Clients stop PR services or ask for event-based contracts.

Anjana Chandramouly
Swetha Kannan

Bangalore, March 27 Public relations firms are bearing the brunt as corporates prune costs. From shrinking fees, loss of clients to changing relationships, they are facing it all.

Crippled by budgetary constraints, corporates are negotiating payments to PR firms, says Mr Ramanujam Sridhar, CEO, Brandcomm, a media agency that also handles public relations.

According to Ms Mythili G. Nirvan, Managing Director, PrachaR Media Solutions Pvt Ltd, some clients have not increased the retainer fee on renewal of contracts. Ms Nirvan says this trend is prominent “particularly among clients based out of Europe and the US.” They are attributing the move to the recession. While some corporates prefer to “take a break temporarily”, others have terminated their contracts with PR agencies. “We have lost three clients across all our offices for their own cost-cutting reasons,” says Mr Shivanand Reddy, CEO, Corporate Voice Weber Shandwick.

Brandcomm has also lost a couple of clients in the IT sector.

Replacement contract

Event-based assignments are slowly replacing long-term contracts in some PR firms.

Says Mr J. Suresh, CEO-Brands and Retail, Arvind, “We now work on a project-to-project basis with PR firms. We were very active with PR when we were doing re-launches and opening large-format Megamart stores. As the re-launches are over, the extent of PR work we are doing at this stage has lessened. We are organising media events purely based on any specific activity like launches and we will continue to do the same as and when required.”

Clients are also wary of travel expenditure and prefer video-conferences to face-to-face interactions with PR executives, says Mr Sridhar.

Tackling situation

So, what strategies are PR agencies adopting to tackle the tough times?

Says Mr Reddy: “We have had some pay-scale revisions recently and going forward, our staff pay structures will continue to be linked to productivity.”

A few key people in Brand-comm are taking cuts too.

Is downsizing an option? “Though we are not downsizing staff as of now, the time has come for us to look at our people mix and over a period of time take a look at those who are not delivering. If situation does not improve, we may have to serve notice to non-performers,” says a PR official who does not wish to be named.

There are other ways to stay lean — like “doing without press conferences in multiple cities,” says Mr Reddy.

On the positive side, PR firms say a slowdown can be used to drive new businesses aggressively.

Says Mr Sridhar, “We are trying to look at new clients to drive new businesses. Last month, we added 3-4 new clients. There are two or three in the pipeline.

When corporates are cutting down heavily on advertising today, the role of PR becomes critical.

The PR business is better off than advertising. Retainer costs are lower than advertising costs. The strategic use of PR firms can benefit corporates.”

Text 100 Global Public Relations and its research arm Context Analytics recently undertook a study that shows that “public relations may be more important than advertising to brand value”, especially in the context of the downturn.

Mr Rowan Benecke, Regional Consultancy Director, Text 100 Asia Pacific, says, “Given the recessionary climate and that many companies are assessing where to allocate their marketing budgets, our Media Prominence study findings reinforce that PR is a cost-effective tool that delivers real business value – often at a fraction of the cost of advertising.”

(This article was published in the Business Line print edition dated March 28, 2009)
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