Flat PR Retainers: Undercutting and low margins
Even as PR evolves to embrace the post-AI, post-truth, and social media age; have PR retainers moved in the same direction.
As per Xavier Prabhu, founder & MD, of PRHUB, the question of flat retainers needs to be clarified as flat post-inflation adjustment or not, "If it’s flat pre-inflation adjustment it means decreasing retainer fees. This is important because don't think many agencies factor this in their review discussions. The real reason is lack of tangible differentiation and commoditization which tilts the balance heavily in favor of clients.
The very fact that there is a growing input cost across the players in the space (very large, large or boutique) needs to make both clients and agencies realize that there is a minimal cut-off below which is unhealthy not just for that agency but the whole industry as well. As that then becomes the benchmark."
Prabhu adds, "It’s not just about the retainer size. Let me give you an example. If there is a 10 lakh retainer with a 1 lakh profit on it, the margin is only 10%. But if the same 1 lakh profit is there on a 3 lakh retainer fee, then the margin is 33.33%. It’s all about the value one realises."
Roshan Mohan, Group MD, Pepper Communications Group (PCG), adds that " The recession in some key markets is also resulting in lower retainers. Sectors like IT, manufacturing, from the US & EU markets, have slashed budgets for PR and marketing."
Mohan also explains that even with sectors that are growing, the company involved can make a difference, "Healthcare, for example, is on the rise - but the retainers range from as low as INR 40,000 to a few lakhs - it depends on the company and the value that they see."
"The challenge is also the fragmented nature of our industry, where there is no standardisation. A quantitatively similar service, at least in theory, can be offered by Agency X at INR 50,000 while Agency Y may charge INR 1,00,000 while a third agency may charge up to INR 5,00,000. The real value perhaps lies in between these figures", adds Mohan.
Yasin Hamidani, director, of Media Care Brand Solutions says another challenge has been, "A rise of paid PR articles which media houses and 3rd party agencies are offering to clients.
Consequently, PR firms struggle to raise retainers despite growing demands and complexities in the industry."
Which sectors, organisations offer better PR retainers
Apart from crisis communication, IPO-related work, and campaigns to solve a specific business challenge Prabhu says, "MNCs largely are more receptive to higher value retainers relative to the effort being put in and outcomes expected. A large Indian client may pay the same retainer fee, but their expectation will be higher.
Except for hospitality, lifestyle and certain types of professional service segments, most other sectors are open to paying relatively well or higher. An agency needs to have a healthy mix of such clients to ensure higher value realisation and revenues."
Customised Digital Channel Strategies attracts higher fees
Rachna Baruah, founder, of Madchatter Brand Solutions, believes, "Agencies with integrated capabilities to build corporate and personal brands will win in the long run, with specialists who can devise a curated strategy for different digital channels that will help garner premiums from brands.
Take LinkedIn for instance. According to recent studies[1], , LinkedIn has seen a 55% increase in user engagement among senior executives over the past two years. Additionally, the platform reports that 61 million LinkedIn users are senior-level influencers, and 40 million[2] are in decision-making positions. PR agencies need to stay ahead of the curve in terms of where a brand's target audiences are and what their changing consumption preferences are like."
Shashank Bharadwaj, founder and managing partner, WebX Integrated Marketing Solutions (WebX IMS) agrees that offering a comprehensive suite of services, like combining traditional PR tactics with digital marketing, influencer engagement, and social media management, can justify higher retainers. However, it’s important to set clear expectations from the beginning. While integrated PR can enhance reputation and brand awareness, it cannot alone drive sales.
Clients are often willing to spend more when influencer engagement is part of the plan, but they usually expect sales results. If the campaign fails to deliver sales, clients might cut their spending or stop PR activities altogether, believing it “didn’t work for them”.
Devesh Purohit, communications professional says, "Apart from media outreach, Indian companies are willing to spend on advertorials, vendor sourcing, crisis management, content drafting, media buying, public policy tracking, developing investor relations reports, preparing decks and celebrity sourcing if they find value and good ROI. Media monitoring of the brand along with keywords, competitors, industry trends and community/social listening is another set of services which companies pay for."
Bharadwaj adds, "Certain client segments in India, such as international-based automotive companies, healthcare and pharmaceuticals, and corporate enterprises, tend to pay better PR retainers. These segments have a more mature understanding of PR, reputation management, and the importance of public perception.
While start-ups also are more receptive to higher-value PR retainers, its funding cycle dependent."
Baruah believes "Agencies who can actually deliver in B2B complex segments with the right track record are seldom to find and hence more valuable."
If you enjoyed this article, you can subscribe for free to our weekly event and subscriber alerts.
We have four email alerts in total - covering ESG, PR news, events and awards. Enter your email address below to find out more: