The economic slowdown in the country may soon begin to hurt the over 150 big and small public relations firms in the country, which collectively manage 'fee income' worth Rs 300-500 crore (Rs 3 to Rs 5 billion) per annum. However, the slowdown is also expected to raise the demand for effective communication.
Executives in leading firms say clouds of worries have appeared on the horizon, though there is no immediate loss of business.
Perfect Relations founder and CEO Bobby Kewalramani admits there have been a few postponements of new contracts as well as requests from clients to reduce fees. NS Rajan, the managing director of Mumbai-based Sampark, says growth might be affected if the turmoil continues further.
And Text 100 says some smaller clients have curtailed their budgets.However, several smaller firms, which do not wish to be named, say candidly that business has dwindled sharply in the last few months. Companies, especially foreign-owned ones, are now doing fewer events.
They expect huge cuts when multinational corporations announce their 2009 budgets in January. Some have even laid people off.Some companies, when contacted by Business Standard, said that they will now negotiate hard for lower rates and will look out for public relations firms which can give them more bang for the buck.
In simpler words, smaller firms could soon face the downturn heat.Faced with the prospects of a loss in business, companies worldwide are looking at saving costs. Several are known to have slashed their ad budgets.
The fear is that the axe could next fall on the public relations budget.Some firms, however, argue that since these budgets are very small (a company with an annual ad-spend of Rs 10 crore or Rs 100 million, for instance, may not spend more than Rs 25 lakh or Rs 2.5 million on public relations), a big cut is unlikely.
Also, add some others, since the public relations function is handled directly by most CEOs, unlike advertising which is controlled by the chief marketing officer, a significant cut is unlikely to happen.In the past, companies have made good use of public relations in a downturn. Audits have shown that the impact of an article is far greater on readers than an advertisement. Some studies have said that the affect is 17-times higher.
This, several public relations firms hope, will hold them in good stead during the downturn."Due to the slowdown, firms have cut their advertisement spends drastically. The same companies cannot afford to stay away from being in news for long and public relations gets to be seen as a cheaper replacement," says Vaishnavi Corporate Communications CEO Vishal Mehta.