Performance Based PR is Out There, But is it Right For You?
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. Better known as a performance PR model.
A performance based PR 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.
Read an article about this upcoming model and you would think that it's a crazy idea. But is it really? The only difference is not at the service or task level. After all pitching is pitching. The real difference is how, and when the PR agency gets paid. That's it.
It's not pay for play!
In 2004, an investigative reporter for the Los Angeles Times noted that city watchdog officials in Los Angeles were examining inflated hourly rates and shady billing practices of the PR agency giant Fleishman-Hillard. The result was a front page story in the Times, and an eventual lawsuit against Fleishman-Hillard’s $4.2 million over billing of the City of Los Angeles. What’s more, Mayor Jim Hahn soon canceled all city contracts with other PR agencies.
With accusations still flying, the bottom-line concern appears to have been accountability. Government officials acknowledged the need for positive PR, but simply could not match up the dollar spent with the dollar delivered. Some have called this LA flap the beginning of the end of the old retainer model in public relations.
I can't argue the merits of this case, however I can tell you this; the retainer-based model is loaded with potential fraud. Staff are asked, by managers, to hand-in time cards at the end of the week. For the most part, they are accurate recordings. Although, the pitfall is within what I call the unintentional lie. With multiple employees recording multiple actions throughout a jam packed schedule, there's bound to be misrepresented time worked on any given project. This typically isn't malicious towards the client. People are easily interrupted with phone calls, emails, and whatever else crosses our path, resulting in lost hours being tallied up at the client's expense.
Today, the concept of performance PR has arrived in the business world, and it is quickly gaining momentum. Naturally, one of the questions being asked more and more by companies is whether this 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 at blazing speed and are more focused on specific activities that will create profitable top line growth for their company. Consequently, many CEOs are now insisting to see a tangible return on their PR investment. 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 PR 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 public relations programs 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 Public Relations programs 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, it saves clients money since they know they'll only pay for PR placements that deliver results.
Is Performance Based PR Right For You?
The next step then becomes determining if Pay for Performance Public Relations programs is right for you. Essentially, what type of organization 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 events 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 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 Performance PR program 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 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 a Pay-for-Performance opportunity 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 $15,000 – $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.
Ask yourself this questions:
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 respective PR agencies. In both cases, the individuals managing of the agencies 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 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 a performance based PR 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 forgoing the outdated retainer contracts. 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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