Will PR retainers grow in 2015?

 4th December 2014    PR Insight 
 Paarul Chand

The PR business in India is going through a consolidation process where you have established PR firms at one end of the market and a growing appetite for PR from the SME sector, which prefers smaller firms, at the other end. Legacy challenges of slower growth at the top end of the business as well as rising costs and flat retainers combined with a poor business sentiment and economy in 2014 has impacted growth.

So, as the last month of 2014 rolls in, the question on every PR professional’s mind is whether this will change in 2015? And whether the improved business sentiment, post the Modi government, as well as a growing PR demand from new companies will result in better retainers, better growth and of course, better pay.

Could retainers rise in 2015?

Subhash Pais, founder and business head, i9 Communications Pvt Ltd believes that retainers should start correcting positively in 2015 as compared to 2014. He says this is because of 3 main reasons, “First of all, the top agencies have started consolidating (even on the retainer front), although there is a long way to go but it’s a positive sign of the industry bottoming out as well as top agencies having the confidence to not just pile on clients but also look for what they are worth.”

“Secondly, in the last 18 months or so quite a few of those one man agencies which were set up by the dozen everyday between 2008-2011 have shut shop and newer ones aren't popping up at the same speed. This has meant that there is some sort of consolidation happening at the other end of the market as well.”

Finally, Subhash adds, “The general sentiment in the market is definitely more positive in certain sectors than what it was in the last couple of years and I believe that will result in newer energies being invested into marketing those sectors. It’s left to be seen if these sentiments affect PR retainers in the short and medium term but one would definitely feel optimistic right now than what they were at the beginning of 2014.”

Bhuvana Santhanam, senior director, national business development and branch director, Bengaluru, Perfect Relations agrees that, “From an industry perspective, the economy definitely seems promising and there is an upward trend. Some of the promising sectors would include infrastructure, technology and start-ups across all domains.”

Sandeep Rao, co-founder, One Source – a WhatsApp platform for the PR business, however is not that optimistic about higher retainers. He says that the majority of bigger global corporates have hired agencies already and have well established relationships with them.

Sandeep points out that, “This means that most agencies, big and small, target smaller organisations entering a phase where they require PR and have begun to understand its importance for business development. However, the amounts that these organisations are willing to pay for PR are not necessarily commensurate with rising costs. Also, figures might be improving as far as the economy is concerned, but reality is that we are not out of the doldrums as yet. Of course the economy is improving, but are clients ready to discuss a rise in retainers? No, not, particularly.”

Vish Gopal, executive assistant to Ruzbeh Irani, chief group communications and ethics officer, Mahindra Group believes that old perceptions about advertising being essential but not PR still exist within companies, “I think the recent slump in PR retainers is indicative of a larger endemic issue in the way corporates perceive PR and communication functions. Although recent trends suggest that PR is gradually gaining favour with marketers and executives, advertising continues to be the weapon of choice for mass communications. As is the case, in a tough economic environment where corporates are struggling to retain customers, PR is often seen as expendable.”

Neha Mathur Rastogi, founder of WordsWork Communications Consulting admits that, “It is true that PR retainers have not had a fair growth over the years. A lot of this is a combination of our inability to grow retainer fees of long term, large scale, clients as well as more new business emerging from smaller budget SMEs. It is also a direct reflection of the current economic environment forcing marketing budgets to freeze which has a trickle-down effect on PR as well. While the burgeoning SME sector brings more volume to the market; the overall value has been flat lining since some time.”

Subhash feels that, “The sheer volume of competition seemed to shock the industry. It became a norm to go into a competitive pitch facing 15 other agencies and being clubbed with all sorts and types. On the client side apart from starting a bidding war and cutting down retainers there wasn't much gained as the industry overall did not make much progress and growth rates across agencies flattened out. However, some big and global agencies still beat the trend and did very well and grew very well over the last few years. I think small and VFM agencies challenging the biggies will continue and hopefully it will be beneficial rather than detrimental to the industry.”

Obstacles to growth

Subhash is also critical of, “The traditional 'all under 1 roof' approach where all communications tools are sold under one consolidated sales pitch. It’s like a combo meal at McDonald’s where if you add Rs 10 you can get an extra Pepsi with your meal and sometimes you don't even need to as the Pepsi would be given away free. The Pepsi used in this purposely conjured bad analogy is PR.”

Vish also agrees that, “Strategic thinking continues to be the Achilles heel for many Indian PR firms. Although we have cracked the code of operational and managerial efficiency, PR strategy development needs significant improvement. What corporates need, especially in tough economic times, is strong research, sound advice, and solid execution.”

Part of the challenge in doing this is talent challenges and differentiated service offerings.

How to grow PR in 2015

In spite of the legacy challenges for the PR business, Subhash believes that, “The market is already looking nicely primed. That said the market will get a strong impetus only when there is good quality, stable talent at the right price.”

Subhash also feels that integrated communications is not the solution because, “Theoretically it sounds great, but when applied, it becomes a waste of money, time and is often the reason for conflicts. The answer lies in the corporate communications acting much like a mature systems integrator, getting the best of agencies together to make them work in a nice melodious manner, especially since communications in each area requires expertise of a very different kind. In fact, a better title for ‘corporate communication’ of the future could be ‘communications integrator’.”

Neha agrees that while integrated communications is a sensible direction for growth, “We can also rely on more global players setting foot in India with a higher value and appreciation for the role PR plays in the overall communications strategy. Another driver for growing business is a sense of collaboration. Collaboration can come within the industry with smaller global firms looking for local partners as well as with associated industries. Over the last 2-3 years we have worked on several joint pitches with our network partners in advertising, brand consulting as well as event marketing.”