Bean-counting is affecting China's PR industry

In the midst of an austerity crunch, clients in China are increasingly letting procurement drive PR agency pitches. Unfortunately this is resulting in agencies being hired on price and fired on ability.

BEIJING – China’s communications leaders want their PR agencies to be cheaper and yet more creative, according to a study by pitch consultancy R3.

Nearly six in 10 marketers in China (57 percent) now rate ‘cost of service’ as the most important factor in selecting an agency to work with. This is a marked change from only 17 percent in a similar study two years ago, said Sabrina Lee, MD of R3. "From this result alone, we can see the new face and challenges of the PR industry in China.

For the ‘China social and PR agency scope’ whitepaper, R3 met with more than 150 marketers and corporate communication leaders from more than 215 different PR agency relationships across more than 60 agencies over the past four months. This is the third wave of the study, but the first one with such dramatic cost outcomes, said the consultancy.

"Unfortunately, ‘people quality’ has moved from the top factor on most important to number seven," said Lee.

Conversely, the demand for creativity has never been higher, as a key reason clients opt to change agencies is a ‘lack of creativity’, followed by ‘the team and professionalism’ and ‘integrated capability’.

More procurement

The clash of priorities between the reasons clients hire agencies and the reasons they fire them may be because more companies are getting procurement to lead contract negotiations with PR agencies: 72.5 percent this year versus 65 percent in 2013.

This may have resulted in a slight change in agency compensation methods over the past two years. Compared with 2013, 2015 sees more agencies engaged on a purely project basis (38 percent versus 34 percent), whereas fewer agencies (39 per cent in 2015 versus 42 percent in 2013) are succeeding at a mix of retainer and project compensation. Pure retainer accounts have held steady at 23 per cent over the past two years.

As a result, the more progressive agencies have invested in commercial directors to work more closely with procurement, noted Lee. "It’s clearly a global trend for the industry, and the entire procurement sector has matured a lot in five years."

PR losing out on digital

Chinese companies are still reluctant to engage their PR agencies to handle digital marketing, found R3. Only 23 per cent of those surveyed are using a PR agency to lead digital versus selecting a digital agency (32 per cent) and 28 per cent preferring in-house. In fact, when it comes to agency selection, digital capabilities are of the least importance to clients.

The future of PR hinges on agencies being able to move that needle, said Lee. "We’re seeing more and more acquisitions in this sector in China than all the others combined, PR must play an active role."

Alibaba, Coca-Cola lead amongst clients

When asked to name the best peer marketer at public relations in China, local tech giant Alibaba was most mentioned, followed by Coca-Cola. In the case of Alibaba, its successful IPO makes it a textbook success story. Other companies recognized for their PR approach included Xiaomi, BMW, Durex and Mercedes Benz.

Top agencies are OgilvyPR and Blue Digital

This hasn’t changed from the 2013 study. WPP’s Ogilvy PR and Bluefocus’ Blue Digital still stands out in terms of perception among the marketers surveyed.

"Both these agencies have taken different paths to growth in China but both are equally reaping the rewards of a long term strategy," said Lee.

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