PR sector building reputation

The 2003 annual survey of the Public Relations (PR) sector in China was carried out recently by the China International Public Relations Association (CIPRA).

The survey focuses on the basic business conditions and nature of the agencies operating in the country. Among the agencies surveyed, including sub-branches, were those operating in the four major service market areas Beijing, Shanghai, Guangzhou region and Chengdu region. From the 50 questionnaires sent out, 45 returned were returned valid for use, among them 14 foreign-funded PR firms and 31 from domestic agencies.

According to the data provided by the respondents and further field investigations, the best PR firms in China in 2003 were then selected to make up the top-10 international and the top-10 local agencies. Their ranking was ascertained by taking their business scales, business performance and service quality into consideration.

A firm qualified for the top 10 had to meet strict criteria.

They had to readily release valid relevant data which showed an annual revenue exceeding more than 12 million yuan (US$1.45 million), employing over 35 employees, having more than five long-term clients on its books, and boasting an established nationwide network.

The following are some findings from the survey.

Basic Conditions of PR Industry

The service market of PR industry in China, excluding Hong Kong, Macao and Taiwan, maintained a stable growth in 2003.

According to statistics collected through the sample survey from the four major markets, the total revenues of the whole industry is estimated at 3.3 billion yuan (US$397 million) an increase of about 800 million yuan (US$96.39 million) over the 2.5 billion yuan (US$301 million) 2002 total.

The combined revenues of the top 10 agencies reached 900 million yuan (US$108.43 million) in 2003, a rise of about 100 million yuan (US$12.05 million), or 12.5 per cent on the previous year.

The overall profit was about 500 million yuan (US$60.24 million). The average growth rate of the top 10 international agencies was 15 per cent, while the top 10-local companies exceeded 30 per cent.

The total number of PR firms in the four surveyed cities was over 600, including sub-branches. Among the total, around 150 had more than three clients and employed more than 20 staff.

In line with unofficial estimations, there were over 1,500 PR companies operating in China last year, with the total number of PR practitioners exceeding 15,000.

PR companies operating in the country's four major cities took 80 per cent of the market share in China. Among these Beijing-based companies took the lion's share, 40 per cent of the market .

This is because most of the top 10 agencies have their head offices in the capital so as to be in close proximity to key institutions, such as government offices, business HQs, and national and international media outlets.

The Shanghai market continues to strengthen, the report shows, due to the expansion of the city as international business hub boasting healthy consumer consumption.

Chengdu stood out as a fast growing market, acting as a base for the Southwest China market.

The top-10 local firms were seen as well operated agencies, who had over eight long-term clients on average. Meanwhile, domestic companies chose local PR firms as service providers. Among the client list was China Mobile, Shanghai Volkswagen, and Boshi Fund Management.

The average number of employees in a top-10 international company was about 50 40 of which were professionals, while the figures for the top-10 local agencies were 75 and 60 respectively.

The number of PR practitioners increased rapidly last year, up 10 per cent over the previous year. The average flow rate of personnel in per agency was 16.5 per cent, while the figure in the top-10 internationals and the top-10 locals were 15 per cent and 18 per cent respectively.

The pressure of work in the PR industry remained immense. The weekly staff working hours for the whole industry was 45 in 2003, sliding lightly from that of the previous year's 46 hours.

Training

Training programmes attached great importance, and the annual training hours per person at the top-10 international and top 10-local agencies were 50 and 40 respectively last year.

Agent fees from long-term clients usually made up a major part of a PR company's revenue. Long-term clients were, naturally, very important to the PR companies, providing stable income, industry insiders said.

Fifty-five per cent of the industry's combined profit came from fees charged to long-term clients, while the figure for the Top 10-internationals and the Top 10-locals agencies was 64 per cent and 46 per cent respectively.

The survey showed the average age of the PR personnel in China was 29 last year. The top 10-internationals and the top 10-locals had an average staff age of 30.4 and 27.8 respectively.

Fifty-four per cent of the combined industry staff were female across, with top-10 internationals recording 57 per cent and local firms 51 per cent.

Remuneration

Salaries were relatively high and showing signs of increasing through out the survey period. The monthly salary of an account manager working for a top-10 international agency was over 10,000 yuan (US$1,205) , while and AC working in a top-10 domestic firm received between 6,000 yuan (US$723) and 8,000 yuan (US$964). Local agencies paid ACs under 6,000 yuan (US$723).

Business development in 2003

China's economy continued to expand during 2003, with the gross domestic product (GDP) growth rate hitting 9.1 per cent, despite the negative impact of SARS during the first half of the year.

Meanwhile, entry into the World Trade Organization (WTO) further opened the market, consumers' confidence strengthened, and communications, automobiles, retail and real estate sectors remained in dynamic mode, creating a favorable market environment for PR operators in China.

Agencies seized opportunities to develop new markets and new business, and this spurred the sector's growth momentum. Moreover, professional PR services have been increasingly recognized as good businesses by the domestic clients, and more and more professionals were entering this promising industry.

