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Who Put PR in the PRC?By Winter Wright Modern PR came to China in 1984, when Hill & Knowlton opened a rep office in Beijing. The following year, the country's first joint-venture PR agency was started by Serge Dumont, a French entrepreneur who originally planned to offer market-entry services to small and mid-sized French firms but soon found PR to be more lucrative. Dumont's company, Interasia, served as a kind of boot camp for China's first generation of PR folk. "He even trained us in table manners, dress code, that kind of thing," remembers David Zhang, now China director at Hill & Knowlton. In the early 1990s, large agencies began arriving on the mainland en masse, and Dumont sold his firm to Edelman, a New York-based PR giant. Over the past decade, the strong economy has helped the industry take off, and today China is Asia's second-largest PR market after Japan. In 2001, revenues fell by three percent worldwide but rose 33 percent in China. Last year, revenues grew by 25 percent year-on-year to reach US$300 million, according to CIPRA, the Chinese PR industry trade group. CIPRA estimates that more than 10,000 people in China work in PR - pretty impressive, considering that the business is overwhelmingly concentrated in Beijing, Shanghai, and Guangzhou. Public Relations: A Quick Primer PR is actually several different industries in one. Li Hong, managing director of Fleishman-Hillard in Beijing, compares it to a pyramid. At the base are firms that provide support services, such as sending out news releases and assisting at promotional events. In the middle and upper tiers are agencies that deliver advisory services such as crisis counseling, media training, and public affairs (also known as government relations or lobbying). Because it's intangible, some people find public relations hard to grasp. It shouldn't be. PR is simply about gaining influence-identifying the people and organizations that have it and enlisting their support to achieve certain ends. The goal can be to sell a product or cure a disease, but the common denominator is always influence. Where is all this influence directed? At stakeholders, the various groups that pay attention to an organization's performance, and often to other issues: how it treats its employees, for example, or whether it pollutes the environment. In the not-too-distant past, public companies could pretty much go about their business in secrecy. Today, they answer to a small army of stakeholders that includes customers, employees, suppliers, shareholders, government regulators, securities analysts, non-government organizations (NGOs), and other constituents who must be persuaded to support the company's plans. It's made things trickier, to say the least. "There are very few business issues an organization can encounter that do not have a communications element," says Susan Tomsett, head of Burson-Marsteller in Beijing. But many companies take a purely reactive view of PR, regarding it as a service to be used only when things go wrong. "Most companies don't even think about their reputation until they have a crisis, and then realize they have no bank of goodwill there," says Emma Smith, managing director of Greater China for Weber Shandwick. Deposits in that goodwill bank can pay off when the going gets tough. Let's say, for example, you run a multinational corporation with operations in China, and a high-level government official criticizes your company or its products. Rather than sit there and fume, or issue denials that will just make you look guilty, you instead decide to build a communications program for identifying and approaching your company's main stakeholders and winning them over. "There are mechanisms for doing this kind of engagement," says Patrick Horgan, chief representative of APCO, a communications and lobbying firm. These include "arranging meetings, disseminating information, building coalitions, and holding seminar activities and joint research programs that produce original research useful to China." After a period of time, Horgan says, "You've gone from a situation where the company had no recourse, no defense, was susceptible to attack, and was perhaps having its bottom line impaired, to a situation where government relations are sound and criticism is muted or silenced." You are, in other words, now part of the conversation, an entity that is being spoken to, rather than spoken about. PR: More Than Just Media? Indeed, many public relations people say good PR functions like an immune system: something that either keeps you from getting sick, or helps you heal faster when you do. But this kind of preventive medicine can be a tough sell in a market like China, where clients demand concrete results for every marketing dollar spent. That's one reason why so many PR firms here focus on media relations: the results are easy to measure. PR executives stress repeatedly that they do more than just send out press releases and contact reporters. But a thick sheaf of press clippings is a handy thing to show a client who wants measurable results. "If you talk about PR in the West, it's composed of corporate communications, lobbying, sports marketing, etc." says Michael Soong, vice president of local agency PFT. "But in China, PR is still at the emerging stage, so media relations are crucial." International agencies say this is a limited view of what the industry can offer its clients. Local agencies, they argue, tend to focus on product launches, press relations, and other "arms and legs" PR that provides more muscle than brainpower. "It's vastly different from what we offer," says Tomsett of Burson-Marsteller. "The work we do tends to be issues-based, and focused on the strategic imperatives of clients." She is quick to add that local agencies meet a need, and do it well. "They've been able to carve out a position and make themselves very relevant, both to Chinese and international companies invested here. They're able to move quickly, offer a product that is needed, and do it very cost-competitively." By and large, however, foreign PR agencies say local firms have a less sophisticated view of their clients' business. "Local agencies are not driving things like corporate reputation in the direction they could be," says Alistair Nicholas, general manager at Edelman PR in Beijing. Nicholas says clients need help deciding what their corporate brands should stand