Should you avoid ’sinking the boat’ or ‘missing the boat’? The New Yorker on advertising spent. Does it also apply to public relations?

Some of you, I am sure, have read The Wisdom of Crowds, a 2004 book by James Surowiecki, financial editor of The New Yorker.

It is a very inspiring book and, although hardly citing public relations, it is for us what one might call a ‘professional book’, in the sense that it clearly illustrates how by listening carefully to a specific public, an organizational decision whose consequences relate to that public and/or vice versa will generally improve in quality and accelerate the time of its implementation.
Which is the function we today assign to the ‘reflective role’ of strategic public relations.

In this week’s issue of the New Yorker, Surowiecki writes a highly thoughtful and interesting piece on how organizations -yesterday and today- differentiate themselves between those who select to ‘avoid sinking the boat’ and those who select to avoid ‘missing the boat’.

The author uses ‘advertising spent’ as a relevant indicator and brings many cases to support his thoughtful arguments..
Very good reading indeed.

I wonder if a similar indicator could not also relate to ‘public relations spent’ in a recession, and –if so- whether one may not add on a couple of other considerations which are directly related.
One legend goes that, contrary to advertising, public relations is anticyclic.
There have been various studies to prove this, but it is fair to say that there have also been other studies which prove the opposite.

Yet, one should consider:
a) public relations is normally more labour than capital intensive, therefore the immediate monetary spent is lower than that of traditional advertising;
b) public relations is normally more difficult to drop abruptly than advertising is. If not for other reasons, because of its normally fixed high labour costs, so it takes more time for the drop to occur and, by that time, according to the experience of the more recent crises, the economy recovers anyway.

Another legend also goes that marketing public relations efforts are ‘almost as good as.. but less expensive’ than advertising.
This is -mind you- a bold argument to sustain…

Most of us public relators don’t like AVE’s because we don’t think the system makes sense…
Yet, when we need to defend or to capitalize our professional turf, we use that argument as if it was objectively valid… And this is not a serious way to increase our share of the pie…
It is undoubtedly objective that, normally, marketing public relations is less expensive than advertising.
But it is highly subjective to say that public relations is ‘almost as good as.. advertising’.

As we know, in some cases it’s bottom line effects are even much better than advertising.
In others not.
I remember P&G’s studies which showed that one dollar spent in advertising returned on average 110 cents, while the same spent on marketing public relations returned on average 180 cents.

Very gratifying indeed, yet there is one big caveat: in such calculation, the vast difference between advertising spent and public relations spent considers the negative impact of advertising saturation.
Even admitting the validity of P&G’s calculations, it is clear that, on those basis, if P&G decided to invest in public relations ten times what they are investing today, the relative return would inevitably drop because of public relations saturation….

A third legend goes that corporate, financial, public affairs and other public relations efforts are, in many cases, inevitable and unavoidable. Even more so in a recession.
If it is true that public relations support organizations in consolidating their stakeholder relationships and corporate reputation and help cope with regulation of operational issues as markets inevitably intensify their strings to the use of public funds, then recession pr spent should in fact increase, as many of our colleagues seem to be experiencing.

What do you think?

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7 Replies to “Should you avoid ’sinking the boat’ or ‘missing the boat’? The New Yorker on advertising spent. Does it also apply to public relations?

  1. I am sure Frank is correct, and that many of our colleagues who think and practice public relations according to the processes that this blog has been advocating since its inception, will greatly benefit from the ‘disruptions’ which are taking place.
    I would also very much caution from taking a ‘glass half full’ perspective in overblowing the slight signs of recovery which seem to be appearing…
    Come on…it is clear that if one throws to the market a pile of cash as most governments have been doing in these last six months the short term effects are inevitable.
    But the real question is: is all this money really going to modify the fundamental flaws our social, economic and political have made so evident?
    I do not think so and the expected failure of the G20 summit in London is a vivid demonstration.
    To the contrary (from a ‘glass half empty’ perspective), I fear that a temporary improvement may be followed by another abrupt fall which will only create more confusion, and stifle whatever trust (is this the correct term to use?) may be left. Yet, as Frank’s long and competent experience indicates, this turn of events will only enhance the need for our professional competencies, as long as we do not adopt a ‘business as usual’ approach.

    I also agree with Joao that employee or internal stakeholder relationships are paramount to organizational survival.
    However I remember that, back in the early sixties, when I was working for John Vertstrate and Paul Brown at 3M company, I was never allowed to use the term cost when referring to public relations, whatever the item involved was, and only the term investment.
    Not really: in my view, one of the things we do not value enough in our professional community is the outstanding impact we bring to our clients and employers.
    And this has very little to do with availability or lack of adequate evaluation or measurement systems, and much more to do with our own lack of awareness of how effective (and also destructive, in many cases) public relations can be.