The professional PR service market continued to develop at high speed, with an annual growth rate of 32 per cent in turnover last year, seven percentage points higher than the 25 per cent in 2003.

According to the survey, 60 per cent of the PR companies considered their performances in 2003 to be "fairly good," while the figures for the top-10 international and the top-10 local agencies were 50 per cent and 70 per cent respectively.

Client base

In 2003, large clients of the PR sector were engaged in IT, communications (including mobile phones), durable consumer goods (including automobiles) and fast moving consumer good industries, which in total took up 80 per cent of the PR market.

PR for communications and automobile clients witnessed remarkable growth, making up 25 per cent and 20 per cent of the client fees respectively.

The service for governments and non-profit organizations occupied a smaller market share for top-10 international agencies while fast moving consumer goods became the new growth point for top-10 local firms.

Health, real estate, finance, culture and sports became more and more dynamic.

The top-10 international firms improved their project service and became more flexible. And the service quality of the top 10-local firms gained more market recognition, with long-term agent services rising to 46 per cent last year.

In terms of business type and service channels, 90 per cent of the top-10 internationals were comprehensive service agencies, providing media relations, corporation communications, marketing communication, event management, and strategy consulting for clients, while only 60 per cent of the top-10 local firms were comprehensive service providers.

Consolidation

Top-10 internationals agencies continued to hold the majority of the high-end service market. The top-10 local agencies showed great competitiveness in providing integrated solution packages for product market promotions. This was mirrored in integrated marketing communications, event planning and management, and market added value service all of which consolidated their position.

Both the top-10 international and top-10 local agencies attached great importance to service quality, showing the competition between the two groups has closed considerably. Top-10 local firms stood out in professional services for IT and automobile clients.

After Ogilvy's purchase of H-Line, there was a noticeable trend of market integration in PR industry. Marketing Resource Group's purchase of Panpower was the first significant local take over. PFT Consulting integrated internal resources, and Pegasus Communications and Fleishman Link Consulting became strategic allies.

The co-operation of international and local agencies, and among local companies, was greatly enhanced, and the professional service market experienced an excellent period of consolidation and reorganization.

Since 2003 was the first year for China to fully liberalize its consulting market to the outside world, overseas PR firms including those newly entering the industry opened one after another, solely foreign-funded enterprises.

First in

Text 100 Public Relations entered the China market as the first solely foreign-owned PR firm, and by the end of 2003, six of the top-10 international firms existed as solely foreign-owned enterprises.

The domestic client market developed rapidly. This expanding client base was made up of IT, communications, mobile phone, automobile, household electronic appliances, fast moving retail, medical health, real estate, finance, culture and sport, government and non-profit organizations.

The fourth biggest PR service market, Chengdu, caught increasing attention due to the "Developing the West" strategy launched by the central government. Chengdu excelled itself among the secondary and the third level regional markets, and might in future be more dynamic than the regional southern market of Guangdong.

Over 90 per cent of the top-10 firms have realized that PR consulting services are an intellectual-intensive, knowledge-intensive, know-how exclusive, and experience-intensive occupation and is a commercial service built on professional skills.

Most of the top-10 firms adopted standard service procedures, providing clients with standard PR proposals. The charging system mainly consisted of professional consulting fee, project service fee and long-time agent fees.

Operational standards

Most of the top 10 had clear operational strategies, the survey showed. They paid great attention to developing complete and perfect service product, strengthening the foundation of client services, designing active competition strategies and creating corporation cultures of openness and equality.

Among them, a large part of the local agencies focused on the follow-up of professional development, and adopted active and prudent expansion strategies.

Most top 10 agencies emphasized the marketing promotion of their professional service. They attached great importance to recommendations by the industry associations and marketing, and the displaying of professionalism.

They actively involved themselves in social activities and kept healthy relations with the press.

The emergence of a large number of rising agencies has brought about a dynamic market and the prosperity of the industry. However, the vacuum which exists because of a lack of PR guidelines, led to disordered market competition and a price war.

Staff shortages

The severe shortage of middle and high level professionals and dearth of training resources again restricted the rapid development of the industry last year.

With the emergence of more and more new agencies and a the emergence of more personnel, general directors and client managers have become the most sought after staff in the sector. The survey suggests professional experience and service know-how needed to be shared more, and training of employees by agencies through an effective training system need to be created to ensure agencies of the yield rapid business growth opportunities.

2004 prospects

In 2003, China's professional PR service market achieved gratifying success, and it will maintain the momentum of speedy yet steady growth into 2004.

The annual growth rate of 2004 is estimated to be over 30 per cent. The scale of the PR market and the fields of service will be further expanded, with service quality improved.

Training programmes for high-level PR professionals and other training resources will be further developed and research institutes for the industry are to be established. These will upgrade the professional skills and professional abilities of those PR practitioners who are not yet ready to relieve the severe staff shortage.

The flow of staff is gradually improving, and the development and management of human resources are expected to be generally strengthened. Enditem

(China Daily)