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Gini Dietrich

How the Economy Affects PR…and Your Job

By: Gini Dietrich | October 31, 2013 | 
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How the Economy Affects PR...and Your JobBy Gini Dietrich

Happy Halloween!

Have you seen the video/game on the Google home page today? I made witches brew for a good three minutes this morning.

I thought it’d be kind of funny to do something today such as leadership lessons from Halloween or what Halloween has taught me about PR (just to be a smart butt), but alas. My creativity is failing me.

Instead I thought I’d write about something equally as scary…what’s been on my mind of late: The economy.

By a show of hands, how many of you think about the economy, how it affects your job, and a plan B should things go south again?

I’m just kidding. I can’t see your hands. You don’t have to raise them, but if you do, send me a picture. I think that’d be hilarious to see!

In all seriousness, I’ve been thinking a lot about this.

A Short History Lesson

In 2011, we were just coming out of the Great Recession when the first debt ceiling debate happened.

Because business leaders were still so skittish, everyone (and I mean, everyone) put on the brakes on paying their bills. Our accounts receivables went from 30 days net to 90 – and even 120 – days net.

When you are already short on cash because of the previous two years and then clients stop paying their bills, it’s a pretty painful experience.

I remember having to wait until the very last minute – and sometimes a day or two later – to approve payroll. My assistant had to hand deliver the check for health insurance – on the day it was due – so they didn’t cancel us.

That was the year I thought we were going to have to close our doors.

And then, just as suddenly as it began, the debt ceiling was raised and business went back to normal.

When it happened again last month, though, the stock market didn’t even react. The government was shut down for 16 days and cost the country an estimated $24 billion, but no one blinked an eye.

Cash is King

Earlier this week, I had lunch with our banker and I asked him his opinion on all of this.

He said something really interesting is happening – something that has never happened in his career: People aren’t borrowing money.

Most entrepreneurs, he said, are using the cash in their businesses to pay down debt and are sitting on lots of cash in their checking accounts…and not buying anything. No one is borrowing money for capital equipment or property or strategic employees.

We certainly are doing the same thing. I’m scared to death 2011 will happen again – and soon – so I’m hoarding cash.

But is that the right thing to do? We all react, based on our own experiences. Maybe it is and maybe it’s not, but what I do know is economists are talking about 2014 being another soft year and I don’t want to be in the same position we were in in 2011.

The 2014 Economy

There are three things that could affect how business is done in 2014:

  1. Interest rates will spike. Right now, many organizations are renegotiating the terms of their lines of credits and any loans they may have outstanding. The interest rates are so ridiculously low (some are getting deals at less than three percent), it makes sense to do the same with your home’s mortgage. But with a new head of The Fed coming in, we can expect things will change within the next year.
  2. Europe will crash. While it doesn’t affect us directly, it sure does hurt us when foreign countries stop spending money. Last year, an article was written about how the Apple stores in Spain are completely void of customers. Think that doesn’t affect you? If people aren’t buying consumer products sold out of the U.S., the trickle down affect could be huge.
  3. The debt ceiling won’t be resolved. This one makes my head hurt. We can’t print more money because that’s what causes inflation, but printing more money to pay our debts may be the only solution. I won’t pretend to be an economist or even have an educated decision on how to solve this issue, but I do know the longer we battle this out, the more it hurts every organization in the United States – from Wall Street to Main Street.

How the Economy Affects PR

What does this have to do with PR, you ask?

In a down economy, PR/marketing/advertising is the first to go.

As communicators, we know that’s counterintuitive because if you aren’t marketing, no one knows you exist. If no one knows you exist, they’re not going to buy from you. But most executives see PR as an expense and an easy one to get off their profit and loss sheet fairly easily.

This means PR firms are let go (or budgets are reduced) and PR professionals are laid off.

I don’t say this to scare you or set you into a stage of panic.

Rather, I want you to think about the next six months as a way to prove your worth.

We talk a lot here about how to provide the metrics that show you are an investment, instead of an expense.

In a meeting with a client yesterday, I learned a good 40 percent of their inbound leads are coming from our efforts. I nearly stood on the table and danced a jig.

If you are creating that kind of volume, the argument is made. You’re as valuable as the highly paid sales guy who isn’t going anywhere because the company can’t afford to lose his relationships.

Start talking to your executive team in terms they understand: More leads = increased revenues = better profits = more cash = less stress when the economy is bearish.

