ANALYSIS: Firms put emphasis on ROI amid competitive climate

With companies scrutinizing every penny, PR departments and firms are now implementing increasingly sophisticated metrics programs to prove value.

With companies scrutinizing every penny, PR departments and firms are now implementing increasingly sophisticated metrics programs to prove value.

The concept of ROI is like a gold standard when it comes to measuring how each of an organization's parts contribute to the growth of the whole. It's a basic logic for business decisions, a determination of what you'll get for the money you spend. For a long time, proving ROI was out of reach for PR and corporate communications, so much so that it's tempting to call it a holy grail of measurement. But that would imply that people were actually looking for it. Instead, many PR pros defended their inability or unwillingness to quantify in common business terms the effects of their work, describing it as a creative endeavor that doesn't lend itself to these kinds of measurements. That has changed in recent years. The news that a major PR effort by the Aluminum Association (AA) will have its strategy shaped in part by management consultancy McKinsey & Co. (PRWeek, September 29) is evidence of this. It comes as a bellwether in an environment marked by more and more RFPs with measurement components and, consequently, more and more PR outfits try to find ways to validate what they do. "PR departments within organizations are being asked to demonstrate some kind of return on investment," says Mark Weiner, CEO of Delahaye Medialink, "so it's natural that the same mandate would extend to the agencies they choose." Bringing McKinsey into a communications strategy in such a public fashion seems like a dramatic move. It's at the very least unusual. Management consultancies of this ilk have typically refrained from getting involved in PR, limiting their work in communications to a part of the management restructuring they are famous for. A 1999 PRWeek survey of consultancies like McKinsey and PriceWaterhouseCoopers didn't reflect a move into PR, despite contemporary industry fears sparked by a few of these firms' interest in the reputation-management space. Four years later, there's no reason to think this has changed. What is different is what's demanded of PR programs. The evolution of PR metrics The clip book, that old symbol of PR measurement, has been replaced by more sophisticated evaluations of the quantity and quality of media placements, which, in more ambitious PR operations, have been linked to bottom-line results that resonate outside the corporate communications silo to those doling out the money. Corporations and agencies have built their own research functions, and companies like Delahaye and its competitors offer research-based strategy guidance in addition to back-end measurement. But even Weiner concedes that McKinsey brings something to the table his firm and others don't. "Even though Delahaye can work in a strategic fashion and use a research foundation to provide this concentration, a McKinsey can better represent what a CEO or what the C-suite is thinking," he says. "They would certainly better represent the direction they're taking their client company into than a third party could." Larry Walsh, partner at communications consultancy Osgood O'Donnell & Walsh, puts this in starker terms that serve to underscore some perceived limitations of PR firms. "What [the AA] is looking for is a business outcome, which is not something that PR firms measure," Walsh says. "I think PR firms should do a lot more measurement, but it's very difficult to impute a ROI against a PR program. Advertising agencies don't do it and they've got a lot of measurement." These days this may be more perception than fact, and one that a lot of agencies and in-house communications shops are trying to change. Ketchum, for one, operates what it calls its ROI Lab, which measures clients' profits from spending on PR by using four tools of varying degrees of complexity. The lab is so-named to demonstrate the experimental and evolutionary nature of this kind of analysis. Its creation was driven by client demand. "There's a lot of talk about ROI, but we don't see a lot of people doing it," says David Rockland, SVP and global director of research for Ketchum. "As we've shown these tools to clients, there seems to be good receptivity that this stuff would work." This lab came out of industry and even academic inaction on the ROI front. "PR does not have a track record of doing ROI programs," Rockland says. "Even in the academic literature, everyone was talking about the need to measure, but nobody was doing it - until recently." This change in climate comes not just from an economic reality where every dollar spent must be justified, but also from organizations' willingness to free up data and the development of technology to evaluate it. Collaboration is the key To Weiner, the issue of measurement now comes down more to a matter of effort and a spirit of cooperation than ability. "It's getting different people within an organization to collaborate," he says. "It's an issue of willingness." So far Ketchum has enjoyed at least one big return on its ROI Lab. The agency won a "very large piece of business" because of the impression the lab made on a marketing executive during a pitch, according to Rockland, who declined to give specifics of the account. "This was the first time we used ROI Lab as an integral part of what we're pitching," he says. "I believe it made a difference in part because the people we're dealing with are very quantitative. They're taking a very large risk with a CSR program and want to have some sense of what they're going to get on the back end." Another agency, GCI Group, has a similar focus, making it a measurement goal, but not giving up on measurement if ROI can't be determined, which is sometimes the case. The agency is also emphasizing up-front strategic thinking along business as well as communication lines as a way to establish goals for measurement before a program is even underway. "Measuring ROI represents the best possible scenario because it gains us a direct understanding of the value based on the money spent," says Debjani Deb, director of strategic planning for GCI Group. "Having said that, not every project lends itself to getting to a final ROI." These kinds of projects can include situations where PR isn't the only influence on business outcomes because, for instance, of the presence of other marketing efforts. This makes isolating the effects of PR nearly impossible. In these cases, Deb recommends finding, with the client's input, "incremental goals PR itself might achieve, which might not be ROI, but somewhere between ROI and not measuring anything." This might show the value of a marketing mix by demonstrating how the overall effort affects sales, even though it won't tease out PR. For clients, this is often good enough. "Clients appreciate if you start the conversation on quantification because it's something they think about and need to justify to their higher-ups," Deb says. "Clients recognize how difficult it can be to get to ROI in certain circumstances." It becomes quite clear very quickly in talking with Deb and others that measuring something - a baseline commitment to evaluating PR efforts - is now vital. Measurement is an issue that is broached very early on, in RFPs and in pitches, and can be a selling point for an agency. "There are a lot of people out there who say that PR does not lend itself to a business review or a business climate, and we disagree fundamentally," Rockland says. "We feel PR is a real part of a business and it must be measured like it's part of a business. It's not all about fluff." He adds, "There will always be a place for doing fun, exciting events with pretty people doing pretty things in some funny way to get you on the Today show, but I think as the economy has worsened and as PR has evolved as a field it has become more sophisticated by necessity."

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