Why ROI and PR Mix Like Oil and Water

ROI and PR are like oil and water — they don’t mix well.

Having worked in the PR industry for many years, I know how inflam­mat­ory such a state­ment might be.

Many PR pro­fes­sion­als and aca­dem­ics dream of a future where our industry can show­case our worth by demon­strat­ing con­crete ROI results.

Maybe we’re wrong?

The Basic PR Model

To get us star­ted, let’s look at a basic stake­hold­er mod­el for pub­lic relations:

Stakeholders in Public Relations

In PR, we often dis­cuss stake­hold­ers. And our PR spe­cial­isa­tions are named based on which stake­hold­ers we’re respons­ible for man­aging. ¹The stake­hold­er mod­el is far from per­fect. There are plenty of over­laps, espe­cially when it comes to media rela­tions. Also, the cor­por­ate com­mu­nic­a­tions func­tion is often regarded as an umbrella … Continue read­ing

Here’s the stake­hold­er mod­el in PR:

• 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.

A wide­spread mis­con­cep­tion is that the PR func­tion only deals with journ­al­ists, edit­ors, and influ­en­cers (Media Relations) with­in the scope of attract­ing new cus­tom­ers (Marketing PR). But such work rep­res­ents only a tiny per­cent­age of all the stake­hold­er rela­tion­ships PR pro­fes­sion­als must man­age daily.

Learn more: Stakeholders in Public Relations

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Without get­ting too hung up on estab­lish­ing an exact defin­i­tion of PR, the value of PR can be seen as the total value of all the rela­tion­ships men­tioned above.

ROI in Marketing vs PR

With the basic PR mod­el in mind, let me make a dis­tinct point:

If an organ­isa­tion invests noth­ing in mar­ket­ing, there’s no mar­ket­ing.

If an organ­isa­tion invests noth­ing in PR, there’s still PR.

Or anoth­er way to put it:

No invest­ments in mar­ket­ing = the return on mar­ket­ing is zero.

No invest­ments in PR = the return of PR is still a number.

So, does PR work for the ROI definition?

ROI = net income/​cost of investment

It should be evid­ent that the basic ROI mod­el lacks fun­da­ment­al vari­ables to be use­ful for PR.

Need more con­vin­cing? Let’s keep going.

Two Unsolvable Problems

Can’t we make the ROI mod­el work anyway? 

Perhaps we can bal­ance the net incomes (before^t0 and after^t1 the PR investment)?

Like this:

ROI = (net income^t1 — net income^t0) / cost of investment

There are severe prob­lems with this approach:

One prob­lem is that the return on the PR invest­ment is a fluc­tu­at­ing valu­ation rather than a net income; it’s not “money in the bank.”

This cre­ates an imbal­ance in the formula:

ROI = (valu­ation^t1 — valu­ation^t0) / cash loss

The next prob­lem is estab­lish­ing valid­ity; how could we ever cal­cu­late the value of t=1 if the organ­isa­tion nev­er made those PR investments?

Example:

An organ­isa­tion faces a severe crisis, but the PR func­tion man­ages the situ­ation ideally and min­im­ises the loss of a) net income and b) brand value.

To cal­cu­late the value of the invest­ment, we must know how severely the crisis would’ve impacted the organ­isa­tion without the PR invest­ment. Unless you find a way to vis­it par­al­lel timelines, there’s no way of find­ing this out.

And even if we find a meth­od of approx­im­a­tion, there’s still an actu­al loss of value — which puts the ROI in the red.

The Oil and Water Analogy

So, what does all of this mean in a prac­tic­al sense?

It means that ROI and PR are like oil and water.
They don’t mix well.

Those who don’t appre­ci­ate my ini­tial logic may instead con­sider that we’ve been try­ing to estab­lish ROI for PR since the start of our pro­fes­sion — without success.

Our lack of pro­gress forces us to con­sider the alternatives:

Either ROI and PR don’t mix.
Or we’re just too stu­pid to make it work.

Or, we accept that PR requires a spe­cif­ic ROI mod­el that should­n’t be com­pared. This means, for instance, that an organ­isa­tion can­’t bench­mark the gen­er­al ROI mod­el of mar­ket­ing against the par­tic­u­lar ROI mod­el of PR because it’s… apples and pears.

ROI and PR: A Fork in the Road

“Insanity is doing the same thing over and over and expect­ing dif­fer­ent res­ults.”
— Albert Einstein

If my sug­ges­ted logic does not con­vince you, or if you think I’m mis­char­ac­ter­ising or over-sim­pli­fy­ing the prac­tice of estab­lish­ing ROI, that’s fine.

Regardless, we’re still left at a fork in the PR road:

a) If we’re all about apples and pears, we can keep dis­cuss­ing the ROI of PR aca­dem­ic­ally, but it’ll be use­less in practice.

b) If we’ve been too stu­pid this far, we’ll have to keep try­ing — and per­haps get more com­pet­ent people to join our ranks.

c) Or, we could decide that enough is enough, cut our losses and start focus­ing on some­thing with a bet­ter poten­tial of being useful.

How To Demonstrate PR Value

For my pre­ferred option c) above, I’d sug­gest the fol­low­ing prin­ciples for estab­lish­ing the value of invest­ing in PR activities:

Measuring Attitudes and Behaviours

Still not con­vinced? I accept that.

As noted above, I’m not naïve enough to believe that one short blog post could resolve one of our industry’s most chal­len­ging dilemmas.

However, I do want to close with this:

By cling­ing to the ROI mod­el, we rep­res­ent the PR func­tion at the C‑level by demon­strat­ing how much net income we gen­er­ate for organisations. 

Mark my words: This is a battle we’ll nev­er win.

Instead, we must demon­strate how we’re increas­ing share­hold­er value, cre­at­ing room for the organ­isa­tion to grow, mit­ig­at­ing poten­tial losses, and safe­guard­ing future revenue.

Any board­room would be mad not to invite such a PR function.