Public relations firms are adopting a new model that pays for performance versus the traditional retainer based agreements.
As companies become savvier in how they allocate their promotional budgets, they are rejecting the traditional public relations service model that has fed the bottom lines of PR firms for decades. The days of large retainers, endless meetings, billable hours and illusive results are quickly giving way to a more effective approach to getting the word out: pay-for-performance.
It’s About Accountability Pay-for-performance introduces accountability to the process, an element that has been sorely lacking in the field up until now. Traditionally, companies wanting to promote a new product or service in the media hired a PR firm. In exchange for a substantial retainer — often running into the hundreds of thousands of dollars — and billable hours on top of that, the PR firm committed resources and time to championing the product or service among the media. Problem was, that is where the commitment ended. From the PR firm’s perspective, if a press release resulted in a few newspaper articles around the country, great. If not, no big deal; the fees were going to be collected anyway. Pay-for-performance turns the traditional PR service model on its head, mitigating much of the financial risk that had been assumed entirely by the client.
“For too many years, clients have paid six-figure price tags for PR services without any guarantee of results,” says Alex Konanykhin, founder of Washington, D.C.-based Publicity Guaranteed. “This lack of accountability would never be accepted in any other part of a company’s operations, so why is it acceptable in PR?”
Pay-for-performance companies like PublicityGuaranteed.com charge clients only for articles that actually make it into print or mentions that hit the broadcast airwaves. In most cases, clients can even place caps on their fees to hedge against the chance that an article will be placed in more newspapers than anticipated.
ROI — From Spin to Precision Demonstrating return on PR investment has always been a challenge, if not a downright fiction. The pay-for-performance model greatly simplifies the ROI calculation while increasing the confidence in the numbers. After all, quantifying the ROI and justifying the value of a $50,000 PR investment that yields only 10 newspaper articles is an exercise in spin that would test the skills of even the most seasoned PR practitioners. If, however, the cost of placing those same five articles could be determined precisely — as would be the case in the pay-for-performance model — the math gets much less fuzzy and the case for added value gets much stronger.
Is Pay-for-Performance PR Pie in the Sky? The pay-for-performance trend has already transformed the online advertising world from the Wild West of pop-up ads, e-mail SPAM and search engines to a finely tuned device that generates revenue by connecting sellers to motivated buyers. Google and Yahoo’s Overture, for example, have built profitable mega-businesses by charging advertisers by the click. A Google search can yield hundreds of millions of matches, but click on one of Google’s spotlighted sponsored sites — a good indication of buying interest and motivation level — and the sponsor pays a fee.
Companies like Publicity Guaranteed are already seeing a similar transformation the PR industry, and clients seem thrilled with the results. “We hear many horror stories from our clients about PR dollars from previous campaigns going down a black hole,” says Konanykhin. “The pay-per-performance setup removes that horror for them.”