just don't have time to do it all anymore,” Charles Crumpley, editor of The Los Angeles Business Journal, said at a recent seminar.
Second, in the aftermath of the financial industry's fall from grace, distrust of business is pervasive. PR can help present a company in a more positive light. “Customers are making decisions beyond the specs and speeds,” said Rick Segal, CEO of marketing communications firm HSR Business-to-Business. “They're making those decisions based on the character of the company with whom they might do business.”
Third, many view PR as a marketing technique that delivers strong return on investment. For example, a Procter & Gamble Co. study that examined the marketing of six of its brands for three years found PR was the most effective tactic for three brands. Overall, PR delivered a 275% ROI, according to P&G's study.
Finally, with corporations from Time Warner to Boeing Co. making job cuts and slashing benefits, some argue that a specific discipline of PR—employee communications—is a necessity.
Barbara McKay, managing director of Burson-Marsteller's corporate practice, said that if employees are not kept informed by their bosses, they will fill the gaps in information with speculation and rumors.
McKay advised that company leaders keep employees in the loop as much as possible and not wait until they have all the information about a particular situation. “Don't be afraid to say, "I don't know,' ” she said.
Although a PR program generally costs less than a national advertising program, that doesn't mean PR is cheap. Kathy Burnham, senior VP of the manufacturing practice at PR firm Padilla Speer Beardsley, said that in the current economy, she's seen marketers that used multinational PR firms move to midsize firms and marketers that used smaller firms move to freelancers.
The economic woes don't yet seem to have been as devastating to PR firms as was the case in the wake of the bursting of the Internet bubble. That trimmed revenue at PR firms by 30% on average, according to a blog entry last year from Richard Edelman.
“People are just very cautious right now about spending their dollars,” said Randy Pitzer, exec VP-general manager of Edelman's technology and business practice, who says his unit's business hasn't slowed yet. “I'm actually surprised to see it as even-keeled as it is.”
Solar energy company Solis Energy is a young venture in a burgeoning industry, and it is being cautious about how it spends its marketing dollars. Marketing Director Christine Mair said Solis has had a strong success with High Tech Public Relations.
“We did a six-month campaign [for Solis],” said Tammy Snook, High Tech's president, “They were in The New York Times and on CNET. They got so much interest, they had to stop the campaign.”
Solis also generated strong leads last year with a small advertising budget. This year, it is weighing paying a retainer to a PR firm versus running another ad campaign. “I'm looking at both budgets,” Mair said.
PayPerClip is a PR firm with a relatively new model in which monthly retainers are a thing of the past: Clients only pay when they receive coverage. The company has a detailed rate sheet wherein, for example, a feature story in a trade publication with less than 10,000 circulation costs $3,000.
Richard Virgilio, managing director of PayPerClip, said most b-to-b companies don't need a PR firm's help to develop marketing strategies. Where they do need help, he said, is in an area in which they generally lack expertise: media relations.
“It's the commoditization of public relations,” Virgilio said. “We're commoditizing the exact thing that a lot of businesses don't have, which is strong media contacts and fluency in communicating with the media appropriately.”
Michael Cherenson, chairman-CEO of the Public Relations Society of America, questioned the validity of the business model. “It just places value on the inches of the story,” he said. “For example, how do you place a value on a story you were able to avoid?”
But no matter what, the difficult part of PR remains unchanged. Companies still have to trust a reporter or blogger to tell their story, which is why advertising does have its advantages.
“One thing PR can't always do is be everywhere at once in the way that advertising can do,” HSR's Segal said.