25 Jun 2014

The value of PR beyond marketing ROI

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One of the discussion points that came up in our recent examination of the Barcelona Principles and the valuation of PR is that public relations has a broader, wider impact than just indirect revenue generation. What sorts of impacts might these be? Here are three examples:

  • Crisis communications: when something negative happens to a brand, an effective PR response can help to mitigate the damage from the negative event to a greater or lesser degree.
  • Sales: while a clip in the New York Times may not necessarily generate direct revenue (particularly in complex sales situations), there’s value to a sales professional being able to send an article link to a prospect showcasing how popular the brand is.
  • Customer retention: the bandwagon effect is a powerful influencer over consumers. If a brand is popular and trusted, status-conscious consumers (B2B or B2C – the old “No one ever got fired for buying IBM” applies just as equally) may be convinced to remain loyal.

The next logical question is, how do you place a value on these non-revenue generating activities that are still important? The simple answer most often given is that you can’t, because they’re intangible. However, we shouldn’t settle for the simple answer. The more complex answer is that you have to do some fairly comprehensive testing and math in order to ascertain the indirect revenue impact of public relations, but it can be done.

For crisis communications, you need a baseline study of your audience’s attention, awareness, trust, and sentiment prior to a crisis. Run frequent surveys to your audience (not just your customers and prospects but everyone in your serviceable available market) to ascertain how much your brand is trusted, and what correlation that trust has to bottom-line results like revenue. As trust pervades every level of the marketing and sales funnel, this is not an unreasonable conclusion to leap.

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Assuming that you can prove a relationship between trust and revenue, then in the aftermath of a crisis, creating an improvement in trust with effective public relations should have a demonstrable, measurable impact on revenue. If you can establish a mathematical relationship between trust and revenue, then an increase in trust has a dollar value attached to it.

When it comes to customer retention, you should be surveying your customers on a regular, frequent basis about their loyalty to your brand. Two simple questions you can ask are how they feel about their relationship with your brand on a scale of 1-10, and how likely they are to recommend your company to a friend or colleague on a scale of 1-10.

Run this survey with your customers quarterly or monthly, then examine the customer churn rates during the same time period. Both the number of customers lost and revenue loss (approximated using lifetime value of the customer). Do a simple correlation analysis to see, for example, if an increase in churn rate correlates to a decrease in satisfaction from your customer surveys.

If there is a strong correlation, then you have a method for both measuring satisfaction and quantifying what a loss of satisfaction is worth (churn rate and lifetime value of the customer). When you execute PR campaigns aimed at improving trust and affinity for your brand, you can then do a second correlation analysis to see if the PR campaign has had an effect on satisfaction survey numbers. If that answer is affirmative, then you have an additional way to value PR in terms of customer retention and revenue retention.

Here’s a second example of how to do this indirect revenue evaluation. Let’s say you want to understand the value of reputation as part of the sales process. If you have a simple transactional sales model with checkouts offline or online, A/B test your checkout points. Have earned media hits displayed in a sidebar in your online shopping cart or on displays at half of your retail checkouts. Have business as usual in the other half. Measure to see if there’s a quantitative difference in order size or cart abandonment from the purchases with earned media hits prominently on display.

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For a complex selling process, take two of your salespeople with closing ratios as close as possible and have one inject earned media hits throughout the selling process and one manage their selling process without the earned media hits. Measure over three or four sales cycles (average time to close x 4) and see if there’s a quantifiable deal size or closing ratio difference with the salesperson using earned media hits in their selling process.

These measurement processes are not simple. They are not easy answers; in many cases, they will require extensive investment in people, time, and effort, but the answers are worthwhile if you want to truly grasp the big picture of the ROI of PR outside of the marketing funnel. As always, we’re happy to help, should you want to pursue such an investigation.

Christopher S. Penn
Vice President, Marketing Technology

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