The PESO Paradox

Allocating media budgets has never been trickier.

Cover photo: @jerrysilfwer

tl:dr;
Organisations must invest time and resources to be present where their audiences can be found (e.g., paid, earned, and shared media channels). Still, it's equally valid that such investments detract from efforts to establish direct relationships (e.g., owned media channels) with their audience. This impossible balancing act is the PESO paradox, represented by the acronym Paid, Earned, Shared, and Owned.
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Organisations are strug­gling with the PESO paradox.

Allocating media budgets has nev­er been trickier.

The chal­lenge in attrib­ut­ing media budget alloc­a­tion to pur­chase prob­ab­il­ity is that the true prob­ab­il­ity of pur­chases is extremely small and dif­fi­cult to accur­ately mod­el.“
Source: Ranking and Calibrating Click-Attributed Purchases in Performance Display Advertising 1Chaudhuri, S., Bagherjeiran, A., & Liu, J. (2017). Ranking and Calibrating Click-Attributed Purchases in Performance Display Advertising. Proceedings of the ADKDD’17. … Continue read­ing

Why is it so dif­fi­cult to set up a reli­able frame­work to accur­ately determ­ine how to dis­trib­ute your invest­ments across paid, earned, shared, and owned media channels?

Here we go:

The PESO Paradox

PESO Model - Doctor Spin - The PR Blog
The PESO mod­el in pub­lic relations.
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The PESO Paradox

According to the PESO mod­el, there are four types of media channels:

  • Paid media chan­nels. Example: Advertising.
  • Earned media chan­nels. Example: Third-party pub­li­city.
  • Shared media chan­nels. Example: Social media publishing.
  • Owned media chan­nels. Example: Website publishing.

How do you cat­egor­ise these four types of media chan­nels? A pop­u­lar approach is to divide them based on cor­por­ate function:

Function: Marketing

  • Paid media chan­nels. Example: Advertising.

Function: Communications

  • Earned media chan­nels. Example: Third-party publicity.
  • Shared media chan­nels. Example: Social media publishing.
  • Owned media chan­nels. Example: Website publishing.

Another approach is to divide the PESO media chan­nels based on cor­por­ate UIX control:

Brand Experience: Full Control

  • Owned media chan­nels. Example: Website publishing.

Brand Experience: Partial Control

  • Paid media chan­nels. Example: Advertising.
  • Shared media chan­nels. Example: Social media publishing.

Brand Experience: No Control

  • Earned media chan­nels. Example: Third-party publicity.

A third but cent­ral approach to the PESO media chan­nels is based on conversion/​monetisation strategies:

Value: Awareness

  • Paid media chan­nels. Example: Advertising.
  • Earned media chan­nels. Example: Third-party publicity.
  • Shared media chan­nels. Example: Social media publishing.

Value: Transactional

  • Owned media chan­nels. Example: Website publishing.

The vari­ous above per­spect­ives force organ­isa­tions to face prob­lem­at­ic paradoxes:

The PESO para­dox = paid, earned, shared, and owned media chan­nels can be grouped in dif­fer­ent ways that are equally and sim­ul­tan­eously true but also stra­tegic­ally con­flict­ing, which cre­ates a meas­ure­ment prob­lem (com­par­at­ive valid­ity) for organisations.

How do you set up a reli­able pro­cess to accur­ately determ­ine how to dis­trib­ute your media chan­nel investments?

Applications of the PESO paradox:

  • Should we invest in social media advert­ising to boost the algorithm for increased organ­ic con­tent success?
  • Should we pri­or­it­ise our web­site, where we con­trol the brand exper­i­ence, or social media, where our key pub­lics reside?
  • How do we com­pare the return on invest­ment (ROI) of dif­fer­ent media chan­nels when they are pro­foundly dif­fer­ent and seem to defy any such comparisons? 
  • How do we value aware­ness-type media chan­nels if the long-term cost is pro­por­tion­al to cut­ting away pieces of our busi­ness in a way that will weak­en the organ­isa­tion and strengthen the social networks?
  • How do we fun­nel organ­ic aware­ness into trans­ac­tion­al value when third-party plat­forms work against us and the pub­lic is unwill­ing to switch media channels?

Please note: The PESO mod­el has “fuzzy edges” due to vari­ous hybrid media forms. For example, you can run cam­paign ban­ner ads or social for­ums on your web­site or add advert­ising spots with­in edit­or­i­al social media content.

Learn more: The PESO Paradox

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The Leaky Funnel Problem

The leaky funnel problem.
The leaky fun­nel problem.
Spin Academy | Online PR Courses

The Leaky Funnel Problem

By defin­i­tion, busi­nesses have a bot­tom line:

Making money.

The most wide­spread approach to solv­ing the PESO para­dox of alloc­at­ing resources between dif­fer­ent types of media chan­nels is to trace each mar­ket­ing and pub­lic rela­tions activ­ity to a final transaction.

