Representatives of Nevada’s leading marketing firms gathered at the Four Seasons Hotel on June 9 to discuss important issues affecting their profession. The gathering was part of Nevada Business Journal’s monthly Industry Outlook series. Connie Brennan, publisher of Nevada Business Journal, served as moderator for the roundtable, which raised a number of controversial issues, including censorship versus freedom of speech, and the growing trend of using in-house agencies versus hiring outside firms. Recruitment challenges and compensation schedules were also on the agenda. Participants were first asked what they considered to be some of the most challenging issues for their profession. Following is a condensed version of the discussion.
Mark Brown: Brown and Partners has been in business about three-and-a-half years, and we have about 35 people on staff. One of the issues that caught my attention is censorship. Some of the external influences in this community are trying to rise up and impact the way our clients are communicating, and that is of concern to me.
Ellie Shattuck: I own Shattuck Enterprises with a partner, and we’re a small agency. We deal in development. Our clients want to see positive development, but we are facing some real issues that we have to overcome regarding stop-growth, water, and availability of land. How do we stop people from pushing “zero growth,” because there’s a big movement now? Part of our campaign is to try to get people to think reasonably and be thankful that we are in the fastest-growing city.
Darcy Neighbors: I established Consultants in Marketing in 1996, and our firm specializes in the professional services industry. We don’t handle any gaming or hospitality clients. In addition to that, four years ago we launched Capri, a company that services the funeral industry nationwide. Capri has enabled us to work outside this market and learn the other markets as well. I’m interested in talking about the pros and cons of in-house PR.
Solveig Thorsrud: I’m founder and president of The Firm PR and Marketing. We’ve been in business over 11 years. We primarily focus on public relations. We also started a company called PR Consultants Group in 1999, and it has high-level PR people in all major cities across the country. We were able to use that to work with some national accounts on local levels. We have a staff of about nine people.
Mary Ann Mele: I’m the president of R & R Partners. We have about 220 employees. Most of them are in Las Vegas, but we’re also located in Reno, Salt Lake City and Phoenix. Recruitment is one of the things I’d like to talk about. Clearly, censorship of ads seems to be the issue of the day, and I don’t know if we can separate the Hard Rock ads from what’s going on with the LVCVA (Las Vegas Convention and Visitors Authority). I think that’s part of the issue. And how do you legislate or regulate good taste?
Lynn Purdue: I’m president of Purdue Marion & Associates. We are a seven-person firm, started just two years ago, and we are generalist in nature. We are very involved in development and in private education. I think one of the most critical things to talk about is recruitment.
Jill Flanzraich: I own Adventures in Advertising/Las Vegas, and I’ve been in business since 1995. We’re a full-service promotional marketing company. And what is really of interest to me is positioning marketing experts as professionals. I was the past president of the American Marketing Association here and the International Association of Business Communicators. Professionalism is a recurrent issue with my peers, especially when they are in the employment arena.
Peggy Smith: I’m the owner of Hands Ink Advertising P S Media. We’re a marketing, advertising and PR firm. Our client base is diversified. We have financial and hospitality clients and a lot of not-for-profit groups. I’m very interested in positioning marketing people as professionals and also the pros and cons of in-house versus hiring a PR company.
Tom Letizia: I’m with Letizia Ad Team. We’ve been operating in Las Vegas since 1974. We specialize in automotive. We have car dealers in several markets in the country, and we have nine people on staff. We also do some political work and some gaming work. We’ve been through the in-house versus hiring an agency. We saw it start happening 20 years ago and it caught everybody by surprise, because we were used to making 15 percent commission on every account, and all of a sudden clients started negotiating. We had to adjust to that, and we had to adjust when we saw a lot of major accounts going in-house.
John Schadler: I’m with Schadler Kramer Group. We’ve been in business about five years. We have 85 employees and 20 accounts across the country. About 50 percent of our business is in Las Vegas, and the rest is around the country. I think one of the big issues facing us is finding great talent. I spend maybe 30 percent of my time on that hunt. And I think that today the local market has taken on such national notoriety that we’re up there with the big boys. The work in this town has improved dramatically in the last five years, and I think that’s a result of creative people finding this market attractive. However, I don’t believe people who want a career in advertising are looking at Las Vegas as their first choice. It’s important that we create an environment where people from big advertising centers like New York, San Francisco and Chicago view this area as one of the top-tier markets.