  2. Hi Toni,

    Thanks for bringing up “The wisdom of the crowds”. I very much liked the book and the argument that “the many are smarter than the few”. (this time I shall not speak about how I disagree with this concept of the crowd and how I would probably suggest the wisdom of the publics…)

    To this, I would say that PR has the great advantage of creating goodwill, generating relationship spaces and bringing networks of value into contact (involvement) and relationship (engagement) with the organization. Involving the many (publics) to become smarter (better decision making)

    However, in terms of using the “wisdom of the crowd” to the benefit of the organization, a special place should be reserved for managing relationships with internal stakeholders. This is an area expected to growth where PR costs can be seen as investments!

    In fact, the question these days is of course quantity (how much you spend) but also quality (how well do you spend it). And to address this, the accountability of each dollar spent in terms of a clear contribution to business goals is the key.

  3. Toni,

    Excellent post, and it brings me to 3 observations.

    1. There really are companies that disappear as a result of being too bold at the wrong time. They are referred to oh-so-briefly in the last paragraph of Surowiecke’s article. With no statistics and not even memories of such companies, it’s impossible to know how they might have affected this analysis. Nevertheless, please read on…

    2. I agree that “this changes everything” and we can’t go back to old ways — again. I have been through this three or four times in the course of my career. Each time around, it could be said that “there are new factors” (exactly right, Caroline). Yet our economies, our organizations and even our careers adapted and survived. At least they did if we were smart in how we handled the changes. Call me a congenital optimist, but I believe this is happening again.

    3. Above all, I believe this is a good time for public relations, NOT because of any calculation of whether we are more or less effective/economical than advertising. If media relations and advertising equivalency were our only claims to fame, then we would quickly suffer the sorry fate that is now befalling not only our advertising brethren but journalists as well. But modern public relations is so much bigger than that, and our organizational impact so much broader. This I would argue is the real reason why the current disruptions will actually work to our advantage.

  4. Richard, you seem to agree with me that this is not a typical, even if severe, economic downturn, you state that we will be operating in a new ecosystem and that ‘small is beautiful’ may be a clue to better prepare for this. I would be interested in understanding more the reasons of this potential option. If by small you imply that public relations consultants would better reduce costs, become more lean and offer their services I would agree in the sense that today’s continuing professional education and updating can well be pursued individually rather than necessarily being part of much larger ‘global’ organizations and that many potential clients have become sufficiently competent to select specific and often individual support and advice. If, instead, you imply that organizations in general will need to become much smaller to improve their operations in many markets, I have some serious doubts about this, as complex organizational infrastructures seem to me to be more necessary than ever. I wish you would give us your views.

    Caroline, I certainly agree with you that the change of pace of the environmental issue for organizations is a major and unprecedented variable and that advising organizations to hold tight for the moment in which they will return to ‘business as usual’ is probably the most silly thing any of us could do.
    But there are also other issues, possibily at least as important, that organizations need to deal with and take a completely new priority: for example the explosion of migration and diversity, the need for global regulations and institutions capable of governing them, the huge role that global organized crime has in the day-to-day operations of any organization…..all these require a radically new approach to stakeholder relationships development and governance and I am con-vinced that public relators have a significant vested interest in these, as Bruno Amaral wisely says in his comments.

  5. Forgive a modest commentary, but I think it is important to say that in a time of financial crisis it is important to be a relevant partner with publics around us.

    By this I mean that it is not just a matter of selling goods and services, but of being able to provide intangible value as well as being a somewhat constant presence in the minds of the most relevant publics.

    If we want to be in the thoughts of our publics, we can easily spend a large budget on advertising and bombard every possible communication channel, risking being annoying.

    On the other hand, by being alert, listening and acting as soon as we detect a chance to add value (tangible or intangible) we won’t simply be in the publics mind but also on the publics’ memory. Thus building a reputation that no ammount of advertising can achieve.

    On a time of crisis, we can refer to PR as a tool to identify opportunities to provide value and facilitate wealth creation -thus helping everyone to endure the financial obstacles of recession-.

    Please keep in mind that this is a simple opinion, unsubstantiated by academic references or concepts. But I will stand by the third legend, adjusting it to read that in a time of crisis it is important to expand efforts in boundary spanning and relationship building in order to do a better job in identifying opportunities of mutual benefit.

  6. Thanks for the link to the article – I think history should give us some clues about how to deal with the present, but, we should remember there are new factors each time round.
    This time around that factor I think is the environment. The bold Kellogg equivalent this time around is the company that doesn’t sit and wait for everything to get back to normal but realises ‘normal’ will be different in the future.
    Car companies like Jaguar Land Rover might not be in need of a bail out if they’d been looking ahead.

  7. I remember how it worked in previous recessions: the obvious choice was to save 10% of the advertising budget rather than lose 100% of the PR capability.

    I fear something different will happen this time. For one thing, advertising is diminished in status so it’s harder to find savings here. For another, I suspect it’s the very organisation at risk, not just its marketing budget this time around.

    Metaphorically, a meteorite has hit the planet and the dinosaurs are threatened with extinction. We don’t yet know who will thrive in the new ecosystem but here’s a clue. I’m re-reading Small is Beautiful.

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