The awesome image is courtesy of Marc Johns, who drew it in 2008 and re-released it in 2011. Heck, he could have done a third release this year.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

48 comments
HonoureBlack
HonoureBlack

Dear Gini, 

Thank you very much for your post "How the Economy Affects PR…and Your Job". I was immediately drawn to this article because of how deeply this issue has been resonating with me over the last 2 years. 

Just recently I have made the leap into exploring PR, due to the very narrow job market in my field. I graduated two years ago with a Masters degree in Art History from the University of Victoria in BC and have yet to gain employment. Currently I am working at a wine store and drinking my way through constant rejection (a joke, but also true). Entry level jobs are impossible to find, and for every job I apply for I am being beat out by someone with 10 years or more experience. Even when I apply for an administrative position, someone with no arts and culture experience but with years of clerical experience will be hired over me. 

I understand that my position in the arts and cultural sector would be much worse in the U.S.A.,  given the state of the government, however my interest in PR was sparked at the hope that I might become more diversified for hire. 

 Perhaps this is not the case.....

I remember reading that in 2014 jobs in PR and Marketing will still be on the rise....perhaps you feel differently?

I just thought I would put my experience out there to share that we are not alone no matter what industry we seek. Maybe I have also chosen to diversify myself in an area that will not see growth as I had anticipated.

Thank you again for your thoughtful writing. I look forward to your next post.

Honoure Black

BillSmith3
BillSmith3

Interesting piece Gini, and like you I'm a firm believer we should understand the big picture beyond our profession and how it will effect us. 

KateFinley
KateFinley

Just now getting to comment on this. You've got my wheels turning. I'm going to send this link to my friend who is an economist and get his thoughts. I'll let you know ... 

ExtremelyAvg
ExtremelyAvg

I'm not in the PR game, but this article got me thinking, too. I believe your are correct, 2014 may be a rough year in many markets. I wonder how it will impact my world of books?

One one hand, books are not a necessity, so readers may decided to make fewer purchases. On the other hand, being an indie, my books are less expensive than traditionally published novels, so perhaps it will shift people in my direction?

Again, I'm not in the PR game, but it may behoove those who are to get creative in their pitch. In Eli Goldratt's book, It's Not Luck, a cosmetics company comes up with way to compete against much larger brands by setting up consignment with the salons. It was during a similar down time when cash was tight and that was enough to get them in the door. It was easier for small salons to stock their shelves with product that they didn't need to pay for until AFTER it sold, than to buy the other products and pay upfront.

Is there any reason a PR Firm couldn't run a campaign in exchange for a percentage of the improvement in throughput?

There is a site that advertises ebooks called EReaderNewsToday and they charge a flat 25% of net profits on the promotion. If I drop one of my books to 99 cents, I get 35 cents per sale. Ereadernewstoday is able to track the number of sales using their affiliate code and knows how many I sell during the one day promotion. The last one I did was exactly 200, so they got 25% of $70.00.

It is a zero risk for most indie authors because typical days sales are generally much less than that. Their payment structure is so popular that they have vastly more people wanting the spots than spots available.

If you are correct and a PR firm loses a number of clients...

....and are suddenly faced with excess capacity...

Then, finding clients who might never consider hiring them and pitching a profit sharing model would be a zero risk proposition for both sides. Again, since there is excess capacity to do work at the firm, they might as well be working on ABC Manufacturing's Promotion, knowing that the worst it will do is earn them zero, which is exactly what they would have gotten from the excess capacity.

Again, I'm not in the PR business, so what do I know?

Great post.

Howie Goldfarb
Howie Goldfarb

Oh and another thing!

As thy say above...show your value. People invest when they know it makes them money.

Caveat: If you become invaluable watch out. Businesses always freak about a their business being so dependent on a vendor that if that vendor left their biz would crash. Vendors love single source customers do not.

Howie Goldfarb
Howie Goldfarb

So there are two ways to look at this. First is economy is soft and there could be stock market bubbles and now a new housing bubble and the political unknowns.

The other is going way way back using the stock market's historical growth rate and see where the markets stand to a benchmark. For all we know after the lost 2000-2011 decade for the markets we should be much higher. No worries.

My guess is it might be a lost year because of politics until the mid term election. If you want to hedge buy an index fund that shorts the market. If it drops you make bank.

ClayMorgan
ClayMorgan

In sales, there is a lot of talk about benefits of hiring a company (or sales rep), but while attending a sales management training program this year, I heard something a bit different.

The instructor said you have to make the client understand how much it is going to cost him to NOT hire you.


Your work must put you in a position where the client is scared to not have you and your team helping him, especially if the economy tanks.

