On February 5, 2010, a bunch of young Twitter enthusiasts gathered at a Café Coffee Day outlet in Chennai. They spent several hours chatting, tweeting and running up a snack bill of over Rs. 1,000. An impatient store manager didn’t think this billing was good enough for the time they spent at the café and ordered them to pay up a ‘service charge’. The group refused and left. But they tweeted their experience with the hashtag #CCDSucks. Within hours, it spread like wildfire online and Café Coffee Day became the subject of ridicule and fiery debate. The company could neither control nor wish away the bad publicity created by the event.
CCD is not alone in facing the wrath of increasingly aware consumers who demand the best and have the means to communicate their anger to large audiences. Even Bollywood movies are not safe. Tees Maar Khan, a Farah Khan-directed flick, succumbed to the word of mouse within a week. “I could see the early negative comments stream in on Thursday from the preview shows. By Friday that had built up much more, and by Saturday there wasn’t anything the filmmakers could do,” says Karthik Srinivasan, the head of multinational public relations firm Edelman’s digital practice in India.
Quietly but surely, the PR scene in India has undergone a metamorphosis. Time was when companies could prevail upon a few newspapers and magazines not to publish negative news about them and their corporate images would remain intact.
Customers often suffered in silence and new customers had no way of knowing the track record of the product or service he was buying. It was a simple world of information hoarding and a host of local PR firms thrived by managing it through relationships and quid pro quo.
In many ways, that environment remains but change has begun to happen. A wave of international firms is sweeping over India’s shores. They see the potential to take the business of public relations to a more professional, systematic and pro-active level. They are trying to shake up a smug Indian industry used to treating PR as a minor cost centre focussed on managing a few journalists; and help it prepare for a more assertive and connected consumer base. In the process, PR is becoming a more strategic but expensive affair for companies.
And it is not just the Indian companies that attract foreign PR firms. The country has become an inevitably important market for global multinationals, but a tough one to crack given that customers are getting more demanding of product features but remain price-conscious. MNCs are asking their global PR firms to help them build a reputation in the world’s second fastest growing economy. “International agencies bring in a theoretical, empirical and data-driven approach to everything that was earlier in the fuzzy space,” says Jay Vikram Bakshi, founder of niche communications agency Digiqom.
Indian PR firms are at the middle of this change. Before time runs out, they must shape up to fight the onslaught or sell out to foreign brands. Many have indeed sold out — Genesis to Burson-Marstellar, IPAN to Hill & Knowlton, Hanmer & Partners and 20:20 Media to MS&L and Roger Pereira & Associates to Edelman. A few foreign agencies have started from scratch — Text100, Fleishman-Hillard, Waggener-Edstrom and APCO.
But a few Indian firms are holding out. “I don’t need someone to tell me how to compete,” says Madan Bahal, CEO of Adfactors, one of the leading PR firms in the country.
It is in this conflict that a whole new story of Indian PR is emerging.
You Owe Me One
The public relations business in India is fairly young; most firms trace their origin to the years following economic reforms. Using just sheer doggedness in chasing down journalists, a growing bunch of entrepreneurs fueled a mini-boom. For them, public relations meant little more than media relations. “Everybody who spent a few years doing PR opened up their own mom-and-pop shops, selling media execution. They worried about which hotels to hold press conferences in or what gifts to give journalists,” recalls Rishi Seth, founder-CEO of Six Degrees PR who earlier headed multinational PR firm Text100 in India.
The business was soon commoditised. Most worked on wafer-thin retainers and even slighter profits. To control costs, they began hiring inexperienced and cheaper employees. For many, the profession degraded to ‘planting’ nice stories about their clients or blocking negative stories. Journalists they managed to befriend co-operated.
The Niira Radia tapes offer an insight into what this culminated in: Chummy relationships between agencies, journalists and businessmen that skirt ethical boundaries, news stories that were planted or dictated by clients and the use of advertising to control what news organisations would say.
All that changed with the Internet and mobile phone. There are more than 500 million mobile users and about 80 million Internet users in India today. Nearly 70 percent of Web users are on some social network. Their trust in newspapers, TV news and yes, business magazines, is down sharply: 35-40 percent lesser than two years ago, according to a 2010 survey conducted by Edelman. But they’re connected, eager for information and willing to speak their mind.
“This is the age of radical transparency. If you’re a company behaving in an unethical way, then you will be found out and castigated very quickly. And you cannot hope that your relationships with journalists — however good they may be — will protect your reputation then,” says Arun Sudhaman, managing editor of The Holmes Report, a London-based PR trade publication.
The Radia tapes also showed that the media can’t always suppress a story. “Today there is no concept of ‘blocking’ a negative story. One blogger can pick up a story which has, for instance, been ‘blocked’ on The Times of India and within seconds it will be all over the world,” says Paroma Roy Chowdhury, the corporate communications head for Google India.The Lure of India
To one set of people, however, this frenzied world looks like an opportunity — the US public relations firms. Modern PR largely originated from America and even today, its companies, lobbyists and agencies are considered the global past masters of the game. In the last five years, many of them have set up shop in India. But the trend has accelerated only in the last two.
