What is the ROI on PR?

If everyone applied the old saying, “if you can’t measure it, you shouldn’t do it”, then a large percentage of the 48,000 people employed in the UK’s public relations industry would be getting worried.

As a finance director, you always want to understand the return on investment you make in any area of your business. But PR?

What is the value of a mention in a trade mag or on some web site? At least you can track ads or direct mail.

Even if you’re not already questioning your PR spend, the industry is concerned enough to be working on a bunch of new metrics to prove itself.

This all started some time ago, when the Institute of Public Relations set about analysing how its members measured their work.

But the analysis it carried out painted a very mixed picture of the commitment to, and quality of, the measurement of public relations activity.

At the same time, research by The Survey Shop found that marketing directors were evenly divided on the best means of showing how PR aids the development of a business.

Half of respondents said that PR’s contribution cannot be discretely and exactly measured; the other half that means of measuring the value of PR do exist.

Of course, it’s possible that the first half might have recognised that PR plays only one part on a busy stage – and that an audience of disparate parties was being simultaneously informed and influenced in different ways by the whole marketing and communications show. Either that or they simply rely on “gut feel” to value PR activity.

“It’s very difficult to prove which bit [of marketing] delivers which result,” says Mike Lord, a director at PR agency Broadgate.

“In any form of measurement there is an intangible element, but I can’t emphasise enough how crucial it is that PR agencies measure their activity – and that clients do it as well.”

Those marketing directors who did feel they could measure the value of PR were divided on the ideal method. Half felt PR should be measured against sales, leads, visits or positive feedback.

The other half was split between measuring media coverage or measuring changes in awareness and opinion about a company and its products.

These findings backed up the research from the CIPR which found a clear division between a significant minority of communication directors who said PR benefits could not, and probably should not, be comprehensively measured; and a majority who believed in tangible assessment and reporting.

For this majority, the issue also came down to choosing the methods and forms of assessing this return on investment.

“There’s no consistency across the PR profession about how you measure what we do,” says Chris Genasi, chief executive of Eloqui Public Relations and last year’s president of the CIPR.

“It’s not that there aren’t ways of doing it – it’s more that best practice isn’t shared. It ranges from doing nothing at all to those that invest quite a lot in measuring the impact through media evaluation and audience research.”

So if you, as FD, asks the marketing director for a clear indication of the return on investment for the PR budget, there is unlikely to be a single, agreed figure available – assuming one can be calculated in the first place.

Where that leaves any attempt you make to benchmark performance is anyone’s guess. Perhaps that’s why you might not be as demanding as you should be when reviewing results of PR activities.

“Some FDs can be satisfied with unsatisfactory measures because all they know is numbers,” says Andy Turner, founder of Six Sigma Public Relations.

He suggests there is the need for an education process on both sides, so that FDs and their teams begin to understand what is achievable – and what is measurable.

“Finance people aren’t known for their understanding of PR, but marketing people still need to talk with them,” he says.

Some FDs have made this mutual understanding a priority. Mark Currie is finance director at Management Consulting Group, which has started evaluating its marketing effectiveness.

“As an organisation we’ve moved a long way forward in measuring the returns we get from marketing – and on the PR side we are getting there,” he says. “But we’re not where we ultimately want be just yet.”

Currie says there are two distinct parts to his company’s PR programme. The first is to promote its brands – in this case the two management consultancies, Proudfoot and Parson – to their customers and potential recruits.

The second is to promote the holding company to investors and other consultancies that might be interested in joining the group.

He estimates that around 20 per cent of the total marketing budget goes on PR, and within that 80 per cent is spent on the brands and 20 per cent on investor work. Measuring the inputs, of course, is the easy bit. The impact, the return on that investment, is the challenge.

“We’ve drawn up a picture of what we think PR success looks like – but I think a lot of companies get to that level, and it still ends up in words,” says Currie.

He wants to break down that picture into figures that can be measured. “We have gone some way towards granulating things: we measure the number of quotes we get against competitors, for instance, but that still leaves us at the level of measuring the outputs rather than the outcome.

“We are not, at the moment, measuring the impact on customers of seeing our name in the press.”

There are several methods for evaluating the extent of your media coverage, ranging from simply adding up the number of times your company is mentioned in the press through to calculations that incorporate the volume, quality and audience reach.

It is also possible to measure “share of voice” in the media compared to your competitors.

There have been attempts to equate coverage with a notional advertising cost – “advertising value equivalent” or AVE – because this will produce a monetary value for the coverage.

PR practitioners like AVE because they believe that, as an FD, you’ll only be able to think in monetary terms. But according to Mike Lord, AVE is a very blunt tool.

“The norm across the PR industry is to add an ‘influencing’ factor because a third party opinion is more influential than the company paying for an advert,” he says.

“But if there is a piece of poor coverage, and you then measure that at three times the advertising rate – well it’s nonsense. So you have to evaluate the quality of the coverage as well as the volume.”

But while AVE as a measurement tool is largely disregarded by media evaluation consultancies, most admit they will provide such measures if the client asks for them.

Howard Brand of media evaluation company Echo Research agrees with Lord about the need for quality filters. As a first step, all media coverage, whether on TV or radio, in print or online, needs to be analysed to see if it is the result of pro-active PR efforts.

“In other words, does a piece of coverage owe its existence to a press release, for instance, or a conversation with a press officer,” says Brand.

