This is not a new strategy nor is it avoidable in some instances. When PRs are just starting out on their own it can be the only ammo they've got. They're young, hungry, and willing to work for less to prove themselves. And they're also likely to have far lower overheads than more established competitors. But what happens when significantly established agencies perpetually undercut each other in order to win as much business as they can?
One long-time agency head said: "Yes, I can understand the newbies...but being undercut by a contemporary, I guess you never really know. It is interesting however when a client does tell you their budget and then you see who has taken it after you've declined... Sometimes I'm quite literally shocked they are able to service a client for such a low fee. Better them than me."
Last month, one PR friend said in order to secure a piece of business he went lower than he felt comfortable with, in order to match the client's budget. Then the client advised him they were going with a rival who, once discovering the low fee he had agreed to, had dropped it a further $500 per month to win. It was already pitifully low - and by all accounts, simply unsustainable.
This same rival has done the identical maneuver multiple times, which begs the question - how is her small business sustainable and why is she doing this after 10 years in the biz? Is her agency perhaps not performing well and she's lost her confidence? Or does she think it's all the agency is actually worth? On the flipside, another PR pro with amazing clients says on undercutting: "I hear it happens all the time however I am not bothered by it. I know what our services are worth and what we are capable of delivering, and I won't budge. A client you want in your brand portfolio will always partner with an agency they believe will deliver on their brief. If they cut corners to save a few dollars they often don't get the results, and more often than not come back to us for a long term relationship."
One infamous case in Sydney saw a new young publicist send out proposals to literally hundreds of brands offering to do the work for half the price their agencies at the time were charging. Many clients unfortunately did jump ship and joined her. This literally caused shock-waves through the industry, and years on the guilty party is widely looked down upon for this and other less-than-honorable behaviour.
One very respected industry figure said of this sweeping poach-attack: "The publicist targeted every single one of my clients and offered her services for half the price. Thankfully my clients were loyal and made me aware of the situation. I contacted the PR concerned and told her it was a very uncool way to build a business." It should be noted she also lost a lot of these clients shortly after...as another PR stated: "you pay peanuts, you get monkeys".
Of course, it's not always the PRs fault. The clients "...know PRs are at the bottom of the food chain and that other agencies will take the bait". A key Melbourne PR figures states "I understand why someone would undercut but that type of behaviour teaches clients to have low expectations (in terms of fees AND service) which is not helping grow the reputation of the PR Industry as an important business tool". A showroom gal says that many agencies are even offering to represent clients for FREE to kick-start their agencies. Other clients then go around to more established agencies fishing for the same deal...it's "just out of control that some clients expect us to work for a pittance, but when some agencies are...you can see why they think we might".
On the notion that this rampant lowering of already-low fees is affecting the industry as a whole, another states "This is my biggest bug bear, no one ever stands their ground. Our industry needs more regulation." And from another who says she's lucky to be unaware of being undercut: "I am always happy to be flexible with budgets but clients need to know that with a reduced budget, comes reduced hours, comes reduced results. I can't give you $6,000 of work per month for $2,000. I can't do it. Would you sell $6,000 worth of clothes in a shop for $2,000 every month? NO. At the end of the day, if I wanted to work for free I would go and lie on a beach somewhere."
And if you couldn't care less about our industry and just care about yourself (shame on you); perhaps this piece of advice will sit with you better, from the PR Director of one of the most successful new agencies in town: "If you accept a client on a cheaper rate, it is very hard to increase that over time as the client comes to expect that what they paid initially, is what they pay in the future..."
A final word: "The best protection against other agencies undercutting you is to deliver a service that CANNOT BE BEATEN and client relationships that aren't fragile and ready to bust any minute. Make yourselves INDISPENSABLE."
Do you ever wonder why the PR Industry is so often left with the scraps of marketing budgets? Possibly because this is what some agencies believe they are worth, and they are telling clients all around town this EVERY DAY. Think about what YOU are worth and stick to your guns. Short term gain only leads to long term pain - for everyone.