How PR agencies can beat the fee squeeze: Sanjay Rammoorthy

A clear tension is emerging in India’s public relations industry: the business is growing, but agency retainers are not necessarily growing with it. While the overall industry continues to record healthy growth, stagnant retainer fees are putting increasing pressure on agency profitability.

The problem is a widening mismatch between rising delivery costs, expanding client expectations and largely unchanged remuneration. Sanjay Rammoorthy examines the issue.

Recent industry reports provides some of the strongest evidence of this pressure, PRCAI's SPRINT report for 2024-25 found that 81% of consultancy heads believed client budgets were not keeping pace with agency expenses, up sharply from 59% in FY22. 

Meanwhile, 77% acknowledged that intense competition continues to drive undercutting and price wars, although this was marginally lower than the 83% recorded in FY22. The result is a classic squeeze: higher talent and operating costs, broader client expectations, and relatively flat retainers.

What has changed dramatically, however, is the scope of work expected from agencies. A ₹3 lakh retainer and a ₹10 lakh retainer can sometimes demand comparable levels of senior counsel, crisis support and strategic attention. Once the contract is signed, the size of the retainer can become almost irrelevant to the quantum of work demanded. Clients are often reluctant to pay additionally for services that fall outside the originally defined scope, even when those demands require significant additional resources.

The traditional PR mandate has also expanded considerably. Agencies are no longer being asked simply to manage media relations. Increasingly, the brief encompasses digital and social media, thought leadership, executive positioning, crisis preparedness, influencer engagement, content creation, monitoring, geopolitical intelligence and AI-driven visibility.

The issue does not pertain only to PR agencies. It has been observed that there seems to be a trend in wage stagnation or even contraction for senior for senior corporate communication professionals. In quite a few cases senior roles have been replaced by much junior resources at lower costs.

In other words, agencies are being asked to do considerably more for nearly the same fee. So why aren't fees rising faster?

One reason is procurement. PR has increasingly been treated as a price-driven, commoditised service, with agencies frequently compared primarily on retainers rather than the strategic value they bring to the table. Measurement is another challenge. PR still lacks universally accepted and consistently applied measures of return on investment, making it harder for agencies to demonstrate the economic value of strategic counsel.

There is also an industry-specific problem: too much execution continues to be bundled into retainers. Strategy, senior counsel and routine implementation can end up sitting under the same fee structure, even though their value and cost to the agency are fundamentally different. Most importantly, agencies have not fully monetised their intellectual capital. Crisis advice, geopolitical interpretation, reputation strategy, stakeholder mapping and senior-level counsel are often priced as though they were extensions of routine account servicing. They are not. They represent specialised expertise that can materially influence how a company navigates risk and protects its reputation.

Then comes AI. The technology could put further pressure on PR fees if agencies continue to price their services primarily around hours and headcount. Monitoring, reporting, content adaptation and several other activities can increasingly be automated. But AI also presents an opportunity. If agencies use technology to reduce the cost of execution while repositioning themselves around reputation intelligence, crisis management, stakeholder strategy and narrative development, they could potentially improve both value creation and margins.

The PR business model has not kept pace: The fundamental problem, therefore, is not simply that PR fees are too low. It is that the business model has not kept pace with the cost and complexity of modern PR. Agencies need to move beyond competing almost exclusively on retainers and start pricing according to strategic value, complexity and the resources required. This could mean separating strategy from execution, introducing minimum viable retainers, monetising senior counsel and productising specialist expertise through offerings such as reputation dashboards, crisis audits and stakeholder-risk assessments. Small agencies are still being able to manage, but the crunch is certainly being felt by the mid-sized and large agencies.

But the responsibility does not rest entirely with clients. The PR industry itself needs to look in the mirror. The reluctance of clients to loosen their purse strings is understandable in a competitive business environment. 

Are PR agencies doing enough to increase and monetise the value of their services? T ]he answer, in my view, is no.

Small and mid-sized agencies in particular are under constant revenue pressure and can end up undervaluing their own services. Another common mistake is failing to calculate the profitability—or even the viability—of individual accounts by mapping the revenue against the actual human and operational costs involved. The pursuit of top line growth can sometimes come at the expense of the bottom line.

There is another reason agencies accept lower fees: the desire to build a more prestigious or diverse client roster. A marquee client can provide credibility, visibility and future business opportunities. But when this becomes a persistent business strategy, agencies can find themselves effectively subsidising the very clients they are trying to impress.

It is encouraging that some of the larger independent agencies have begun to push back. Several have established clear fee thresholds below which they are unwilling to take on business. That is a welcome development. But it is still not enough. The industry needs a broader rethink of what it is selling.

The bigger opportunity lies in redefining PR itself—from agency to consultancy, from communication to reputation intelligence, and from execution to strategic counsel. 

A company may negotiate aggressively over the cost of a press release. It is likely to view the economics differently when the service being offered is advice that helps its CEO navigate a regulatory crisis, anticipate stakeholder reactions or protect the company's reputation in an era of immense scrutiny

The Indian PR industry is growing. The question is whether agencies are charging enough for the true value they deliver. That, in my opinion that is still a long way ahead.

Sanjay Rammoorthy is a veteran communications professional.