Why ROI and PR Mix Like Oil and Water

PR should measure attitudes and behaviours instead of returns.

Cover photo: @jerrysilfwer

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

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 (beforet0 and aftert1 the PR investment)?

Like this:

ROI = (net incomet1 — net incomet0) / 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 = (valu­ationt1 — valu­ationt0) / 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.

Highly detailed visual art of oil and water - ROI in PR
AI art. Prompt: Highly detailed visu­al art of oil and water.

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:

  • The value of PR (regard­less of ini­tial invest­ment costs) equals the value of an organ­isa­tion’s relationships.
  • An organ­isa­tion can estab­lish the state of a rela­tion­ship (before and after) through sci­en­tific­ally val­id ques­tion­naires for groups and semi-struc­tured inter­views of individuals.
  • Measured rela­tion­ship states can be val­ued based on desired out­comes for stra­tegic­ally chosen object­ives, estab­lished best prac­tices, or both.
  • PR value should be bench­marked as a fluc­tu­at­ing mar­ket asset, nev­er a fixed net profit.

Measuring Attitudes and Behaviours

How To Measure Attitudes

How do you meas­ure atti­tudes? There are a few things to think about to get your meas­ure­ment right. 2The Handbook of Research for Communication and Technology, 34.5 Measuring Attitudes. In AECT.

An atti­tude meas­ure­ment should meet the fol­low­ing criteria:

  • Valid
  • Reliable
  • Simple to Administer, Explain, and Understand
  • Replicable

There are four main types of meas­ur­ing approaches:

  • Self-Reporting
  • Reports of Others
  • Internal Reporting (Sociometric Reporting)
  • Records

There are four main types of meas­ur­ing methods:

  • Questionnaires and Rating Scales
  • Interviews
  • Reports (Logs, Journals, Diaries etc.)
  • Observations

I’m a big fan of using ques­tion­naires and stand­ard­ised inter­views for PR measurements:

Validity. Attitudes are psy­cho­lo­gic­al, so I strive to cla­ri­fy what I want to meas­ure, noth­ing more, noth­ing less. And I nev­er add any unne­ces­sary complexity.

Reliability. People exper­i­ence the world dif­fer­ently. But even if atti­tude meas­ure­ments aren’t exact, their use­ful­ness for PR more than makes up for it.

Learn more: How To Measure Public Relations

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.


Please sup­port my blog by shar­ing it with oth­er PR- and com­mu­nic­a­tion pro­fes­sion­als. For ques­tions or PR sup­port, con­tact me via jerry@​spinfactory.​com.

ANNOTATIONS
ANNOTATIONS
1 The 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 cat­egory for the oth­er disciplines.
2 The Handbook of Research for Communication and Technology, 34.5 Measuring Attitudes. In AECT.
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 KIX Index and Spin Factory. Before that, he worked at Kaufmann, Whispr Group, Springtime PR, and Spotlight PR. Based in Stockholm, Sweden.

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