Shortly before his death, Edward Bernays, often called the father of Public Relations, said: “Public Relations cannot step boldly into the new century without first reevaluating what it is and where it is going.”
Nineteen years later, “where it is going” seems increasingly clear: Charge clients only for Public Relations (PR) that produces results. A pay-for-performance based concept like this has been widely-recognized by a variety of industries looking to increase employee performance and productivity while offering improved quality. Even today’s medical, health care and educational institutions have introduced performance-based pay structures in order to improve services to customers.
When Matrix Marketing Group launched its Pay for Performance PR model in 2004, the concept was new. Today, the concept has arrived in the PR world, and it is quickly gaining momentum. Naturally, one of the questions being asked more and more by companies is whether the Pay for Performance PR model is right for you.
After the dot.com bubble “burst” in March 2000 nearly everyone, especially independent companies and small to mid sized businesses, experienced serious economic struggles that included major budget shortages and layoffs. Many companies were acquired, liquidated, or unable to recover. Now, in today’s economy, an overwhelming number of CEOs are more concerned with expediting revenue growth rather than merely slashing costs and cutting budgets. They want to gain competitive advantage and are more focused on specific activities that will create profitable top line growth for their company. Consequently, many CEOs are now insisting even more to see a return on their PR investment. And, if company executives aren’t asking to see proof of value and demanding better accountability, you can bet that company shareholders and customers are.
A few vanguard PR firms early on have seen the light and now offer performance-based pay structures as an alternative to the traditional retainer-based model. It’s a progressive move, because until now, clients have not had a practical way of measuring the effectiveness of their PR investment. Under a Pay-for-Performance PR model, clients are now able to pay PR agencies based on results produced, not for billable hours. For example, a business may decide to hire a PR agency to develop and “pitch” its news to a targeted group of media. The company is billed only after a news story is published or covered by the media.
Looking at how the Pay for Performance PR model works, it doesn’t take long for one to see why it is increasing in popularity: It is the pragmatic way to do business. The Pay for Performance PR model is more client-focused, more results-based and it demands greater accountability. Additionally, this model prevents clients from being charged the bundled fees that the majority of PR companies charge using the traditional retainer model. In the end, the Pay-for-Performance PR model saves clients money because it ensures they will only pay for PR services that deliver results.
The next step then becomes determining if Pay for Performance PR model is right for you. Who makes a good candidate? In order to determine this, a company must ask itself the following questions:
- Does my company have a sustainable flow of news stories, create stories and angles that warrant news coverage on a regular basis, and remain active in whatever it does (e.g., creating innovative products, new client wins, product launches, new technology, etc.)?
- Does my company’s news have a national focus with a clearly-defined target audience?
- Is your company experienced in dealing with the media, or are you comfortable in an interview situation with a journalist?
- Are my company’s products and services clearly differentiated and do they match up with the needs of the existing market place?
- Is my company’s messaging established and is an overall strategy currently in place so that the focus is now mainly on increasing PR?
- Do you know what media you would like to be featured in?
A good “fit” between the PR agency and the client should also have trust as its foundation: It is this mutual, trust-based relationship that sets the Pay-for-Performance PR model apart from a traditional retainer-based model. In any successful relationship, the PR agency must first understand what the client does and what its needs are before it can successfully develop and deliver PR services to the media.
Under a Pay-for-Performance arrangement, the burden initially is on the PR agency inasmuch as it absorbs the risk of creating product (e.g., research, pitch, etc.) and incurring costs before measurable results are known. If the work is successful, the client perceives the agency’s “say-do” ratio to be high and thus, a trust-based relationship is formed.
The Pay-for-Performance PR model offered by only a select number of PR agencies today is ideal for start-ups, venture-funded companies and those companies desiring to re-brand or re-launch their products, services, or in some cases, their overall image. This model can also effectively assist companies who are already established but who just want to raise public awareness.
Take for example, Instill Corporation based in Redwood City, CA. Instill provides a comprehensive set of supply chain information services and spend management solutions for leading CPG companies. With a focus on the food industry, Instill’s customers include such leading companies as Applebee’s International, Hardee’s International Dairy Queen, Sodexho International, YUM! Brands’ UFPC (Taco Bell, Pizza Hut and KFC), General Mills, and Procter & Gamble. While Instill is recognized as the leading technology provider in the foodservice industry, the company wanted to continue to build on its national visibility. Engaging a public relations firm was an obvious next step, but Instill was looking for options beyond the traditional retainer model.
“Generating news stories in key targeted media about Instill’s developments and reinforcing our unique value proposition remains a primary goal at Instill, and the Pay for Performance PR model caters directly to this need,” said Jeff Smith, Instill’s Vice President of Marketing. “We are highly results-driven and invest our marketing dollars in areas where we can show demonstrable results. That is what first caught our attention when we became aware of the Pay-for-Performance model and ultimately helped us decide to work with an agency, Matrix Marketing Group, that offered it. This type of public relations model offers unbundled pricing options and a variety of services that generate results, cater to our specific needs, and gave me confidence in making the investment.”
With performance-based concepts restructuring entire companies and reshaping the way many are doing business, it seems difficult to believe that over 99% of PR firms still only offer clients retainer-based models that can cost as much as $10,000 – $25,000 per month. While PR firms are now recognizing the demand to offer more than this traditional alternative, most have not yet implemented the model. This is because they are uncertain and fearful about how to sustain their own company revenue or they have not yet determined how this model can feasibly be offered. Today, PR firms still view everything but the retainer-based model as a waste of time and too often overlook the needs of the client.
This is not to suggest that the retainer-based model isn’t a viable option for some companies. But there are some cautions. In most cases, the retainer-based model lacks accountability because of poor tracking, reporting errors and over-billing. Similarly, a company’s PR work is often assigned to junior associates or interns who may not understand the clients’ industry, positioning and messaging. Another important fact to remember is that a PR agency applying the retainer model will adhere to the fixed monthly fee agreed upon by both parties. Initially, it may be reassuring for a company to know the exact amount of dollars that will be spent for PR each month. But, what will happen if that PR starts to “take off” for the company? This is an important question to think about since when a fixed retainer is present, a PR agency still will only do the amount of work equivalent to its fee.
Why do some agency executives think it is legal to forecast a client’s billings and then secretly adjust those bills upward to meet the forecast when less work was performed than predicted? Two recent cases dramatically demonstrate the problems inherent in a retainer model. The city of Los Angeles and the White House both took issue with over billing problems with their PR agency. In both cases, the respective individuals were indicted for their part in fraudulent bills leading to over-billing the clients for media campaigns. These cases provide evidence of what could happen as the result of poor tracking and a lack of ability to show documentation supporting the billing figures. So why do it this way?
Like so many things in the world, there are no guarantees in PR: PR campaigns can fall apart, product launches can flop in the public’s eyes, PR budgets can disappear altogether, and client news can be pushed aside by the media due to lack of space or breaking news. A Pay-for-Performance PR model will provide clients with one guarantee: “You pay only for the results produced.”
In the end, companies will choose the PR model that is right for them when they determine the PR services they need, the cost to acquire the services, and the agency that they trust. When exploring the Pay-for-Performance model, companies should answer the questions presented in this article to determine if they meet the model’s ideal criteria. They should also recognize the value of trusting relationship that is established from the onset using the Pay for Performance PR model.
With PR services tailored to fit company needs and accommodate budgets, it is easy to see the rationale for using the Pay for Performance PR model. In fact, it seems like only a matter of time before this innovative model outperforms the retainer-based model altogether. It can’t help but make me wonder if Mr. Bernays would ever have envisioned public relations going in this bold, new direction.
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