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BillDorman
BillDorman

If you would take care of 'your' president up there we wouldn't have to worry about this. 

My hand was up. 

The 'health' of the economy has a very direct impact on my income and how much I smile in any given day. 

Is there a chance we will 'tank' again; absolutely. However, I have a glass half full attitude and I expect things to continue to improve. What I'm seeing w/ my customers is people have the cash but they are still taking a wait and see attitude before they start making any significant financial commitments. 

We work hard every day to bring value and regardless of what the economy does or the impact of ACA, people will always buy insurance so I guess I will always have 'something' to sell. Our cheese has definitely been moved and we are finding many other ways to bring value than just a 'cheap' insurance policy. 

That's all I got........

littlegiantprod
littlegiantprod

This post speaks volumes to me.  I feel the same concern from a personal perspective. After being laid off twice in the past 2 years, it has been a rough climb.  Currently, freelancing, it has been a blood, sweat, and tears fight in finding the right job. My hope is that the economy quickly improves to help those (including myself) to find a job — the right job. As always Gini, thanks for the post.  You always make me think.  Ugh my head hurts now!

TaraGeissinger
TaraGeissinger

Happy clients are like insurance policies. :) The longevity of our client relationships depends on how *they* perceive our value. You hit the nail on the head -- we need to not only be doing a kick ass job at meeting and exceeding the goals that we've set forth, but we need to be sure that through reporting or monitoring we are communicating that We are the reason they are now getting those leads, ranking that well or being asked to speak at that huge conference.


lizreusswig
lizreusswig

I've always been struck by how P&G and the other brands who maintained or increased their PR/advertising during the Depression thrived.  Obviously, this isn't easy in a time of reduced or slow income, but seems like it's crucial to success.  


PS - I raised my hand, too but you really do not want that picture - trust me! ;)

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RAReed
RAReed

Why is Jason raising his hand?  

Anyway, great points, Gini. The rise in interest rates and businesses paying down debt instead of investing is a major concern. I hope this won't be another race to the middle for bigger agencies to start targeting smaller-sized fare and forcing the rest of the industry to look downmarket.

JoeCardillo
JoeCardillo

@ClayMorgan Nice point. And, might I add, humans respond best to two kinds of stories, the ones that are "How amazing is this beautiful/thoughtful thing" and the ones that are "This is so awful you won't believe it" .....if you craft those two things and incl. supporting data, you'll be providing value to them (and showing your own). 

biggreenpen
biggreenpen

@littlegiantprod It spoke to me personally too (husband laid off twice in two years, long stretches of "not much" in between, choosing to stay in a situation I wasn't especially thrilled with in order to have stability). Long way of saying I feel your pain. And I think although Gini's article is specific to PR and business, it has parallels with life and personal issues.

ginidietrich
ginidietrich moderator

@lizreusswig We worked with GE for a very long time. During the recession, they cut back on activities, but they never let us go. It's companies like that that understand the importance of communications. It was funny. In 2010, we had a conversation with the sales team and they asked why their leads were down from our efforts. We explained the budget had been cut so we weren't doing as much. They rallied for an increase in budget for us again. 

The big companies get it, but it's pretty scary when you have to decide between payroll and communications. So I get it.

ginidietrich
ginidietrich moderator

@RAReed It could be...it's all cyclical, right? The only trouble is, history repeats itself much more quickly today. Quickly enough that we all should remember the last time and yet...

jasonkonopinski
jasonkonopinski

But I won't leave it at that. 2013 has been pretty darn good overall, but not enough for me to feel completely confident and secure about what's next -- and that scares me a lot. It's caused some unnecessary anxiety, sure, but it's also catalyzed some serious effort on my part to carve out a place with confidence. 

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littlegiantprod
littlegiantprod

Oh wow!  Sometimes I think I'm the lone ranger in this tough market.  I cross my fingers and toes for your husband to not feel this awful pain!!! 

ginidietrich
ginidietrich moderator

@LauraPetrolino @lizreusswig One of the best examples I can think of is Kellogg's during the Depression. I think I have the case study on Spin Sucks somewhere. I'll find it.

biggreenpen
biggreenpen

@littlegiantprod Thanks! Don't want to jinx anything but hopefully his current situation is more stable (and I know he likes it better which is a huge PLUS.) Hope things even out for you too!

ginidietrich
ginidietrich moderator

@RAReed @jasonkonopinski Our growth plan is in place and I am very confident about next year, but I also have contingency plans in place...just in case. Hence lunch with the banker earlier this week.