This is done via a funnel.

Digital fun­nels of sales, com­bin­ing search optim­iz­a­tion and web ana­lyt­ics, are key com­pon­ents in digit­al mar­ket­ing, pro­mot­ing web­site advance­ment and increas­ing sales volume.“
Source: Research of the mar­ket­ing instru­ments of adop­tion of man­age­ment decisions in the field of plan­ning and busi­ness devel­op­ment 2Zinchenko, A., & Kolosova, V. (2019). Research of the mar­ket­ing instru­ments of adop­tion of man­age­ment decisions in the field of plan­ning and busi­ness devel­op­ment. Vestnik Universiteta. … Continue read­ing

Suppose your fun­nel aims to attract social media aware­ness to pro­duce inbound traffic to your web­site. There, you con­vert vis­it­ors into email sub­scribers who are primed to con­vert into trans­ac­tion­al cus­tom­ers over time. In that case, it’s pos­sible to cal­cu­late the mon­et­ary value of a single social media click based on the aver­age order value — or cus­tom­er life­time value.

Counting con­ver­sion rates back­wards, it’s not uncom­mon for organ­isa­tions to find that one single trans­ac­tion at the bot­tom of the fun­nel requires one mil­lion social media impres­sions at the very top.

  • Remember: cor­rel­a­tion does not equal causation.

In the eyes of fun­nel-cent­ric organ­isa­tions, the value of an indi­vidu­al’s atten­tion gets dimin­ished to a frac­tion of a mar­ket­ing dol­lar — when atten­tion is argu­ably an invalu­able resource.

This approach is a “100% pure mar­ket­ing mind­set” — and extremely problematic.

  • In the eyes of advert­isers and fun­nel spe­cial­ists, we are demo­graph­ic entit­ies stripped of our essence, mere pup­pets of con­sump­tion with wal­lets in place of hearts.

Consider all the vari­ous types of stake­hold­ers. A sub­set of these might be inter­ested in being pushed through the organ­isa­tion’s fun­nel — but far from all of them.

  • Corporate Communications = External and intern­al pub­lics, busi­ness journ­al­ists, reg­u­lat­ory insti­tu­tions, part­ners, sup­pli­ers, vendors, etc.
  • Investor Relations (IR) = Shareholders, fin­an­cial mar­kets, mar­ket ana­lysts, fin­an­cial insti­tu­tions, trade journ­al­ists etc.
  • Media Relations = Journalists, edit­ors, influ­en­cers, etc.
  • Digital PR = Inbound web traffic, brand com­munit­ies, sub­scribers, fans, fol­low­ers, influ­en­cers, social net­works, etc.
  • Public Affairs (PA) = Voters, polit­ic­al journ­al­ists, polit­ic­al ana­lysts, colum­nists, interest groups, etc.
  • Lobbying = Politicians, legis­lat­ors, gov­ern­ment offi­cials, com­mit­tees, influ­en­cers, etc.
  • Internal Communications = Coworkers, poten­tial recruits, etc.
  • Crisis Communications = Crisis vic­tims, wor­ried pub­lics, the gen­er­al pub­lic, cowork­ers, journ­al­ists, influ­en­cers, cus­tom­ers, share­hold­ers, etc.
  • Marketing PR = Potential cus­tom­ers, exist­ing cus­tom­ers, trade journ­al­ists, mem­bers, affil­i­ates, etc.
  • Industry PR (B2B) = B2B cli­ents, B2B pro­spects, trade journ­al­ists, trade organ­isa­tions, niche influ­en­cers, etc.

Simply put: Funnels leak.

  • The fantasy of acquir­ing one con­ver­sion out of one mil­lion impres­sions through a fun­nel is some­thing. The exper­i­enced real­ity of those 999,999 who “leak out” along the way is — everything.

So, how must we think about funnels?

  • Avoid “fun­nel-vis­ion”. Always remem­ber that a fun­nel is a power­ful yet unbal­anced and nar­row mar­ket­ing tool. It’s a user-flow visu­al­isa­tion, not a descrip­tion of how the world works.
  • Experiment with non-trans­ac­tion­al fun­nels. A fun­nel must­n’t sell products or ser­vices; it can estab­lish and main­tain rela­tion­ships, man­age per­cep­tions, change beha­viours, or spark word-of-mouth (i.e. vir­al loops).
  • Don’t com­pare apples with oranges. Be mind­ful of put­ting a price on the atten­tion of oth­ers based on your abil­ity to hold their interest.

Learn more: The Leaky Funnel Problem

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Signature - Jerry Silfwer - Doctor Spin

Thanks for read­ing. Please sup­port my blog by shar­ing art­icles with oth­er com­mu­nic­a­tions and mar­ket­ing pro­fes­sion­als. You might also con­sider my PR ser­vices or speak­ing engage­ments.

