The Public Relations Institute of Australia’s (PRIA) Registered Consultancies Group (RCG) is introducing a new Client Agency Charter to help the industry build its commercial muscle. The move comes off the back of research showing that increasing costs are eating into the profitability of the sector, despite strong demand and revenue growth.

PRIA’s annual industry benchmark research has shown that while revenues across the industry showed strong year-on-year growth of 25 percent, profitability was down by nearly a third.

Chair of the RCG and CEO of The Savage Co, Chris Savage, said only one out of six agencies is doing really well: “They're growing strongly, they're making a good return, they're having a really good time, and that can come down to the sector that they specialise in or because of the sort of client portfolio that they've got.

“Three out of six are working harder than ever before, are grinding it out under increasing pressure to get some sort of growth. They're not knocking the lights out - they're doing okay, but it's harder than ever before. And two out of six are finding it very, very tough.”

Chris said the PR industry is not alone in feeling the pressure: “The entire marketing communications industry is under pressure. Clients are under pressure. There's so much change happening in marketing, in marketing communication, in consumer buying habits, and all those things put pressure on costs in business generally.”

PRIA’s research highlighted the wages bill as a key factor, with the cost of talent rising dramatically in the last couple of years. It also highlighted significant churn, with many leaving the agency life altogether.

“The collateral damage of this increased pressure on the agency model is that we're losing staff out of the industry,” Chris explained. “In the past financial year, 27 percent of agency staff left and were replaced in that financial year, and out of that 27 percent, 40 percent either went client side or left the industry altogether.

“That equates to one in 10 of our staff in the past financial year leaving the PR agency sector. And that's not good. We have to provide an inspiring growth-oriented industry where we can attract best talent, and keep the best talent, so that we can provide the best services to clients.”

Chris said there has also been something of a shift in the work and what agencies have to do to secure or retain it: “There’s been an explosion in pitching in our industry in the last three years, an increasingly onerous pitch processes that clients and agencies go through more regularly, and often for not necessarily a large amount of revenue for the winning agency.

“Clients are under pressure as well as all businesses. When times are tough they want to see what's available in the market not only in terms of effectiveness, but also in cost effectiveness. I understand why clients are doing it, but I do see a greater tendency to go to pitch, rather than to work with incumbents in a collaborative partnership model.”

Added to this is the issue of scope creep: “I'm finding that there is an expectation of agencies that they will do some things for nothing. I see scope creep occurring, but agencies are reluctant to go back to clients and ask for additional budget,” Chris revealed.

He said it is down to the industry to take responsibility for the issues it’s facing: “We're not blaming anybody else except ourselves. We need to build our commercial muscle. We need to be better business people. We need to have harder conversations with our clients. We need to work in partnership with clients to get feedback and guidance from them.

“We want to create through our client agency charter a set of guidelines and principles endorsed by the RCG and approved by PRIA that our members and other PR agencies can refer to and say, look, this is what the peak body is recommending around these sort of things. Can we have a discussion in an environment of safety around some of these issues?”

Chris said they have spoken to clients about the charter, and many have welcomed the initiative and are willing to participate and provide input.

“We're very, very excited about that. And it can only be a good thing for all stakeholders: for our clients to have a thriving, vibrant, cutting edge industry, for our talent who want to work in an industry that is robust, and for agency owners who are making the decision to invest their futures, in these sorts of businesses.”

The new charter is set to be introduced in March 2024.