Christopher Penn

Find the ROI of PR By Measuring the Value of Audience

By: Christopher Penn | June 17, 2014 | 
38

ROI of PRBy Christopher Penn

One of the most challenging questions any PR professional is faced with is the inevitable, “What is the ROI of PR?” that you hear in pitches, in new business meetings, and muttered in the hallways of companies everywhere.

Chief marketing officers and decision makers are accustomed to – and rightly so – understanding what value they get out of what they put into any marketing program.

Compounding this is the frequent self-imposed limitation that PR professionals parrot,“I went into PR because I’m bad at math,” which is a separate conversation entirely.

The painful effect of these combined factors means that PR professionals are distrusted by the corner office when it comes to results, and that means PR gets a smaller share of the budget pie than perhaps it should.

Why is the return-on-investment discussion so hard to navigate, and what can we do about it?

Strategic ROI of PR

First, the strategic reason. The ROI of PR has traditionally been difficult to assess because PR professionals and stakeholders don’t understand the measurable output.

Let’s review from the bottom to the top of the sales funnel.

impressions.001

At the bottom of every funnel is revenue and sales. It is the responsibility of sales professionals to generate revenue from leads.

In the middle of the funnel is the domain of marketing: Lead generation.

Leads are drawn from the audience a brand has, and through the use of marketing tools and tactics, those parts of the audience who are interested in potentially doing business self-identify (or at the most aggressive shops, get cold-called) by raising their hands.

At the top of the funnel are the audiences and loyal fans that brands have, the people who are becoming aware of the brand via all of its communications.

These audiences come from the addressable markets that a brand can potentially serve, and it’s the job of public relations and advertising to build those audiences and to identify and cultivate those loyal fans of your brand.

PR vs. Marketing vs. Sales

Why is this distinction so important?

The reason is simple: If you’re measuring the effectiveness of PR on anything other than audiences – such as lead generation or sales – then you’re not measuring PR.

You’re measuring marketing or sales effectiveness, which is not the same thing.

Here’s a simple illustration: Imagine you own a coffee shop.

Now imagine you hire a great PR firm and they get you tons of new audience, but when the crowds of people arrive, the door to the coffee shop is locked.

Your ROI on the day is going to be zero, because no sales could be made.

That doesn’t mean that PR failed to create audience. It just means you weren’t open for business.

Before you ascribe a lack of revenue to your PR efforts, make sure something else isn’t more seriously broken in your overall marketing and sales processes.

Measure the Effectiveness of PR

Measuring the effectiveness of PR is about judging how large your audience has grown.

Fortunately, there is still a way to turn that into a basic ROI calculation.

Let’s recall that ROI is a simple math formula: Take (earned – spent)/spent = ROI.

You know what you spend on PR, presumably, so the question is, what did you earn?

One way to determine this is to infer the value of an audience member.

funnelexample.002

An Example

For example, let’s say you sell very expensive coffee for $100 a cup.

You know, from experience and measurement, that it takes 10 people inside your coffee shop for even one of them to consider buying a cup of coffee, so your conversion rate from lead to sale is 10 percent.

Thus, if you average out the sale revenue over the number of leads, a lead is effectively worth $10.

So far, so good.

Next, you know from measurement and experience that it takes 10 people to walk by your coffee shop for even one of them to come in the door.

Thus, in order for one sale to occur, 10 people must be inside, and therefore 100 people must walk by.

If you take the value of a sale and stretch it across your audience, across those 100 people, then the effective value of an audience member is $1.

Now you have a basis on which to judge the value of your PR efforts.

If every audience member is worth $1 and your coffee shop has a revenue target of $100,000 this month, then you know you need 100,000 new audience members.

If you spend $50,000 this month on PR to earn $100,000 of revenue, then your ROI is 100 percent.

Like this…($100,000 – $50,000)/$50,000 = 100 percent

That’s how you compute the ROI of PR.

Assess New Audience

From here, it’s relatively straightforward to dive into any reputable analytics solution like Google Analytics and assess how many unique new users your PR has driven, directly or indirectly (that’s a discussion for another time).

Cursor

New audience members from PR x value of an audience member = value of PR.

Remember these three things about measuring the ROI of PR:

  • Measuring PR on anything other than new audience is flawed.
  • Audience value can be quantified, especially in the digital realm.
  • Once audience value is quantified, the ROI of PR is computable.

I hope this gives you a starting point to value the PR that you’re generating.

The ROI of PR is knowable if you’re willing to do the work and measure the right things!

I’d also like to thank Gini Dietrich for the privilege and honor of being allowed to share with the Spin Sucks community today.

Note from Gini: And I’d like to thank Mr. Penn for agreeing to blog for me while I’m out. This is a post every one of you should bookmark and refer back to constantly.

About Christopher Penn


Christopher Penn is the vice president of marketing technology at Shift Communications. He is a PodCamp co-founder, Marketing Over Coffee co-host, speaker, author, and University of San Francisco marketing professor.

  • Excellent excellent excellent. In particular, I like the use of the funnels and the very practical approach you clearly laid out.

