Monday, September 26, 2005

PR as Profit Center, Truth or Fiction?

What follows below is my contribution to the PR Blog Week, which ended last week. It comprises some thoughts that have been expressed here before...


Why do we work? What are we doing here? What is the value of Public Relations? Are we offering our clients genuine value or are we just drawing a paycheck, secretly worried that we'll soon be revealed as frauds? After all, we don't make anything. We don't build buildings. We don't save lives. Our inventory of ideas, words, paperwork and tsotchkes are as ephemeral as air.

With so little to point to in terms of "products," it's natural for our clients to occasionally wonder whether or not they are getting their money's worth from the PR program. How do you accurately assess whether or not your client's reputation has improved? How do you measure buzz?

Maybe you don't. Maybe you can't.

Maybe that sounds defeatist? Perhaps, but consider this: since the emergence of Edward Bernays, Godfather of PR, the state of PR measurement has given us only two "accepted" standards: "Ad Value Equivalency" and "Media Content Analysis (a.k.a. Share of Voice)." And for the most part, these measurement models are hokum.

Loosely defined, Ad Value Equivalency equates the value of a PR "hit" against the value of an advertisement in the same magazine in which the article appeared, e.g., "If the clipping in The Economist is 4-inches x 4-inches and a 4-inch x 4-inch advertisement in The Economist costs $225,000, then the PR clip is worth $225,000."

Do you see the inherent flaw in this logic?

The measurement experts at KD Paine have considered this issue and while they do not advocate for the Ad Value Equivalency model, they do make a cogent case for why it has its merits:

"Since ad rates are an indication of relative credibility, an argument can be made for using ad rates as a factor in analyzing media. How much a publication charges for advertising is a reflection not just of its circulation, but also of its reputation versus its peers…While some would argue that an eyeball reached is an eyeball communicated to…when you factor in ad rates you get a higher degree of correlation with ensuing customer behavior."

That's all well and good, but it's still doesn't pass the sniff test. Consider the original Economist example cited above. The Economist is a credible news outlet. Most clients would be thrilled with a positive mention in this widely-read, highly credentialed magazine. But, what if the core audience for your client's product is a die-hard National Enquirer reader? I won't pretend that there is no crossover between the two audiences, but let's safely assume that it's slight. In that case, despite The Economist's more credible reputation and higher ad rates, its value to your client is inconsequential compared to the value of a feature in the National Enquirer!

It gets more complicated, however: whether we want to admit it to ourselves or not, the National Enquirer is a very popular magazine; its ad rates are probably not much less than The Economist's! Yet, most adherents of the Ad Value Equivalency model recognize both hits based only on their ad placement value, and thus the article would be scored the same whether in The Economist or the National Enquirer.

Now let's consider "Media Content Analysis." This approach focuses not only on where coverage appears but how well the client is positioned within the article - it considers context. I don't have a major beef with Media Content Analysis. Certainly it is valuable for the client to know whether or not their message is being accurately communicated in the media, and to compare this traction to the progress made by their competitors. One major downside to MCA is its cost: it is a time-intensive, subjective exercise that does not come cheap; in some cases, the measurement can cost more than the PR program!

And while we're on the subject, let's consider the sums spent by our clients. Anywhere from $60,000 to $1M a year is spent on the average PR program. That's a lot of ka-ching. So call me Scrooge, but I feel as if our clients deserve to know more about their PR success than what Media Content Analysis reports can provide. It's "nice to know" that the client's message is gaining ground and that they are gaining "share of voice" in published industry features. But is this "NEED TO KNOW" information? And should they have to spend a fortune to learn that the basic PR stuff is working?

The PR pro that waltzes into the client's boardroom to brag about their Ad Value Equivalency score and/or increased Share Of Voice typically knows very little about how to take their program to the next level. If PR can't move the needle on SALES, we'll never earn that coveted seat in the Boardroom. Marketing/PR is considered a cost center only because we've never engaged in the rigorous discipline to prove otherwise. And our clients know it.