PR Resource: The PESO Model

PESO Model - Doctor Spin - The PR Blog
The PESO mod­el in pub­lic relations.
Spin Academy | Online PR Courses

The PESO Model

The PESO mod­el divides the media land­scape into four dif­fer­ent media chan­nel types: 

  • Paid chan­nels include advert­ising, spon­sor­ships, ambas­sad­or col­lab­or­a­tions, etc.
  • Earned chan­nels include news art­icles, influ­en­cer endorse­ments, word-of-mouth, etc.
  • Shared chan­nels include social media brand posts, accounts, SERP vis­ib­il­ity, etc.
  • Owned chan­nels include news­let­ters, web­sites, pub­lic­a­tions for intern­al or extern­al use, etc.

Don Bartholomew, vice pres­id­ent of digit­al research at Fleishman Hillard, presen­ted a ver­sion of the PESO mod­el in 2010. According to PR blog­ger and PR meas­ure­ment expert Heather Yaxley, his 2010 art­icle is likely to be the earli­est men­tion of the model:

PESO Paradox | PR Theories | Doctor Spin
The PESO mod­el. Source: PRConversations.

In 2013, PR blog­ger Gini Dietrich pop­ular­ised the PESO mod­el on her blog and later trade­marked her heav­ily pro­moted and widely spread infographic.

In June 2013, Gini Dietrich presen­ted the first iter­a­tion of the PESO mod­el you may recog­nise in a blog post: The Four Different Types of Media. It was fol­lowed in August by the post Mobile Marketing: Use the Four Media Types in Promotion, where she talked about integ­rat­ing paid, earned, owned, and shared.”
Source: PRConversations​.com 3Yaxley, H. (2020, June 28). Tracing the meas­ure­ment ori­gins of PESO. PRConversations​.com. https://​www​.prcon​ver​sa​tions​.com/​t​r​a​c​i​n​g​-​t​h​e​-​m​e​a​s​u​r​e​m​e​n​t​-​o​r​i​g​i​n​s​-​o​f​-​p​e​so/

It is also worth point­ing out this 2010 McKinsey Quarterly art­icle by David Edelman and Britan Salsburg that includes sold and hijacked media along­side what used to be called POEM (paid, owned and earned media). Both of these con­cepts still have value even though their exe­cu­tion has changed in the past dec­ade.“
Source: PRConversations​.com 4Yaxley, H. (2020, June 28). Tracing the meas­ure­ment ori­gins of PESO. PRConversations​.com. https://​www​.prcon​ver​sa​tions​.com/​t​r​a​c​i​n​g​-​t​h​e​-​m​e​a​s​u​r​e​m​e​n​t​-​o​r​i​g​i​n​s​-​o​f​-​p​e​so/

I prefer to use the mod­el to under­score the crit­ic­al dif­fer­ences between mar­ket­ing (paid media) and pub­lic rela­tions (earned, shared, and owned media). Others prefer to use the mod­el to show­case how pub­lic rela­tions could ven­ture into paid media channels.

Learn more: The PESO Model: Paid, Earned, Shared, and Owned Media

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ANNOTATIONS
ANNOTATIONS
1 Chaudhuri, S., Bagherjeiran, A., & Liu, J. (2017). Ranking and Calibrating Click-Attributed Purchases in Performance Display Advertising. Proceedings of the ADKDD’17. https://​doi​.org/​1​0​.​1​1​4​5​/​3​1​2​4​7​4​9​.​3​1​2​4​755
2 Zinchenko, A., & Kolosova, V. (2019). Research of the mar­ket­ing instru­ments of adop­tion of man­age­ment decisions in the field of plan­ning and busi­ness devel­op­ment. Vestnik Universiteta. https://​doi​.org/​1​0​.​2​6​4​2​5​/​1​816 – 4277-2019 – 2‑24 – 27
3 Yaxley, H. (2020, June 28). Tracing the meas­ure­ment ori­gins of PESO. PRConversations​.com. https://​www​.prcon​ver​sa​tions​.com/​t​r​a​c​i​n​g​-​t​h​e​-​m​e​a​s​u​r​e​m​e​n​t​-​o​r​i​g​i​n​s​-​o​f​-​p​e​so/
4 Yaxley, H. (2020, June 28). Tracing the meas­ure­ment ori­gins of PESO. PRConversations​.com. https://​www​.prcon​ver​sa​tions​.com/​t​r​a​c​i​n​g​-​t​h​e​-​m​e​a​s​u​r​e​m​e​n​t​-​o​r​i​g​i​n​s​-​o​f​-​p​e​so/
Jerry Silfwer
Jerry Silfwerhttps://doctorspin.net/
Jerry Silfwer, alias Doctor Spin, is an awarded senior adviser specialising in public relations and digital strategy. Currently CEO at Spin Factory and KIX Communication Index. Before that, he worked at Kaufmann, Whispr Group, Springtime PR, and Spotlight PR. Based in Stockholm, Sweden.
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