    I’ve often attributed the challenge with demonstrating ROI to one of two things. Either the PR professional really doesn’t get business in general or the client’s business in particular, OR the client can’t articulate business goals for his or her company. If you don’t know what the business goals are ($XXX in sales or XX new customers), it is hard to develop a viable strategy.

    I would think a PR professional who uses your approach and has a good strong grasp of business should have nothing to fear when the question of ROI is brought up.

  • ClayMorgan Thanks, Clay!

  • BillSmith3

    Thank you Chris for a great post.

  • I agree with Clay, this is excellent. 
    I do have a question though, about this: “Measuring PR on anything other than new audience is flawed.” But new audience isn’t the goal of every PR campaign, is it?

  • allpointspr100

    Thanks for the post, Christopher. Did you make the first few graphs in Paper53 app? And as long as you understand the audience and the company you’re doing the http://allpointspr.com work for, then you will find that your ROI for PR can be unlimited, essentially.

  • THINK_Lyndon

    Thanks @cspenn, some interesting ideas here.  I recorded my take on measuring PR here and would love your thoughts on it http://t.co/WukmOb0tZe

    Best wishes, Lyndon

  • THINK_Lyndon

    Eleanor Pierce I agree Eleanor.

  • allpointspr100 Yep, I’m a big fan of the Paper app. It makes inept artists like me look stylishly inept.

  • Eleanor Pierce No, not in special cases like crisis comms, where you’re trying to undo damage, certainly. But for most of the time when the CMO asks the VP of Comms what PR has done for him lately, he’s thinking P&L.

  • BillSmith3 Thanks for the kind words!

  • THINK_Lyndon I like the idea of influencers and relationships as outcomes; the catch will be quantifying them to the point where the CMO will be able to add it to a projected P&L.

  • I really like this post, in part because I’m one of those PR people who say I hate math. This made calculating ROI very clear and easy to understand. 

    One comment: My thought when I read the first example of the coffee shop was the PR person ought to have done research before implementing a campaign to know when the coffee shop was open.

  • Fantastic post. I really like how you mapped PR and marketing on to the sales funnel. Definitely saving this post for future reference.

  • RebeccaTodd Thanks!

  • teamccloud Ain’t that the truth!

  • richardbagnall

    Great post making very sensible points.  The key is to link PR to the objective or the outcome that it is tasked with. In *most* cases this is awareness building and increasing the audience at the top of the funnel, but in some cases it can be more specific that that. 

    For this reason, AMEC (the International Association for the Measurement and Evaluation of Communications) has recently launched the social media measurement framework and user guide. It allows all organisations of any size to set their metrics against their objectives, agree what success looks like and then measure appropriately.  It has wide support across the PR profession and is endorsed by the CIPR, PRCA and the UK Government through the Cabinet Office.

    You can read more about it, download the frameworks, the user-guide and a menu of suggested metrics from AMEC’s website at http://www.amecorg.com/social-media-measurement/

    RIchard Bagnall
    Chair AMEC Social Media Measurement Group
    CEO PRIME Research UK

  • CommProSuzi

    Christopher, this is terrific! I’m definitely keeping this one.
    I do have a question for you. How do you determine which source drove the leads?
    Explain: Many campaigns are integrated, i.e., include advertising in various forms. So, leads will come from a variety of sources. How do you suggest sequestering the PR leads from the advertising leads or do you?
    (If I’ve missed the explanation above, please forgive me.)

  • cspenn Got it. Thanks for clarifying Christopher, and again, excellent post!

  • CommProSuzi That’s a deeper conversation about attribution analysis and what you can do with Google Analytics. It is possible, plus you can infer indirect impacts of PR on things like organic search based on the links you help create.

  • Joe Walton

    Hello Christopher,
    Great post but I had a question. One of the three key points you make is… ‘Measuring PR on anything other than new audience is flawed’.
    What if the aim of your campaign is to increase the value created from an existing customer base.
    An example would be if your coffee had reached everyone in town. There are no new customers left but a targeted campaign has been implemented to increase the frequency of people who trade up witch an extra shot of espresso for $10 when they visit.
    How could you calculate and is it right to consider the ROI here.
    Thanks,
    Joe

  • Joe Walton I think that’s a fair point, Joe, but is that PR or marketing? I delineate the two by the outcome. Awareness, attention, and trust are the characteristics of great PR with an outcome of audience. To me, retaining and upselling customers you already have, audience you already have, is a function more of sales and marketing – loyalty marketing, in fact. 

    That doesn’t mean PR is without a role – you can never have too much awareness, love, or trust. It does mean, though, that ultimately the audience has already been captured and now needs to be given additional reasons to trade value.

    I’d love your thoughts on it, too.

  • Oh, this is definitely a bookmark’er. Wow. I particularly loved this quote “Now imagine you hire a great PR firm and they get you tons of new audience, but when the crowds of people arrive, the door to the coffee shop is locked. Your ROI on the day is going to be zero, because no sales could be made. That doesn’t mean that PR failed to create audience. It just means you weren’t open for business.” ROI is often so frustrating (to non-math types like myself) because there are just so many other variable interfering. You really opened my eyes with this piece, @cspenn  Just a fantastic post.

