Toward A True ROI For PR
Nearly every week, vendors selling various software, databases and other “amazing solutions” (their words) contact us. Many of these are likely fine tools, but when an over-enthusiastic sales person promises an “outstanding ROI,” our caution alarms ring louder than Seattle’s famed 12th man.
Too often, “ROI” is used as a business-y substitute for the word “benefits.” No harm, right? Usually not, but when marketing and PR people misuse the term, we undermine our credibility with clients and other business leaders who understand it as a precise financial calculation based on actual dollars spent and earned.
The problem isn’t that PR doesn’t generate a strong ROI (we believe it is just the opposite), it’s that our industry too often falls back on squishy metrics such as Facebook likes and shares and calls that “ROI.” By comparison, after closely analyzing the costs and profits generated by its various marketing activities, Proctor and Gamble found that PR generates 275% ROI, making it the company’s best performing marketing activity.
While many PR pros don’t have the extensive marketing mix models P&G uses, we can make legitimate ROI estimates. For example, within the past six months, two Brandner clients received emails from architectural specifiers who had read articles we bylined for the clients in trade publications. Both readers said that the articles convinced them to switch from competitors’ products to purchasing our clients’ materials.
So, what’s an estimate of the ROI of each of those articles? Although each article cost the clients less than $1,000 to write and work with publications’ editorial teams, we’ll assume a cost of $1,000 for simpler calculation. Without knowing the precise value of the purchases those customers made, given the typical cost of the clients’ products, we’ll make a conservative estimate and assume small-size jobs with $10,000 in goods sold and a profit to each of our clients of $1,500 - yielding a 50% ROI (i.e., a $500 gain above a $1,000 outlay). The actual financial benefit of those articles is likely higher, as other readers may have been persuaded to make a purchase, but we would have no way of knowing. And, don’t forget the long-term impact that may lead to a future sale.
Calculating ROI is a powerful way to show PR results. For more insight and resources on evaluating and measuring ROI, The Public Relations Society of America (PRSA) offers a number of resources showing the business value of PR – check it out here.