I usually really rate what Andrew Lark has to say but I’m puzzled by some of his most recent post on start-ups wanting to spend $10,000 to find a tech PR agency. He doesn’t make it clear if he’s talking a one-off project fee to start or this is one of those Silicon Valley $10,000 a month retainers – if only we had a few more of those in Yorkshire!
Most of his points are very good (see below) but one of them jarred with me:
"3) 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)"
I’m sorry but if you want ideas you have to pay for them. We don’t put our best stuff in proposals. We reserve that for clients who are paying for them. If you’re spending a lot of time on a new business pitch creating a fantastic idea that will deliver results then that time is effectively being subsidised by your other clients.
Ideas are easy. Ideas that work to deliver results require a bit more work. Andrew also says that PR agencies must deliver results and ‘get your business’. Both are absolutely right. But that’s exactly why you can’t put your best creative ideas in your pitch. I want to get into the bones of a client to really understand it and come up with an idea that will deliver results. That requires time to research and think. Time is money.
When talking to potential clients I always want to discuss results. It’s what we always want to deliver. The problem is what do you mean by results? Does it mean media coverage – in print, online or blogs? Does it mean leads or visits to a website? Or does it even mean actual sales? Well no intelligent marketing person would link public relations just to sales as there are far too many other variables (product, price, place) and PR isn’t a magic bullet.
One of the main problems we find when talking to start-ups is that they don’t set realistic targets. Sometimes they don’t set any target at all, other times they set ones which are unrealistically high. Our approach is to try and help them set realistic targets. But in a pitch situation you too frequently find PR firms that will agree with targets that are too high and then fail to meet them. This leaves the client disillusioned about their PR spend. It means we don’t get the gig because they think we aren’t good enough or ambitious enough to do what they want. I prefer honesty and if I’m going to get things wrong it will be by under promising and over delivering.
Andrew’s other points are:
"1) 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…"
My response is yes it is hard work and PR consultancies often don’t help themselves. One thing we struggle with is how to differentiate ourselves from other agencies. I think I know what the differences are: partner led clients (we don’t delegate everything to junior account directors/managers/execs), passion (we only work for clients we ‘like’ and believe in), honesty (we stand up to clients and tell them what we think is right – not what they want to here or what will earn us the biggest profit). The problem is that other agencies can and do say the same things but I’m not convinced they fulfil them as well as we do. But who is a client to believe? We don’t try to compete on resources or media contacts because we know others can beat us and I don’t believe either of those two things prevent us from running very successful public relations campaigns.
2) finding an agency that gets your business and has a real enthusiasm for contributing to the growth of the business – harder still
This one I find surprising and very sad if it is true. We quite simply don’t pitch for clients unless we are enthusiastic about them and believe in them. That’s why we’ve turned down opportunities to work for some clients. Not because we don’t need the work – believe me we do – but because we couldn’t be passionate about them. The ‘gets your business’ is slightly different as sometimes before you are appointed clients don’t want to let you in close enough to really ‘get them’.
Andrew concludes by saying we need a new kind of agency – one not built on billable hours. I don’t buy it. Professional time is the main expense in public relations. Yes, the time you spend has to relate to the results you get. But that’s just being professional. It’s about knowing what works and what doesn’t. I’d feel dishonest charging a client for time I haven’t spent.
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.
UPDATE: Andrew Smith at The New View From Object Towers offers another excellent insight on this issue.
Stuart
I don't blame you for not giving away ideas for free. Why would you? Apple doesn't give away iPods!
As a client, I see a pitch as an opportunity to assess a consultancy: its people, its track-record and likely creativity. And the all important question: is the chemistry right? I'd be surprised to be presented with a killer idea in a pitch – partly for the reasons you give, but also because it usually takes time for a new client-consultancy relationship to pick up speed.
It's also worth stressing that much depends on the quality of the client. Too many companies don't really know what they want, which hardly makes for a comprehensive, well thought out brief.
Rob
Hi – it's me. Glad this is stirring-up some debate.
I am talking about those 10k a month retainers.
On ideas you are confusing idea generation with monetizing ideas. The Apple analogy someone used is a good one. Nobody at Apple asked the market to fund the idea – they funded it then monetized it.
So long as agencies get stuck in the current paradigm of fee-based idea generation they are screwed. Why shouldn't you have charged for outcomes rather than billable hours? What you in effect did was turned yourself into a high value commodity.
Oh, and btw, ad and interactive agencies got over this a long time ago…
I agree the billiable hours thing is hard to grasp on the agency side – spent most of my life there. But the sooner agencies understand that the billable hour is only useful as an internal metric, the better. Externally, we don't care and are happy to pay for value. I'm actually surprised at how often agencies are willing to show in public how inefficient they are.
Don't be too quick to dismiss other business models as an alternative to the traditional professional services payment-by-the-hour business model. Value and honesty can be entirely complementary. Indeed, there are plenty of other models that work, and as Andy says other professional services firms are successfully applying difference approaches with high levels of customer satisfaction and profitability. Lawyers regularly work on contingency or fixed fee and build margin into their costings accordingly. Corporate finance firms work on a success basis.
The challenge is that there can never be guarantees in PR because there are so many variables to manage and so it would be a challenge to build a sizable business based on an alternative model. As far as I'm aware, only Max Clifford has managed to do this in the PR industry.
Stephen, to some extent I agree. And for projects we will, and have, charged on a 'non-time' basis. However, I think it only works in certain circumstances where the brief is for a very specific, limited project. For most PR briefs we see it simply wouldn't work. Lawyers only work on a contingency basis in certain circumstances.
For us fixed fee is just the same as billable hours. All it means is that you calculate the hours in advance and if you get it wrong then you take the hit, not the client. That's actually how we work with most people whether it is a project fee or a monthly retainer.
I am very uncomfortable ethically in being give a big fat cash bung just for doing my job. Equally I believe in a fair day's pay for a fair day's work. If you're being paid then you have a duty to do your best. Does that mean you won't do your best if working for a client that can't afford to give you a bung?
I totally believe that the PR industry should be looking at a value-based billing model over hours worked…the tricky things is agreeing a fair value on results with each and every client and, indeed, linking PR results to a client's bottom-line to establish that value.
I ran a small agency for a while in the late 90s where we experimented with value-based pricing. You need a mature and forward-thinking client to do it (we found that smaller companies were better…we were then generally dealing with senior-level decision-makers) but if you do get a strcuture in place, it certainly focuses your team's minds on generating results (getting on the phone, selling in stories quickly and efficiently…rather than poring over releases and collateral for hours).
Quick case study – we worked with a small advanced technology company who's CEO was very keen on being regularly featured in the FT (and who isn't?). But he placed a value on that – and he reckoned that to his business, a piece of FT editorial was worth the same as a half-page ad in the FT which, at the time, was ratecarded at £34,000. Boy, did that focus our minds! And for nearly a year, his company was featured in the FT every month, and for nearly a year, he paid us £34,000 a month. We were an agency of four people at the time. And, of course, in working with him to create FT-worthy stories every month, we were creating loads of additional trade press coverage that he saw as a bonus.
Remarkable – and highly unusual – but the value of the results PR achieves is often more than the cost of the time involved. So why shouldn't we get a fair return?