BOSTON, Jan. 15, 2002 (PRIMEZONE) -- As the U.S. teeters between recession and recovery, many companies are still paying the price for following bad counsel and strategic planning during the 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. Many of these larger agencies were often "friends" of the VCs, with referral and finders fees -- and possible conflicts of interest -- being the rule rather than the exception.
Despite the current 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. Reluctant at first to cut valued technical personnel, public relations and marketing departments were often the first to be downsized or last to be built up, often to the point of counter-productivity.
As they move toward recovery, 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. They -- along with the VCs and investors -- are becoming better-educated buyers of marcom services. The same 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 staff turnover may lead to new, inexperienced members of the account team.
Despite the drop in agency rates, investors and tech companies are finding that traditional tech PR agencies still insist upon selling more services than necessary, and often require retainers in excess of $12,000 per month. This is frequently beyond a pared-down marcom, 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 have started 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 outsources have to work smarter, faster and cheaper.
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, the day-to-day contact performing the actual account work tends to be young and inexperienced. Businesses are questioning whether retaining the services of a large agency is really a prudent investment.
In adapting to market changes, smaller companies are again desirable as alternative marcom providers find ways to profitably service clients and produce results. 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' is out! Are you paying for the view
from your agency's conference room instead of results? A
prestigious address does not make an agency do better work or
increase the chances of media coverage.
-- 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 marcom alternatives through networking, referrals,
online searches (use key words such as PR, tech PR, outsourced PR,
marcom, etc.), or look at press 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, 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.
Editor's Note: With 15 years of experience, Jon Boroshok is a veteran of high-tech and Internet marketing communications. He is the founder of TechMarcom, Inc. of Westford, MA (www.TechMarcom.com), an independent agency specializing in value-based marketing communications for technology companies. An accomplished strategist and writer, he has written articles and columns that have appeared in The Boston Globe, ZDNet, CMP Publications, eCommerce Times, Mass High Tech, PRWeek, and more.
Boroshok has a B.S. in communications from Emerson College and an M.B.A. in marketing from Northeastern University. In a true display of his Internet expertise and practicing what he preaches, Boroshok met his wife online.