for in the local market, what issues are critical to their business, and what key messages separate them from their competitors. "In Australia and the U.S. and Europe, this has become sophisticated," he says. "In China, it's 'Let's donate money to the earthquake victims in Xinjiang.' That's a good thing, but do you want to make it the core of your CSR program? Those are the questions that need to be asked, and I don't think local agencies are asking them yet." Local firms are also said to be less advanced in the processes they employ. One example is the "pay by the inch" system used by many Chinese PR firms, wherein clients are charged according to the number of characters that appear in the newspaper coverage the agency generates for them. Such a fee structure is "ridiculous," according to Maggie Tsai, vice president of H-Line Ogilvy Communications (called H-Line Public Relations before Ogilvy PR acquired a 60 percent stake in the company last year). Rather than day laborers charging by the inch or pound, Tsai says PR firms should be "outsourced think tanks" valued primarily for their intellectual capital. Most clients probably don't see it that way just yet. True, PR's reputation has improved considerably from a decade ago, when the dominant image was that of the gongguan xiaojie, a pretty girl hired to entertain (mostly male) clients at promotional events. But many companies still regard PR firms as an extra set of hands: useful in a support function but not a source of high-level counsel. PR people insist this characterization is out of date, maintaining that they are, or should be, in the business of selling advice, like management consultants or tax attorneys. Going for the Gold But do clients in China need high-level communications counsel, and are they willing to pay for it? "Clients are willing to pay for results, but not for information, which runs directly counter to the whole notion of consulting services," says Mitch Presnick, communications counsel to AmCham-China. He notes that some clients may expect counsel as part of the package, but they see it more as a fringe benefit than a deliverable. "The local market isn't used to buying consultancy, it's used to buying washing machines," says Weber Shandwick's Emma Smith. Yet Weber Shandwick may provide the best evidence to date that PR can accomplish strategic goals for its clients in China. Shandwick is the agency that advised Beijing during its successful bid to host the 2008 Olympic Games. "We can't take full responsibility or credit for it, because obviously there was a pretty good product there in the first place," says Smith. She says the communications campaign behind the city's Olympic bid succeeded because it addressed directly the thorny issue of human rights ("One of those issues that isn't going to go away"), while at the same time framing China's bid in a broader context. "A China that's welcomed into the world is better than one that isn't," she says. "What we did was present aspects of China that the rest of the world knew nothing about." Winning the Olympic bid "gave an enormous boost to the power of PR," says Jean-Michel Dumont, managing director of Ruder Finn Public Relations in China. "It created a strong understanding on the part of the government that PR can really help public perception, and is really useful." So useful, in fact, that Shanghai is following in Beijing's footsteps, seeking PR counsel for building its own unique brand as it prepares to host the World Expo in 2010. A handful of agencies are bidding on what is reportedly a multi-year, multi-million dollar contract to promote Shanghai's image as a world-class metropolis. The precedent for such a campaign is well established. Hong Kong already works with a clutch of PR firms that portray the city as the New York of Asia, and many international agencies run campaigns promoting entire countries, usually to attract tourism and foreign investment. PR veteran Serge Dumont, who worked on Beijing's first (unsuccessful) Olympic bid in the early 1990s, notes that in contrast to the situation 12 years ago, senior Chinese officialdom is now "willing to pay real dollars to get good brains." Which raises the next question: If you have real dollars and you need good brains, do you hire an international firm or a local one? We can dispense right away with the idea that local firms are always cheaper: they're not. Yes, the locals do tend, generally speaking, to charge less than international firms with senior expatriate staff, but that price gap is narrowing. Michael Soong estimates PFT's fees are only about 10 percent lower than those charged by his foreign competitors. "The difference is not vast," he says. Moreover, local firms that can prove their value usually raise their rates as soon as the market allows it. "If you're not a well-known international PR agency, of course the client will expect a lower rate," says Philip Zhao, head of Shanghai-based PR Legend. "But after you've delivered good-quality work, even exceeding what an international agency has delivered, you'll be able to ask for more money." Case in point: a Beijing-based IT company that wanted PR support for an event in Xian sought quotations from a foreign and a local agency. The foreign agency quoted fees of US$4,000; its local competitor wanted US$10,000. "Strategic Counsel" vs. "Local Knowledge" Beyond the issue of money, what level of service, brains, and expertise can you expect to get from a foreign agency in China, versus its local counterparts? American readers may recall a long-running beer commercial where two groups of men shouted the phrases "Tastes great!" and "Less filling!" to describe what they liked best about their favorite brew. Something similar occurs with local and foreign PR agencies, with foreign firms promising "strategic counsel" while Chinese agencies tout "local knowledge." Let's unpack these terms, starting with the shopworn label strategic. What does it really mean? "If a good piece of advice can spare the client a major embarrassment, marketing headache, or lost productivity, and improve its position in the market, that should be considered strategic," says Yuki Wei, managing director of PRAP, a Japanese agency partly owned by Ogilvy PR. Strategic counsel, say others, entails deciding which moves to make, rather than simply executing orders capably. "Is it enough to do things right, or is it better to do the right things right?" asks Marianne