The impact of demonetisation on PR

 15th February 2017    PR Insight 

February marked two important financial events for India. The presentation of the Union Budget 2017. And the three-month mark of the demonetisation announcement.

In a two part series, PRmoment India explores the impact of both these events on the PR business and what it could mean for the economy in general.

In the first part, we examine the impact of demonetisation on PR business.

Slow down in new PR business

Samir Kapur, vice-president at Adfactors PR, India’s top PR firm  naturally has a key question on his mind, that is, “ What will be the outcome for PR and business of PR?”

 Kapur says that, “The PR business is already feeling the pain even as consumers find themselves check-mated in the process. According to me, the 4 major sectors that are impacted are consumer goods, NBFC & MFI, Realty and the surprising element is banking sector.” 

Kapur says that, “ Officially, realty prices have not exactly crashed.  But it is seen as a sector that is a very cash-centric business in the country. The squeeze has made it virtually difficult for the realty sector to function smoothly. Currently, the impact is being absorbed by the stock price of realty stocks which have corrected sharply. But sooner, rather than later, this impact will show on realty prices too. If the squeeze continues then realty sector may soon find itself with negative equity in its ongoing projects. That is when the desperate selling will actually begin and the cookie may actually start crumbling! So, agencies focused purely on this sector are going to face the heat in terms of payments getting stuck and new projects not coming through.” 

Banks will need reputation management in the time of demonetisation 

 On the face of it, the demonetisation appears to favour banks. It will lead to a surge in deposits. However, the real worry may be on the assets side of the balance sheet.  Kapur believes that, “With the liquidity squeeze, banks may face a default risk not only on their corporate portfolio but also on their retail portfolio. As of now, the euphoria seems to be on the liabilities side of the bank’s balance sheet. But bad loans may multiply if the liquidity squeeze continues for a few more weeks. That will be the acid test for the Indian economy in preventing an overall slowdown in the economy. This is where the PR agencies specialising in reputation management and understanding corporate governance will come to fore and market will open up for them in this sector.” 

Could it be tough times for bagging new business for PR firms?

Is it tough times for PR firms?  Kapur  believes that, “ This is a tough time to be selling business to customers. The budget allowances simply aren’t there. If agencies thought it was hard to make a new business development before—they’re going to find out how much harder it can be, as even that fraction disappears in across-the-board cuts. Making matters worse, the corporate relationships have lost much of their power. With less money to go around, proposals are subjected to higher levels of review in buying organisations, and the corp-comm people agencies have traditionally dealt with are no longer the decision makers.”

Anup Sharma, senior communications consultant agrees that there will be a slowing of new business for PR companies right upto the first two quarters of the calendar year.

Post that, issues such as GST could also offer financial uncertainty.

What is the solution? 

Never has measuring the benefits of measuring PR’s impact been more important. Kapur says, “ Management is just as loss averse as the rest of us they don’t like to have to justify expenditure unless there is a measurable benefit.  Building trust by talking their language allow us to re-frame research in a more commercial sense and open up opportunities to discuss more strategic projects to address longer-term business goals. Loss aversion can also be used to our benefit as public relations can help protect a brand by uncovering poor sales practices and training needs of customer facing staff though covert observational techniques. Further, for digital communications related public relations outreach and research use A/B testing to measure any uplift in conversion and then calculate the loss of revenue if the old content has been retained.”

Thrust to digitalisation is a massive PR opportunity 

As consumers start making the shift to digital money in ever growing numbers- this is one of the biggest PR opportunities. While individual companies like Paytm have already faced the ups and downs of promoting digital finances and the government has its own machinery rolling out messages; there is a vast underserved area of the population that needs to be communicated with.

And that remit will include not only traditional media but strong stakeholder communication as well.

Says Nikhil Dey, president – public relations & public affairs, Genesis Burson-Marsteller, “The thrust on digitization post demonetization and in the budget is, on the whole, good for the industry, giving digital outreach more penetration, especially in the rural areas. With the allotment of funds to rural infrastructure and development, there will be increase in purchasing power of the rural population where I foresee brands building momentum to strengthen engagement with their relevant customer base.” 

Next week: Find out which sectors of PR could benefit from the budget announcements.