Lynne Sloane: I’m Lynne Montel Sloane with Montel Sloane Company. I have help from an assistant and a bookkeeper, but the firm is basically me. I have a limited number of accounts that I’ve handled for many, many years. I have had my own company since 1994. Being positioned as an expert and a professional is important to me, particularly since I don’t have a large agency with 85 people or longevity in the market.
Merrell Virgen: Virgen Advertising has been in business for about five years. I have 29 employees now, but that can change daily. All these topics are of interest to me, and I’m sure I’ll take this information back and share it with my partner, Andrew.
Peter Poggione: I’m a partner in Star7 Communications. I’ve been running the business for about 11 years now. We have seven employees and, if we have a niche, it would probably be the financial industry. I’d like to talk today about the pros and cons of in-house advertising versus hiring an outside firm, because that’s a big issue we run across on a daily basis in our quest for new business.
Marlene Olsen: I’m with Olsen and Associates Public Relations in Reno, so I guess I’m representing the northern half of the state today. Public relations is about all we do. And – go figure – in Nevada our policy is not to take casinos or political candidates. But, we’ve been able to survive on that for 22 years. We have a staff of nine, which would make us the biggest PR firm in the northern half of the state.
Helen Foley: I’m a partner in Faiss Foley Warren, and we have been in existence for about six years, but Linda Faiss, Melissa Warren and I have worked together since 1990. We focus on public relations and government affairs. Our primary focus in public relations has been the real estate market, and we are intimately involved in all the water issues, not only from the standpoint of our real estate clients, but also because we’re doing an increasing amount of work for the Southern Nevada Water Authority. A majority of our clients have been with us for more than 10 years, and it can be a challenge finding new ideas and new concepts to re-energize their images.
Censorship and the First Amendment
Connie Brennan: The first agenda item is the role of ethics versus censorship. We can’t talk about this without discussing the situation with the Hard Rock billboard. (Editor’s note: The Nevada Gaming Commission forced the Hard Rock Hotel & Casino to take down a billboard that many local residents considered offensive.) Let’s ask the question first: How many of you believe the controversial Hard Rock billboard should have come down? (Three hands go up). Only three of you? Why? Why shouldn’t it have come down?
Schadler. It’s freedom of speech. I have two kids, and it’s not pleasant sometimes to drive down the street and see these billboards. But I think the overriding element here is freedom of speech.
Brown: I was offended by some of what the Hard Rock did, but I will defend their right, and have defended their right to carry on. I think at times the Gaming Control Board has overstepped its bounds.
Foley: Well, I think it was in very poor taste. I think it insinuated that prostitution is legal in Clark County. I understand freedom of speech, but I worry about the messaging. We become very offended when the New York Times prints articles that talk about showgirls and downtrodden people, but in Nevada we lead the nation in suicide rates, in dropout rates – in almost every statistic that’s bad. We try to improve ourselves and to diversify our economy, but what we have done is to promote sex to the limit. At least, I thought it was the limit until I saw those signs. Then I thought, “Well, I guess we’re going to go a step further.” I am pleased that R & R’s advertising campaign has brought us a record number of tourists. It’s wonderful. And they have a tongue-in-cheek campaign. But when you step over that, people don’t really know where to draw the line. I think we’ve gotten dangerously close in some of the advertising promoting Las Vegas, and it makes me fearful for the community we’ve worked so hard to develop, to entice other major businesses to come to diversify the economy. I don’t want to do anything to damage that.
Letizia: We made an adjustment here a few years ago. We promoted the family approach, and it bombed. It failed miserably. People have been coming to Las Vegas for what we offer. I don’t condone strip clubs. I don’t want my kids driving by billboards that show women half-dressed. But the bottom line is a lot of people come here for that. These businesses are very successful. They gross millions and millions of dollars a year. The hotels are now going to be gearing for this type of entertainment. This is what people who come to Las Vegas want. So you can’t deny them – they come here for that. The campaign R & R has produced, which is a brilliant campaign, hit the nail right on the head. If you try to regulate against what’s working, you’re going to have problems. And you can’t restrict freedom of speech. We have First Amendment rights. Now, with the Hard Rock, you have a different issue. You’re dealing with Nevada gaming, which is a regulated industry.
Purdue: Las Vegas has always had two personalities – the side seen by the people who live here and raise their families here, and another side we present to tourists. And as far as economic diversity, I don’t think we can pretend to be something different than we are. Las Vegas is what it is, and if a company doesn’t want to come here and deal with that, that’s fine. There are a lot of economic incentives for them to come here. We have seen some diversification, and we’ve seen people willing to see the other side of Las Vegas.