This premise is borne out by a survey we conducted earlier this year with the respected marketing consultancy, Launch Pad. Our goal was to discern the differing views of Public Relations by Sales and Marketing execs. The results were striking.

  • Over 50% of all Sales and Marketing respondents said PR impacts Lead Quality.
  • About 50% of all respondents said PR impacts the length of the Sales Cycle.
  • About 25% of all respondents said PR can increase the size of a first-time order.
  • Most tellingly, 49% said that Lead Generation was the best measure of PR success.
  • Yet just 30% of all respondents felt that Lead Generation is a function of PR! And fully 36% of respondents "sometimes" to "never" use PR in the Sales process!
Think about that: you get a stellar hit in The Wall Street Journal, and of the 100 sales reps within the client company, 36 of them never use the reprint in a sales call. The phone may be ringing off the hook with calls from Journal-reading sales prospects, yet 70 out of 100 marketing executives told us that PR has no impact on Lead Generation. Doesn't that bother you? Don't you think that we deserve a li'l credit?

The PR industry talks a good game about bottom-line impacts but clearly our core audiences are still scratching their collective heads. Both Sales and Marketing executives seem to intuit that PR has a beneficial role in the sales process (well, 49 percent of 'em, anyway), but have essentially given up on measuring that benefit.

Trust me, no one will care about "Share of Voice" when the revenues are in free-fall. As is so often the case, the marketing budget will get hacked and you'll lose the account. Sorry, but remember that PR is considered a cost center, not a revenue engine.

But what if the PR team can show that sales leads that came through the PR channel are the only leads to consistently make it through the Sales funnel to the deal close? In that case, PR can be salvaged at the expense of other programs.

It is possible - yes, it is! - to calculate PR's revenue contribution. But yea, it's a pain-in-the-butt and requires collaboration between the Sales, Marketing, Finance and Web/IT organizations within the client organization. It is a process that requires optimization of the client's Web site forms and analytics, as well as their online CRM application. Even after all that, the system won't be perfect: it will only be able to measure PR's impact on inbound lead flow; benefits to the outbound sales process, while important, will not be captured… Also, this "PROI" model can't account for the fact that some of the datapoints will be self-reported by the clients' prospects. Not perfect, but a quantum leap beyond today's "acceptable" metrics.

Imagine the glee on the VP of Marketing's face when she can show her CEO that "22 percent of all inbound leads came from our PR program… Of those, 40 percent were qualified deals… Of those, 19 percent converted to sales." Pretty cool, eh?

It gets better. Once a deal has been tagged as having originated in the PR channel, the client can continue to track it through its customer lifecycle. A year later - or 3, or 5! - the VP can report to her CEO that, "40 percent of the deals that came to us through PR are still customers, 5 years later; this represents the lowest churn in our base… perhaps it is because prospects who came to us via unbiased media reports had the clearest perspective on our strengths and weaknesses…"

Compare statements such as these with, "If we'd bought a 4-inch x 4-inch advertisement, that same PR clip would have cost us $225,000."

No contest.

The fact is, Ad-Value Equivalency, Media Content Analysis, etc., have no meaningful, LONG-TERM impact on the perceived value of PR in the minds of the C-Suite executives who pay agency invoices. The CEO, CFO and CMO care about MONEY. They know implicitly that reputation drives REVENUE, which is the only reason they care about reputation in the first place.

It's also the reason so many of today's marketers are being tasked with "metrics." Virtually every other marketing program has been automated in some way or another, and thus can be measured. PR stands alone on the mountaintop, thinking itself unmeasurable - but we all know by now that being "hard to quantify" does not make us unassailable! Sooner or later, for the whole PR industry, we'll need to be able to point to our role as a profit center. When that day comes, if we can't prove it - they won't pay for it.

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