Procter & Gamble Co. has developed an analytic tool to quantify the sales impact of public relations-giving PR high marks and boosting prospects for a discipline whose relative lack of financially measurable returns has long held its growth in check.
Using a new system, dubbed PREvaluate, that combines marketing-mix models with detailed data on media impressions, P&G studied PR programs for six of its brands, with results presented earlier this month to the company's global leadership council, including Chairman-CEO A.G. Lafley. For four of the brands, PR had a higher return on investment than any other medium or marketing tool, and for the other two it came in second.
"This has been the age-old [problem] in the PR business: `Fine, like your clips, but show me the bottom line,"' said Charlotte Otto, global external relations officer for P&G. "Now we can do it. I think people's jaws dropped when we showed them this data. ...We are at such low levels of the marketing mix [for PR], generally less than 1%, that there is definitely upside business potential."
If P&G were, for example, to even double its PR budgets to 2% of its marketing spending, that would result in another $59 million globally for its agencies, which include Omnicom's Fleishman-Hillard and Porter Novelli, Publicis Groupe's MS&L, Interpublic Group of Cos.' DeVries and independents such as Marina Maher Communications.
But it's not just those agencies that could feel the benefit of a marketing leader like P&G calculating the discipline's value.
"We've always been in that catch-22, where research programs done pre- and post- have constituted such a large portion of the budgets that it's often been impossible to afford," said Richard Edelman, CEO of the independent PR agency Edelman. "Also, there's so much noise. How do you isolate public relations from advertising or direct mail? For me, this is like independence day. I can't imagine anything more exciting for anyone, like me, who's been in the business for 25 years."
Systems for measuring impact of PR abound-most revolve around fairly imprecise measurements of media impressions or consumer attitudes without directly tying PR campaigns to measurable sales impacts. But growing numbers of marketers, particularly in the highly analytical package-goods business, are building their plans based on marketing-mix models, which use econometric analysis to determine sales impact of various media approaches.
Measuring PR using marketing-mix analytics has been difficult because the budgets are so small, the data and the impact proportionally slight, said Gregg Ambach, VP-analytic services for ImmediateFX, a marketing-mix analytics firm. Direct marketers, such as financial-services firm Wachovia, have been able to measure impact more easily, but companies that have to base the sales impact number on massive aggregations of scanner data have had more trouble.
Adding to the problem: The quality of media-impression data most marketers get doesn't allow for meaningful analysis, Mr. Ambach said. "They treat all impressions the same ... and you don't know anything about the quality of the impressions or what type of vehicles they were hitting."
P&G has addressed those issues by getting detailed data that breaks down impressions by geography, medium and other quality measures-such as whether they were positive or negative, full-fledged features or passing mentions, Ms. Otto said, adding that the system had been vetted and approved by P&G's Consumer and Market Knowledge research group.
"Companies that spend the cash to understand that metric better can be very successful at measuring [ROI of PR]," Mr. Ambach said. "Lots of companies are asking about it, but it's very rare that you get the good inputs that allow you to get a good read."
Just as marketing-mix modeling has been controversial among marketers and agencies, some of whom argue it favors short-term thinking and fails to capture the full value of advertising, applying it or other ROI tools to PR has generated controversy, too.
"I resist attempts to put process around what we do," said Bill Nielsen, then corporate VP-public affairs at Johnson & Johnson in a 2003 speech. "I reject the assertions of others that if it isn't measurable, it isn't worth doing." J&J declined to comment. Mr. Nielsen, who has retired from J&J, could not be reached.
"We've had some friendly discussions about that," said Ms. Otto of Mr. Nielsen's outlook. "But if we want to be business partners, if we want to have our work worthy of the investment of scarce marketing resources, that's a cop-out. We can measure it, and we have."