Shattuck: Years ago, Las Vegas was a growing town wanting conventions, but people always thought of Las Vegas as “Sin City.” There were many conventions that would not come here. We worked very hard to build a new image that we were a town of quality, for business as well as for conventions. And then this comes about. You all may be talking to a lot of different people, but people we talked to in the big companies are worried about those ads – “What happens in Las Vegas stays in Las Vegas,” et cetera. When they come here and see the community, they say, “Why don’t you project what you have in this community also?” I don’t know how many conventions we’ll lose, because there are still a lot of moralistic people in the convention business who will not come to Las Vegas. Dallas and New Orleans are getting the conventions. Everybody thinks people keep coming to Las Vegas to have a great time. Yes, they do, but there’s a fine line of taste, and I think we’ve all overstepped that, as far as trying to bring big business here to town.
Flanzraich: When you say “big business,” do you mean convention business or economic development?
Shattuck: Both, because you’re dealing with many of the same people. People who come here for conventions love the shows, love the lights, and they love Las Vegas. But yet, do they want to bring their families with them?
Brown: I don’t know if advertising our main industry prevents businesses coming to town. I think what stops economic growth, or at least gives people cause for concern, are the elements that come out of growth – the fact that our school district is overcrowded, and the traffic situation – those are the issues the Nevada Development Authority finds that keep people away. We all have a responsibility to say, “Yes, this is Las Vegas, and because of what we are, we may have some challenges other communities don’t have, but we have a responsibility to try to work to solve those.” And all of us in this room are uniquely positioned to help address some of those issues in terms of growth and education, and some of the down-side problems a transient community like ours has.
Mele: I’d like to comment on the convention issue. I share the same concerns as the rest of you in terms of our community, but conventions held in Las Vegas have on average 10 percent larger attendance than they have when they’re held in any other city. We have higher levels of convention and group bookings. The business is as strong as it has ever been.
Letizia: We have to remember the goose that lays the golden eggs is the 34 million tourists who come here every year. And why are they coming here? Because they like what we have to offer. And businesses that are moving here aren’t saying, “They have these billboards around town and topless clubs, so I’m not going to Las Vegas.” I see businesses from California coming here because they love our tax climate, and they want to get out of California because they’re getting killed, tax-wise and California is unfriendly to business. We have open arms to business here in Nevada, and that’s why they come. Sure, you’re going to lose a group here or there because of what we represent, but so be it. We’re winning so much on the other side that it far surpasses the downside.
Mele: I don’t think we give professionals who are in charge of relocating a plant or a corporate office enough credit for being smarter than to make a judgment about what Las Vegas is all about based on a tourism ad. They’re a lot more savvy than that.
Recruiting Creative Talent
Mele: We realized a couple years ago that you can’t ever stop recruiting. When you find good talent, whether or not you have space for them at the time, you hire them. You find a place for them and make them happy and hope they stay. Our business is also unique in that we sell ideas. And those people in our companies who are primarily responsible for the creative ideas are looking for very different things than the other professionals in the company. We’ve learned that we have to recruit them and treat them in a different way than we do the administrative staff, because creatives care about the work. You can’t lure them with great benefits and a nice place to live. It’s all about the work for them, and so it’s like you have to recruit on two different levels constantly.
Schadler: Traditionally, the work in this market hasn’t been viewed as being great. It’s just been in the last five or 10 years that Las Vegas is developing notoriety as an ad town. But once you attract certain people and they start to figure out what a great place this is to live and work, the message starts to spread. We are getting calls from New York, Chicago and San Francisco. In many respects, we have been the beneficiary of the struggle advertising centers have gone through in the last several years in those three markets, but I think it’s still a struggle to convince top talent to move here.
Mele: And here’s the other thing: Creative people don’t stay long. You have to realize that retention is just not an issue with them. You try to get the best you can out of them for maybe two to four years.
Smith: You can’t keep them very long. Even if you have a young person right out of school and he or she is really brilliant, you know in two years they’re going to go to a larger agency. And even if they’ve been in the business 10 or 20 years, if you can’t keep the creatives really inspired enough, they go on to another level.
Mele: One of the things that shows the work is better here, and that we are bringing in better talent, is that those who are leaving here are going to the hot shops in the country, and so those shops will be looking to recruit their talent from us, which I think is a reflection of the good work we’re doing.
