Doctor SpinPublic RelationsCorporate CommsWhy ROI and PR are like Oil and Water

Why ROI and PR are like Oil and Water

tl;dr: PR should measure valuations instead of returns.

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.

But maybe we’re barking up the wrong tree?

Table of Contents

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

    The Basic PR Model

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

    • Corporate Communications (organisational stakeholders have communication needs)
    • Investor Relations (the financial market has communication needs)
    • Public Affairs and Lobbying (political entities and voters have communication needs)
    • Marketing PR (customers and prospects have communication needs)
    • Media Relations (journalists and influencers have communication needs)
    • Inbound Communications (online brand communities have communication needs)
    • Internal Communications (employees and partners have communication needs)
    • Crisis Communications and Issues Management (active publics have communication needs)

    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 of 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 if we find a way to balance the net incomes (beforet0 and aftert1 the PR investment)?

    Like this:

    ROI = (net incomet1 — net incomet0) / cost of investment

    There are serious 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 perfectly and minimises the loss of a) net income and b) brand value.

    To calculate the value of the investment, we must know how severe 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 special ROI model of PR because it’s … apples and pears.

    ROI and PR: A Fork in the Road

    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, then we can keep discussing the ROI of PR academically, but it’ll be useless in practice.

    b) If we decide that 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 that has 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 prior investment costs) is equal to 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.

    PR in the Boardroom

    Still not convinced? I accept that.

    As noted above, I’m not naive 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 adhere to the idea of representing 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.

    ROI - Humans Influence Humans
    Humans influence humans. Image credit: Unknown.

    Cover photo by Jerry Silfwer (Prints/Instagram)

    .

    Jerry Silfwer
    Jerry Silfwerhttps://www.doctorspin.net/
    Jerry Silfwer, aka 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.
    Buy PR Merch

    Grab a free subscription before you go.

    Get notified of new blog posts & new PR courses

    🔒 Please read my integrity- and cookie policy.

    How to train a spokesperson? This is how I start training corporate spokespersons (and why I always bring a video recorder).
    Most popular