But here’s the funny thing: The entire market for agency PR in India is estimated to be just around $100 million annually, says Sudhaman. That’s about 35 percent of just Edelman’s 2009 global revenue. Average monthly retainers still hover around the Rs. 100,000-150,000 figure, a pittance compared against companies’ marketing or advertising budgets. “In New York I wouldn’t consider retainers less than $20,000 a month,” says Robert Holdheim, Edelman’s India head.
So what’s luring these agencies into India? Mostly it’s the realisation that their home markets have matured and the hope that ones like India is where the future money lies.
“We found the PR function undervalued when we went to Europe in the 1960s. It took us 15-20 years to prove our worth. I would predict the same will happen in India as firms begin to use and see the value in our services,” says Harold Burson, the 90-year-old founder of PR firm Burson-Marstellar.
International agencies bring a whole new way of doing PR in India. Unlike the local firms which follow ad-hoc methods, they work with data, templates and processes. They try to understand the business problems of the clients rather than just look at the marketing problems.
They also don’t look for workarounds, as they have to comply with the code of conduct imposed by headquarters. They are forced by US laws to be straight in their dealings with clients or media. Laws like the US Foreign Corrupt Practices Act and Sarbanes-Oxley impose a black-or-white code of conduct on these firms around which there is often no way. For instance, “there is no line item in our balance sheet that says miscellaneous expenses,” says Madhuri Sen, head of Waggener-Edstrom India.
This is most evident in government relations. The old way of doing this is to fix up meetings for CEOs with ministers and secretaries. This is often done through personal relationships and more. The agency and the client would engage in intense lobbying to get what they want.
But foreign agencies are changing that. They instead focus on making out a public case for it. For instance, if the issue is opening up the retail sector to foreign investment, the argument will be how it can create jobs without putting local grocers out of business, reduce prices and lead to a better experience for the customer.
And they do this by floating whitepapers, offering economic arguments, and engaging at the level of joint secretaries where policy starts taking shape rather than the secretary or minister where it’s merely finalised. “It’s not about file pushing and fixing, but about contributing to debates. Its advocacy,” says Holdheim. Prema Sagar, the head of Genesis Burson-Marstellar says she’s never had to face bribery.
Sen says firms like hers are also getting their clients to measure PR in a more holistic manner. “Instead of just looking at media clips, also look at citations in analyst reports, brand perception, the number of events the company gets invited to,” she says.
Indian firms have been racing to the bottom, charging less and less fees. This has forced them to hire untrained people and let them loose on clients. But almost all foreign firms are run like accounting or legal firms, with each employee’s ‘billable hours’ assigned across the various clients the person serves. The more experienced the employee, the higher the rate.
“For multinational agencies, each employee is supposed to generate a certain revenue and profit which they monitor on a month-on-month basis,” says Seth.
It is indeed a new experience for Indian companies to pay their PR agencies charges for every overhead, including an extra photocopy! They have been getting away for too long with paying a token Rs.100,000-150,000 per month as fees to local PR firms.The CEO Factor
The biggest barrier to PR agencies doing more strategic work for businesses is often the CEO. The world may have moved online, but many CEOs still expect to see their announcements plastered across the front pages of all leading newspapers.
“I ask them what’s wrong with Web sites, Twitter or Facebook but the CEOs still want paper. Some of them tell me, ‘In the good old days my friends would call me up after reading the papers and say what a great product,’” Sagar says.
There are exceptions, of course, like Mahindra & Mahindra. Managing Director Anand Mahindra is one of the most visible Indian CEOs on Twitter with nearly 200,000 followers.
“The way Anand Mahindra is using Twitter at the leadership level to address issues ranging from consumer complaints to employee messages, his Twitter account would probably be the most valuable tool in his company’s perceptions armoury,” says Bakshi.Indian and Loving It
International firms have become ubiquitous on the PR scene in India. The only three exceptions are Vaishnavi Communications, Perfect Relations and Adfactors. Even they are under constant wooing by foreign firms looking for a toehold in India. Dilip Cherian, founder of Perfect Relations, says “We are constantly courted and are consistently one of the first ports of call for an acquirer. And though we have always believed that any deal that enhances all round shareholder value is good, we are not in a hurry to sell.”
Bahal of Adfactors, is categorical that he will not sell out to an international agency. He sees Indian agencies selling out as a sign of weakness and a lack of vision or ambition among entrepreneurs to take their firms to a higher level. Worse, most entrepreneurs have sold out for ‘peanuts’, he says. Bahal is open to partnerships ‘by the hundreds’ though.
The fact remains that the top Indian PR companies like Vaishnavi and Adfactors are still the revenue leaders; they are no weak competitors.
Some entrepreneurs like Seth are trying to position themselves as the optimal mean between the knowledge and process-driven discipline of international firms and the local know how and speed of Indian firms.
At the end of the day, the nationality of the PR agency doesn’t matter, but the quality and ethics behind their work do. As Hill & Knowlton India’s head Radhika Shapoorji says, “Consumers are getting more empowered. They know their rights and will not stand for nonsense. And in sectors like aviation, telecom and hospitality, due to the sheer number of customers and customer touch points, you can almost expect a crisis a day. Therefore companies must treat each complaint as an issue, before it becomes a crisis.” (With additional reporting by Samar Srivastava)
(This story appears in the 28 January, 2011 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)