Brown: We’re also facing a challenge because of growth issues. We are losing one of our competitive advantages, and that is inexpensive housing in a low-tax environment. With the housing market increasing so significantly, the salary ranges are going up. The low-cost economy we’ve enjoyed has been a big asset in recruiting some people, but it’s disappearing.
Schadler: When we started our agency, we talked about all the great values here. We still have a great tax structure, but low-cost housing and the 10-minute commute to get to work are sort of out the window. So now we’re paying New York City salaries in many cases.
Brennan: Is the recruitment issue mostly with your creative people, or is it across the board? Do you also have problems finding account executives?
Schadler: Yes, but the creative area is very specialized.
Mele: You can teach account executives critical skills.
Schadler: But creative talent is very much innate. You either have it or you don’t. It’s not something you can really teach.
Thorsrud: Recruiting quality candidates in the PR field is always a challenge. We are constantly on the lookout for someone who not only has the experience and talent, but also the personality that fits with our company culture. Because we have such an outstanding staff, we often have to deal with other companies targeting our employees to come work for them. We have to work very hard to make sure our employees are happy.
Virgen: In our agency, we are generally not in a position to offer larger salaries, so I often look for newer and younger talent. I really question now whether people coming out of school can even draw. It’s incredible. We have a couple spots that just keep rotating, because we get someone in who has a beautiful résumé, but they’re not truthful about their skills. We’ve started saying, “You have one week – we’ll try you out. If you get it, great, but if you don’t, you’ll have to go.”
Mele: That’s a really good point. One thing we started doing in the last couple years, especially for folks who seem to have great portfolios, is letting them come in on a trial basis. We’ll even pay for them to commute for as long as a couple of months. Because you don’t know until they’re in there what they can really produce. That’s worked out well. It weeds them out before you move them out here.
Olsen: We have been successful recruiting right out of the Journalism School at the University of Nevada, Reno. We hire interns and part-time students, and many of them have turned out to have a career with us. The university is turning out very talented young people with great ambitions.
Sloane: As an extremely small company, I outsource because I don’t have the resources or the account lists and the account executives to maintain a large account list. And the beauty of the Internet is that one of the best artists I have is actually in Massachusetts. I’ve found that you can’t have one artist on staff and expect him or her to do everything, because every type of project may need a different expertise. I have artists I use here in this market, and I have the artist back East, because she has a particular style. So the beauty of it is, you really don’t have to have them as employees. You can cherry-pick some of the finest ones who are willing to work on a per-project basis. I find it’s less costly because I can negotiate either the cost of the project or the hourly rate on an estimate of how long it will take. And I don’t have to have an employee on my staff and pay benefits and all of the additional costs, which we all know is very expensive.
Smith: I agree. I have people around the country, and it is better for a smaller agency. It’s better for the client. They’re actually saving money because I don’t have all the overhead, and it’s a lot less stressful for me. And I can concentrate on the areas that I really enjoy – the PR and the media. So there’s a good balance. It’s taken about five years for me to evolve into that, but you can get the best of everything.
Compensation and In-House Agencies
Brennan: It seems that 20 years ago, everybody was getting a full 15 percent commission. It wasn’t really negotiated. I understand that has changed now.
Letizia: Clients started thinking, “The agency is making all this money every year on my account. I can buy my own media and maybe go out and hire a production person and a few artists, and save that money.” To a certain degree they can. A lot of the hotels are staffing full-service agencies – they have an artist, a media director, PR people and production people. At first, it was just strictly to save 15 percent. The guy would say, “I’m an in-house agency,” and save that 15 percent, and he felt he was doing his job, but really, most of them were doing a very poor job. They weren’t buying their media effectively. They weren’t doing a good analysis. They were simply calling up the TV station. But others learned how to do a pretty good job, so the agencies had to step up to another level in order to justify that commission, whatever it was. We now have to justify how we buy media and why we can do it better. So it made us more professional. The in-house idea became a big issue, not just in Las Vegas, but everywhere, and a lot of agencies have gone out of business in the last 10 years. There are a lot fewer agencies in the country today than there used to be.
Mele: Don’t you think the commission system was a flawed system in the first place?
Letizia: Totally.
Mele: If you think about it, it’s the most ridiculous way of compensating an agency, because you’re immediately suspect when you go into a client and recommend a media plan. The way it evolved made sense at the time, but it’s so antiquated.
Letizia: In the early 1900s, newspapers used to pay sales reps 15 percent to go out and sell ads and that’s how it started, and we inherited it.
