China’s PR industry is a sector being forced to confront change. Several trends are coming to the forefront, primarily the demand for creativity and an increase in digital and integrated capabilities, fuelled by the meteoric rise of social media in China.
Greg Paull, principal at consultancy R3, says these trends are causing problems for agencies, with many having trouble hiring and keeping the digital experts necessary to stay competitive. A recent study from R3 found that the main factors influencing companies’ decisions to change PR agencies are poor integrated and digital capabilities. With the number of marketers in R3’s study who stated that they did not do any digital marketing falling from 13.5 per cent in 2013 to just 3.5 per cent in 2015, it is becoming increasingly crucial for agencies to hone these digital skills.
High turnover rate is a major issue, says Elan Shou, senior VP, managing director China at Ruder Finn Asia. The industry may be growing fast, but the talent pool remains small, she adds, with in-house departments and agencies fighting for the same talent.
The role of procurement in agency selection is also on the rise in China, a trend driven by the recent austerity crunch in the country. R3’s study found that more than 72 per cent of companies have procurement teams involved in some stage of negotiations.
So how are agencies responding to these challenges? Scott Kronick, president and CEO at Ogilvy Asia-Pacific says it is not uncommon for the agency to form one client team made up of PR professionals, advertising experts, CRM advisors and activation specialists. Clients are influencing this move towards integration because their teams are also restructuring along these lines. But, he adds, agencies must do a better job of retaining their people and creating service teams that are sustainable. And the rise in procurement is making the agency work harder to engage and deliver value.
“The great procurement departments face this challenge together with their in-house teams so they are getting the best value for what they pay, not just the agency that has the best pricing,” he says. “That is not a winning formula. The client engagements where procurement approaches us separately without a connection to the people asking for the work usually do not work and we’re trying to avoid these.”
With procurement departments heavily involved in agency selection and evaluation, it’s no surprise that measurement is also becoming key to agency performance and future success.
“Agencies must get beyond measuring communication outputs to documenting evidence they are affecting consumer behaviour and driving business leads and sales,” says David Ketchum, CEO and founder at consultancy Current Asia. “The breakthrough will come from companies that train their procurement partners that buying communications services is not the same as buying bricks.”
He believes that measurement is another reason why brands in China are dissatisfied with their PR agencies’ digital performance. Many agencies, he says, still focus on social media as an extension of media relations, rather than learning the harder-edged skills of demand generation driven by analytics.
Those agencies that are adapting to the current environment are adopting a ‘local’ approach very quickly, with even multinational ones much more in tune with their clients’ audiences than they were just a few years ago.
“They are now better connected with the realities of driving traffic, making search work and driving mobile engagement,” adds Ketchum.
Oscar Zhao, CEO at BlueFocus Communication Group, says the biggest challenge in China is a change from a profit-driven mindset to one focused on value creation. Clients are now demanding to see the immediate effectiveness from PR communication through key performance indicators.
“Our core challenges are how to create value for consumers and generate business impact,” he says. “Technology, innovation and integrated capability, combining social PR/ePR, digital and mobile, for example, are the weapons for success.”
A 2014 China PR Market Annual Research showed the total size of the PR industry in 2014 was RMB38 billion (US$6.2 billion), representing an 11.5 per-cent growth, year-on-year, compared to the previous year’s growth rate of 12.4 per cent.
While these figures point to some contraction in the industry — a reflection of the current economic slowdown in China — R3’s most recent study shows that agency-client relationships are on the slow road to stabilisation, with the average number of years in these relationships slightly increasing over R3’s 2013 figures.
“Those who want to remain competitive are investing in tech-savvy talent that are capable of working with big data, as the rise of mobile, social and digital influence how marketers disseminate their message, and how consumers make purchasing decisions,” Paull says.
Marketers are increasingly looking for a ‘one-stop’ solution provider that can manage all aspects of PR and integrated marketing. Those agencies in China that hire talent with technical backgrounds that can lead across both digital and social media, as well as the in the growing area of buying, will likely come out on top.