“Once you are able to accurately assess what part of the coverage is pro-actively driven – ie, a result of PR spend – then you can quickly and fairly simply identify how much that has influenced overall coverage. In other words, what the contribution of PR to the mix of media perception was in that period.”

Each piece of coverage is analysed in terms of its favourability (that is to say, whether it is positive, negative or neutral) to create a whole picture.

In addition, Brand recommends analysing the penetration of different publications within your target market – a positive story in a publication is not worth a great deal if your preferred audience, such as suppliers, customers or investors, does not read it.

But Brand is quick to issue a caveat. “There is no magic bullet, no Holy Grail, no figure which says PR has contributed this much in pounds, shillings and pence,” he says.

Inevitably, such an analysis will be subjective, which Brand argues is no bad thing. “If you are trying to analyse your client’s perception in the media, then that perception is subjective anyway on the part of the reader, who will form an opinion about a company that he sees mentioned in the paper.”

Tom Vesey, MD of CARMA, another media evaluation company, says a model that strips out general economic and sectoral factors to isolate the impact of particular coverage on your bottom line remains largely wishful thinking.

Instead, he advocates establishing a series of KPIs based on individual markets and available resources, and then measuring the PR team’s success against those indicators.

It could be that a relationship with a key publication is weak and that the performance of the local PR team would be judged on how well it turns it around. You can also set targets for the percentage of articles that contain a number of key marketing messages.

“You can use very basic things, like increasing your share of voice, and the advantage of this system is it looks at the market, establishes the competitive environment, establishes the resource that the organisation has to deploy and then says ‘here’s the challenge’,” says Vesey.

“It’s a case of identifying the possible, then putting in place realistic but challenging objectives, and then devoting whatever resource it takes to deliver that,” he adds. “This creates a balanced and mature relationship between the FD and the communicators.”

But there’s another problem. To identify your PR performance indicators, your business objectives need to be very clearly articulated. Richard Edwards of Communications Management says that money is only well spent if PR relates to corporate strategy and targets.

“We have lost count of the times we have spoken to organisations who want ‘a little bit of coverage’ about a new product,” he says. “But if you ask for fluff, you get fluff.”

Edwards believes the board, and especially the FD, needs to invest time in giving the marketing and PR team a clear vision of what they want to achieve – right down to sales and profit numbers. You also need to invest resources in tracking where sales come from.

“FDs should demand that the source of all new business is measured, that marketing directors link PR to commercial results and that quality, not quantity, defines activity,” he says.

Why? Well, while the analysts can tell you about the impact your PR activity is having on the media, they can’t tell you what impact that coverage is having on the intended audience. This is where market research comes in.

Mike Lord suggests a system of “pre and post” testing to analyse the impact of a particular campaign. “It is essential to prove the work is delivering results,” he says.

Louise Cooke, media evaluation development manager at TNS Media Intelligence, agrees that measuring the end result of media coverage on the audience is vital. “Media analysis per se can only really show the output, what’s been said,” she says.

“But you cannot really prove the outcome until you ask ‘the people’. If you merge the two together, then you can begin to draw some good conclusions.”

The fly in the ointment? To do research on PR ROI, you’re going to have to increase your “i” – the costs. Estimates vary but we reckon media analysis alone could typically account for between ten and 15 percent of total PR spend.

Wider market research costs considerably more, especially if the target audience is hard to reach – all of which can create a problem for your PR guys when they’re presenting their budgets to you.

“When the PR team says ‘more please’ the finance team will tend to say ‘no’,” says FD Mark Currie. “It’s up to people from both teams to set the tone that gets the balance right in justifying the investment.”

Or, to put it another way, how badly do you need to control your PR spend? Badly enough to spend more on it?

But this collaborative approach does appear to offer a way forward. Currie urges more FDs to take an interest in the PR process.

“Don’t be frightened if you don’t understand PR,” he says. “If we understand it, we can measure it, and your accountancy training will help you to break down the process.” Remember: the PR bunnies are probably more scared of you than you are of the mysteries of spin.

One final point. Jon Aarons, a director at international PR agency Financial Dynamics, says you must distinguish between the role of PR in the marketing mix on one side; and in developing and protecting corporate reputation on the other.

He says FDs are not very interested in the former – but, in the post-Enron era, they have woken up to the critical value of reputation which will be reflected in the share price.

“If FDs are sceptical, there are endless case studies that prove the value of effective communications,” he says. “And plenty more to show the risks of failure.”

How do companies measure PR?

Gut feel – the finger in the air is many companies’ number one metric, although it’s often dependent on whether the chief exec’s mum saw the coverage. No one admits it openly, but if the CEO is happy, everyone is happy.

Thickness of the cuttings book – never printed double-sided, usually on high-quality paper. Takes no account of quality of coverage. A slightly more empirical measurement involves adding up the column inches of the articles.

AVE – or “advertising value equivalent”. A noble but flawed measurement that calculates how much it would cost to buy the media space according to advertising rate cards. A bit tricky when dealing with the BBC. But at least it aims to put a monetary value on coverage.

Key performance indicators – probably the most practical method, sets targets in terms of coverage volume, quality, delivery of key messages and share of voice compared with competitors. Media evaluation agencies will analyse each press cutting to establish effectiveness against the KPIs.

Market/audience research – measures the end result of PR (public perceptions); can
be very expensive and it’s difficult to isolate the impact of PR from other marketing efforts.

Increase in sales/revenue – the Holy Grail, especially as everyone, from the chief exec
to the sales teams, will be claiming the increase was down to them.

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