Schadler: It’s really a new paradigm. The in-house agencies absolutely serve a function. A hotel doesn’t need an expert to say, “We ought to advertise our shows in Show Biz magazine.” Sometimes they think they can do PR just as well as a big agency. But there’s also been a tremendous recognition in the last couple years about the value of branding, and about the value an agency can bring because of all the different disciplines that are involved in the communication strategy. And clients are expecting results from their agencies. One of the biggest challenges agencies face is validating compensation structures. We spend a lot of time on that. Marketing is expensive, and when Sept. 11 hit, the first thing that stopped in this town was marketing. We got called into our client’s offices the next day and they said, “We’re cutting fees.” They couldn’t turn the lights off, but they could turn the advertising off. So, it’s all about money, and it’s forced agencies have to find ways to be more effective for less money. How can you offer services to your clients that maybe they didn’t consider, that will help grow their business? We take the attitude that, we’ve become extensions of their marketing departments, and we care about their companes.
Brown: I prefer a fee structure that’s justified, of course, but a fee structure that takes into account the services we provide. We have ongoing conversations with our clients; any time we feel we’re not doing enough for that fee, we negotiate that fee down. We’ve initiated that discussion and vice versa. Our clients expect and appreciate that.
Thorsrud: I’ve found that some companies are now forgoing advertising and using public relations initiatives instead. We work with quite a few clients who did not get the results they wanted with advertising, and when they switched their focus to PR efforts, they were thrilled with the results. Of course, PR is not always the answer, but many times it can make a huge difference to a company’s bottom line.
Foley: One thing that is different from the old days of placing ads or even in-house advertising is that you are no longer responding and reactive to what chients want. You have to be very proactive in being a partner with them, to help steer and guide them in the very best direction.
Olsen: I’ve found that if you’re competing on price, then an agency is a very scary place to be. And the way you get there is by not adding value constantly in everything you do – in all your services, in getting to know the clients and their goals, and really thinking about return on investment for each client. Once you’re competing on price, you’re probably losing the client anyhow.
Poggione: A lot of in-house agencies go into it hoping to save money, but the reality is, when you factor in the overhead associated with getting the same type of product an agency can perform, when you factor in retirement funds and computers and work space and everything else that goes into it, the savings are negligible for the return. And you lose the ability to have an objective view from outside. You also lose the creativity that the larger group of individuals can bring to the table.
Smith: If you don’t have the right people, the experienced media and PR people, it could really cost you a lot of money. They could make a mistake and put in the wrong ad or advertise somewhere where you’re not even reaching your market. I have media background, and I’d like to see media people certified or have some kind of training. For example, an organization like AMA (American Marketing Association) could issue a PR certificate, showing that people who are placing media have some education. But I’ve never been able to gather enough support for that idea.
Sloane: I think it’s the best of both worlds when the in-house agency and the outside firm can keep the lines of communication moving, because the president of that company isn’t going to have time to sit down with the PR firm on a daily basis. So the president communicates with the company’s marketing department, which then outsources to an advertising and PR firm that implements what they’ve decided on. You really can have all of that going on at the same time.
Letizia: I think Peter (Poggione) hit the nail on the head. The key is, if you’re in-house, you lose your objectivity and you become part of that corporate structure. When you get into that corporate structure, it seems like everybody’s a yes man. Everybody’s trying to cover themselves and trying to save their own jobs, but when we come in, we’re totally objective. If necessary, we’re going to tell you, “Hey it’s not going to work.” We’re not going to agree with you to make you feel good. If you can work as an extension to that in-house agency, that’s the best, because we have to live with in-house. It’s there, but allow us to come in as a consultant and speak our mind.
Poggione: If you come in as a consultant, as opposed to an agency, you have a much better chance of succeeding because you are complementing instead of competing.
Flanzraich: The natural extension of what you’re saying is that you can come in saying, “I’m going to make you look good to your boss. You’ve got my brain power, but I’m kind of a ghost writer for you.”
Letizia: Exactly.
Neighbors: When I started my company nine years ago, I named it Consultants in Marketing on purpose, because we never really wanted to be seen as another agency. And I think it’s really going to be up to people like us in this room to be industry transformers. We have to get real creative and think way beyond the box about how we’re going to position our value and sell that value. I recently saw a national report about the profit margin agencies are making across the country, between 0.5 percent and 0.9 percent. I don’t think any of us want to work for that kind of profit margin. With the commission issue and people going direct, we really have a big challenge ahead of us. And I hope we can get together and learn how to face it.
