The future of PR agencies in India

 17th October 2013    PR Insight 

The Public Relations business in India is at an exciting time, although this has not come without many challenges.

The relatively young market is going through a transformation, regarding a number of variables including talent shortages, the increase in social and digital platforms, and the challenges of dealing with a slowing economy during the run up to the general election in 2014.

This has meant that the profitability of PR has become a challenge, and a number of agencies are feeling the need to address this within their business.

Profit issues facing agencies

Pranav Kumar, managing director at communication agency, Bite, told us what he believes are the biggest issues facing agencies at this time in the India market: “It’s a mixed bag and an amalgamation of everything. Sub-inflation client budgets and increasing direct staff cost is by far the biggest contributor, no denying that. There’s rising business cost and the usual pressures any business faces when inflation persists on the wrong side of the fence. But I also think that it’s the overall marginalization of the PR business as we know it against the backdrop of an increasingly competitive agency landscape in India. Clients have more choices than ever before, so agencies need to be smarter.”

Nandita Lakshmanan, Founder and CEO of public relations firm, The PRactice, also noted the impact increased staff costs have had on profits and added that: “The plateauing of retainer fees – which has grown incrementally over the last decade, is one of the biggest issues facing our industry today”.

The PR business in India has potential for profit, not only does it have a vast selection of media including social, digital content, online media, as well as traditional broadcast and print widely available, but also the growing awareness about the role of PR in all round reputation management in a social media age. Yet, India’s public relations still has trouble convincing clients to raise fees in keeping with the potential of the work being delivered, this means that client fees are not where agencies need them to be.

Pranav Kumar says hard work is the answer to this: “I’d say it’s all about finding ways to add value. Clients increasingly don’t want clipping books. They want business results”. Pranav adds that, “Agencies that deliver this level of service can justify above average fees. And they will attract above average people”.

While this problem is not necessarily new to PR, due to the economic slowdown India is facing, the issue has been amplified. Nandita Lakshmanan says that her agency’s business model focuses more on retention of clients than on new business acquisition. Therefore, this problem impacts us even more as we don't sweep the market for projects in order to make up for squeezed margins. Nandita adds that, "there is a need to move with the time, leverage technology solutions available and convince clients to migrate to new solutions being talked about. These call for investments – both from the agency side as well as from the clients’ side."

"Timesheets and a clear focus on agreed deliverables is a good point to start. We constantly review manpower productivity within The PRactice. We also evaluate RFPs and if budgets are not commensurate to the deliverables, we don't hesitate to drop business. In all this, it is important to maintain conversations with clients on the profitability of the account - we succeed with some, but fail with others. We have seen that surprise writ on some client's faces as they assume they are among our large businesses, and yet they really are what we categorise as "small" or "medium sized" businesses. Most clients (despite having moved from agencies) are unfortunately not cognisant of the "business" of running a PR firm.”

Balancing below inflation client fees and above inflation salaries

However, no matter what structures agencies put in place the imbalance between below inflation client fees and above inflation salaries, in particular need to change, and India needs to move away from a commoditised PR. Pranav Kumar believes that digital may be the answer: “I think it boils down to the incredible transformation we find our industry in, with digital becoming all pervasive and that’s where the real opportunity is”. Pranav trusts that if PR can blend their skills to fit with the 24/7 online world, and offer something new and different then there is a tangible opportunity to move away from a commoditised PR.

Nandita says: “If we are to move away from commoditised PR, both PR firms and the client community must be closely involved in the process.  It really is a vicious cycle isn't it? Just see the dozen odd RFPs one gets - these are media relations ONLY briefs that show the function at our client's side hasn't evolved. We also see the unhealthy practice of budgets not being listed in the RFP.  I believe this is unique to India, but I fail to understand the logic of doing so. Unless the PR function hasn’t evolved within a corporate it is unlikely the PR manager is unaware of budgets allocated to them."

Nandita adds that: "On the other hand, if the industry behaves cohesively on aspects such as knowledge and transparency around budgets, investing in capabilities that are specialised, develop proof of concepts that show what one can do beyond commoditised PR and have more conversations with C-Suite executives, I believe we will steer the PR industry into the next level. Firms like The PRactice have already started seeing the weighty, traditional ways of PR shifting - slowly but surely, to accommodate creativity and counsel that is appreciated by C- suite executives.”

Alongside the profitability issues, the shortage of talent is still a concern, and the lack of money to spend on talent is only creating a stronger challenge for this. Pranav thinks that people are something that should be invested in no matter what: “Given that people are the number one cost in this business, you really have to be able to manage your margins effectively and be in a position to invest in an agency’s number one asset – its people”.

But what price is too much to pay for the right people? Nandita explains: “Many candidates we meet today have more jobs in their resume than skills that are required to fulfil their roles! Employees must realise they are paid a salary that takes into account their aptitude, attitude and performance and jumping jobs does not become a reason for a 30 per cent increment (though that is the way the industry has been operating)."

Pranav Kumar, managing director, Bite & Nandita Lakshmanan, Founder and CEO, The PRactice