The power of PR

An increasing proportion of many marketing budgets are being put towards public relations rather than traditional media advertising as media fragmentation makes audiences harder to reach, thus prompting marketers to pursue more targeted methods of communication.

PR industry revenue is expected to grow by an average of 1.5% per annum over the five years to 2009-10, with a dip in 2008-09 due to cuts to marketing budgets in the economic downturn. In some sectors however, PR spending was maintained or even increased in an attempt to mitigate the effects of the downturn.

The emergence of new digital media, particularly online, has seen consumers’ engagement with main media (ie. TV, radio, newspaper and magazines) wane. These factors have led marketers to increasingly turn to PR for more subtle, below-the-line methods to ensure that communication reaches the target audience.

To do this, PR techniques are used to try to incorporate communications into media content that consumers choose to view and interact with. In particular, social media such as blogs, discussion forums, video sharing and social networking sites are a key avenue for PR communications.

PR is becoming an integral part of overall marketing campaigns and the line between PR and advertising is being blurred by activities such as the production of viral videos. The increasingly technologically complex array of potential communication channels presented by the emergence of new media has also benefited the industry by boosting outsourcing of PR services. The convergence between PR and advertising activities and the increasing use of PR is driving the need for closely integrated campaigns across various media and in turn prompting mergers between PR and advertising firms.

Over the next five years, the PR industry is expected to continue to benefit from the increasingly common use of new digital media in engaging and communicating with clients’ customers. Continuing growth from contracting out of PR services will also occur. Over the five years to 2014-15, IBISWorld expects that real industry revenue will increase at an average rate of 3.4%, relating to forecast stronger economic growth.

A strengthening economy will lead to stronger growth in advertising and marketing budgets by government and business. Also important is the continuing strong transfer of marketing and promotional expenditures to PR.

This will be in line with the demand for more direct and cost- effective means of communicating with customers. Adding to this will be continuing strong growth by all governments on public information campaigns and by political parties at election time.

Communication strategies relating to carbon footprints and reduction strategies of clients will emerge as a strong new growth area.

Due to the healthy market conditions industry employment and profitability are expected to increase in the five years to 2014-15. In fiscal 2010-11 general advertising expenditure across all media is expected to begin to recover as the economy strengthens. A key issue for the PR industry is that some further consolidation, globalisation and integration of services may continue, with more attention being paid by clients to the effectiveness of their campaigns.

New avenues for PR will continue to be explored and developed as new technology emerges and markets continue to segment further. Increasingly, PR firms are being requested to assist in implementing their recommendations and to monitor and evaluate progress.

Key success factors for operators in the industry:

• Highly trained workforce. Skilled, creative and qualified staff are required to carry out client briefs.
• Having a loyal customer base. To develop over time a base of repeat clients and to ensure that a significant component of fee income comes from repeat work from satisfied clients.
• Optimum capacity utilisation. To ensure that staff spend the maximum time possible on chargeable hours to client work.
• Well developed internal processes. To have the ability to monitor time and costs spent on projects and evaluate these against the agreed budget.
• Production of premium goods/services. To provide quality service to clients, delivering quality products to clients both within time and budget.
• Having a good reputation. Word-of-mouth recommendations are important to attracting new clients.

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Robert Bryant is the general manager of business information firm IBISWorld.