  • teamccloud OMG I hate math so much. Glad I’m not alone. 😉

  • cspenn allpointspr100 Checking out the Paper app as we speak!

  • JodiEchakowitz

    Good food for thought and I especially love the closed coffee shop analogy as it definitely puts your approach into perspective. However, your post suggests that PR folks should not be looking at the more marketing (or sales) related metrics that PR can influence. This would mean casting aside many of the outputs, outcomes and business results outlined in the Barcelona Principles of PR Measurement. What I’m wondering is what your thoughts are on the Barcelona Principles.

  • Joe Walton

    Thank for the reply Chris,
    I suppose I don’t draw that distinction.
    To carry on the hypothetical analogy… imagine a popular local celebrity pops by the shop. The crafty owner decides to take advantage and gathers a celebrity endorsement about the thrill of a double shot. Using a mixture of social and traditional media relations they start a trend for ‘doubling up’ amongst existing customers who wish to emulate the celeb. They achieve this without paying for advertising, POS or communicating directly with the customers who are unaware the owner instigated this.
    This, for me, is still PR led activity.
    The outcome here is change in behaviour, from a basic to a premium product. So I would suggest PR can create value in other ways than new audience.
    What do you think, do the same rules of calculating ROI apply here?

  • JodiEchakowitz Here’s the thing I disagree with about that specific set of principles. Business outcomes are absolutely, positively important. That said, tying your goals to things you cannot control and have no influence over is what I take issue with. That comes from a background in B2B marketing where PR and marketing can drive enormous audiences and leads, but if the sales guys can’t sell, then you have no ROI. That doesn’t mean you as a PR professional failed at your job. You may have done everything right. It means that your sales guys are bad at their jobs – should you be held accountable for their failures?

    PR can influence those metrics, unquestionably. Getting the right audience is absolutely our job. We see PR’s impact on search, social, and media. But ultimately, at the end of the day we do not control those downfunnel functions, and I would no more hold PR accountable to a potentially bad sales team than I would hold advertising’s performance to customer service metrics.

  • David Geddes

    This is an excellent example in situations where there is a reasonably direct link between PR and a business result measurable in financial terms. See the attached link for a series of white papers on measurement and evaluation, including a paper on ROI. 
    More generally, ROI should only be used in cases where both the investment and the outcome can be measured in financial terms. We damage our credibility when we flippantly use the term ROI to make us sound smart or quantitative. In fact, the Institute-sponsored Coalition for Public Relations Research Standards explicitly advises against using the term ROI in other cases, i.e., in most of what we do in PR. 

    Think about it, as builders and protectors of brand and reputation, doesn’t PR do FAR MORE than just bring in revenues? 

    The most important part of measurement and evaluation is setting goals and metrics that align with those goals. We often turn them into a balanced scorecard to get full recognition for out accomplishments.

    http://www.instituteforpr.org/2011/08/public-relations-research-measurement-curriculum-3/

    http://www.instituteforpr.org/prrsc_document/return_on_investment_and_related_metrics/

  • Hi Christopher, great article. It certainly got me thinking.

    I agree we need to find better quantitative measures for PR. But we shouldn’t always look to revenue as the only metric. 

    Using your example, let’s say your coffee has medicinal benefits. When someone drinks it regularly, their sex drive improves. I know, it’s a stretch, and that’s why you need to educate your prospects. PR will play a key role in securing earned media coverage about the scientific studies you’ve conducted about the product benefits. 

    Naturally, it takes a while to convince people. The first round of PR does not drive any additional traffic to your coffee shop. But  this initial effort isn’t a failure. When prospects see the medicinal benefits message 7x, they convert. And once they do, your shop is flooded with business, you franchise around the world, and retire to Fiji. 

    In this case, the initial metric is how well you’ve educated people. Through tracking and attitudinal studies, you’d gradually see the needle move as people turn from total disbelief, into considering purchasing your coffee, and then into an actual customer. Eventually the metric is revenue but there are other factors that come into play as your campaign evolves.

  • Pingback: Leseliste Juni 2006: Facebook-Manipulation, Disruption und Dauerbrenner Google & Überwachung()

  • Pingback: PR Metrics: What to Measure in the PESO Model Spin Sucks()

  • Pingback: Three Facebook Advertising Tactics to Reach Your Target Audience by @jlarkin353 Spin Sucks()

  • Pingback: How to winterize your public relations planCloud0086 Latest Tech News | Cloud0086 Latest Tech News()

  • Pingback: The Eleven Most Read Blog Posts of 2014 (and a Bonus!) by @belllindsay Spin Sucks()

  • Pingback: Analytics: the Sideways Approach to Measuring PR by @shonali Spin Sucks()

  • Pingback: Analytics: The sideways approach to PR measurementCloud0086 Latest Tech News | Cloud0086 Latest Tech News()

  • Pingback: Analytics: The sideways approach to PR measurement - Payne Public Relations()

  • Pingback: Performance Metrics: Why Your Team Doesn't Measure Up by @lkpetrolino Spin Sucks()

641 Shares
Buffer38
Tweet215
Share111
Share235
+142