Friese, general manager of Ketchum Newscan in Beijing. Local knowledge, on the other hand, basically means understanding "how things are done here," and doing them accordingly. This can mean not being overly bound by the policies and procedures of international PR agencies, or understanding that clients expect you to put in a certain amount of work before you start billing them. Chinese agencies, for example, may approach their contacts on behalf of a prospective client even before settling on a price, whereas foreign agencies would probably send the client a proposal and then wait for confirmation that the business was theirs. "When it comes to account service in this market, you need to be fast and flexible," says PFT's Michael Soong. "You need to be professional, but if you're too professional, you are missing business opportunities." Michael Ning, communications manager at Motorola China and a former Xinhua News Agency reporter, has dealt with plenty of PR agencies, both foreign and local. He notes that returning overseas Chinese are quickly internationalizing the local agencies and raising their service level. "If you want to have an event or press conference, or a media visit to a factory, and it's purely for the mainland market, I'd prefer to use a local agency," says Ning. "If it's for a CEO visit, or media training for executives, I'd use a foreign agency." Despite the rule of thumb that foreign agencies can be counted on for brains and local agencies for muscle, there are exceptions that weaken this generalization. Hill and Knowlton's David Zhang notes that some local agencies "are providing very senior counsel," working with Chinese executives who attend international business conferences and advising China's hinterland provinces on how to attract more foreign investment. Ruder Finn's Jean-Michel Dumont agrees. "Some local firms can give solid strategy, usually only in selected segments," he says. "They don't have the depth and breadth of international companies yet. On the other hand, I know plenty of international companies that do only implementation and media work." Global Networks: Need to Have, or Nice to Have? One concrete difference between foreign and local agencies is that foreign firms have offices outside of China. Access to a worldwide network clearly benefits certain types of clients: Chinese companies that want to list their shares on a foreign stock exchange, for example. Other companies want to make sure their activities in China are publicized back in their home country, says Lynn Furrow, general manager of the Hoffman Agency in Beijing. Such cross-border PR is difficult or impossible without a global network. But some argue that the benefits of a network are overstated. If a company's goals in India differ sharply from those in Malaysia, how is working with a single regional network better than hiring two separate local firms? "It makes sense to pick the best agencies in each market, but international networks seldom have the best everywhere, despite what they say," says Serge Dumont. If an international network is required, local agencies can always partner with a foreign firm. Ogilvy Public Relations became China's largest PR company in part by acquiring an ownership stake in H-Line, a successful local agency. "We thought buying a company like H-Line and keeping it a separate brand but also introducing them to the Ogilvy PR network would be a wonderful combination," says Managing Director Scott Kronick. "H-Line gets an international network, while Ogilvy gets a company with deep roots in the local environment." Such a partnership could serve as a model for future local-foreign collaboration. It also illustrates the industry "convergence" that some say will gradually erase the distinctions between local and foreign firms, as foreign agencies localize and Chinese agencies become more international. "We're at the stage of development where it becomes irrelevant whether you're Chinese or foreign," says Serge Dumont. "What matters is whether you're competent." Agrees Fleishman-Hillard's Li Hong: "Eventually there will only be the difference between a good PR firm and a bad PR firm." The Death of Guanxi ? It's ironic that an industry founded on building reputations has trouble maintaining its own. In the West, PR people are often dismissed as flacks or spin doctors, while in China, there's a perception that the whole industry rests on simple guanxi, and what's strategic about that? Predicting the death of guanxi or relationship-based business in China has become fashionable of late, and there is some justification for this. In an increasingly globalized world, guanxi inevitably bumps up against geographic limitations. Moreover, it's a finite commodity that can be overused or exhausted, and it comes with a time limit as contacts retire, switch jobs, or lose their influence. All of this suggests that, while certainly not useless, guanxi now lacks the paramount importance it had, say, ten years ago. Patrick Horgan recalls APCO's fruitless search for a director of government relations some time back. All candidates were eventually rejected because, when asked questions such as "How would you influence China's policy on e-commerce?" they replied with some variation of, "I'd call one of my friends." That approach doesn't work, says Horgan, adding, "It's a terrible waste of political capital." If PR is largely about influence, then China's PR industry is set to become vastly more interesting in the years ahead. That's because very soon, new sources of influence will emerge. Greater pluralism in Chinese society means there will soon be constituencies other than government officials and state-run media to take into account. Industry associations, consumer rights watchdogs, and non-government organizations will gradually make the transition to full-fledged interest groups-the stakeholders whose influence PR aims to harness and direct. That gradual evolution, coupled with the merging of local and international players, could transform China-based PR into an industry where brains, muscle, local knowledge, and strategic counsel all fuse into a single offering that requires the best and the brightest from a multitude of disciplines. If that happens, PR in China may finally start to get the respect it craves, and frequently deserves. Please
send comments on this article to winter@amcham-china.org.cn
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