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. 

“In a cor­por­a­tion, a stake­hold­er is a mem­ber of ‘groups without whose sup­port the organ­isa­tion would cease to exist’, as defined in the first usage of the word in a 1963 intern­al memor­andum at the Stanford Research Institute. The the­ory was later developed and cham­pioned by R. Edward Freeman in the 1980s. Since then it has gained wide accept­ance in busi­ness prac­tice and in the­or­ising relat­ing to stra­tegic man­age­ment, cor­por­ate gov­ernance, busi­ness pur­pose and cor­por­ate social respons­ib­il­ity (CSR).”
Source: Wikipedia ¹Stakeholder (cor­por­ate). (2023, October 27). In Wikipedia. https://​en​.wiki​pe​dia​.org/​w​i​k​i​/​S​t​a​k​e​h​o​l​d​e​r​_​(​c​o​r​p​o​r​ate)

This is 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.

Developing and main­tain­ing rela­tion­ships with vari­ous stake­hold­ers is a sig­ni­fic­ant chal­lenge for PR pro­fes­sion­als since their inform­a­tion needs are typ­ic­ally very dif­fer­ent. ²A wide­spread mis­con­cep­tion is that the PR func­tion only deals with journ­al­ists (Media Relations) and product pro­mo­tion (Marketing PR). However, such work rep­res­ents only a tiny frac­tion of all the … Continue read­ing

“Public rela­tions dis­tin­guishes itself from mar­ket­ing by focus­ing on the stake­hold­er-organ­iz­a­tion rela­tion­ship, which com­prises mutu­al ori­ent­a­tion around a com­mon interest point and a mul­ti­pli­city of stakes.”
Source: Public Relations Review ³Smith, B. (2012). Public rela­tions iden­tity and the stake­hold­er – organ­iz­a­tion rela­tion­ship: A revised the­or­et­ic­al pos­i­tion for pub­lic rela­tions schol­ar­ship. Public Relations Review, 38, 838 – 845. … Continue read­ing

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 or 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

How To Measure Attitudes in PR

How do you meas­ure atti­tudes? There are a few things to think about to get your meas­ure­ment right. ⁴Educational Communications and Technology. (2001, August 3). 34.5 Measuring Attitudes. The Handbook of Research for Educational Communications and Technology. … Continue read­ing

An atti­tude meas­ure­ment should meet the fol­low­ing criteria:

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

There are four main types of atti­tude meas­ure­ment approaches:

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

There are four main types of atti­tude meas­ure­ment 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

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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.