THINK PIECE: Basing a PR agency’s fee on sales won’t save a client money - it’s an attempt to focus on goals

Despite a lot of talk about ’performance billing,’ it appears unlikely that PR firms will enter into agreements under which their fees are based on clients’ product sales.

Despite a lot of talk about ’performance billing,’ it appears unlikely that PR firms will enter into agreements under which their fees are based on clients’ product sales.

Despite a lot of talk about ’performance billing,’ it appears

unlikely that PR firms will enter into agreements under which their fees

are based on clients’ product sales.



Procter & Gamble announced last September that it was going to require

all its advertising agencies worldwide to accept compensation based on

product sales. It was suggested that PR would be wrapped into this

scheme somehow.



The announcement earned headlines in the business press, unleashed a

chorus of praise by ad-agency executives and inspired a conference on

’alternative’ fee systems for PR firms.



Incidentally, our firm has drafted numerous contracts under which fees

were based on publicity secured. This can be called ’performance

billing,’ but should not be confused with compensation based on client

sales.



In fact, neither the conference nor a series of interviews with P&G and

past and present PR firm principals has identified any large firm that

has considered basing its compensation on a client’s revenue. The

problem is not that PR firms are unwilling to enter into such deals, but

that clients are not really prepared to do so. They may be thrilled by

the idea initially, but their enthusiasm fades when they contemplate the

difficulties.



Here are a few examples of the problems: is a sale counted when the

product is shipped to a wholesaler, when a consumer pays for it or when

its guarantee expires? Over what time period will sales be credited to

the PR firm? What if the manufacturer is unable to produce enough goods

to satisfy seasonal demand? And with integrated marketing does the PR

firm gain authority over advertising, direct mail and other marketing

techniques?



The reason for client interest in PR-fee gimmicks often is not a desire

to save money, since PR fees usually are a tiny part of the client’s

costs.



Rather, the PR firm has failed to tie its PR program explicitly to the

client’s substantive goal, and the client is looking for a way to focus

the agency’s attention on that.



The problem is that PR pros often assume they understand the goal of the

client when they do not, and then become overly focused on the

communications process. The client, on the other hand, usually is

focused on the substantive goal and has only mild interest in the

process. PR people must learn to stop talking about their communications

expertise and dwell on the client’s concerns.



Especially when there is no PR person on the client side, constant

detailed repetition and restatement of the client’s substantive goal is

essential, however boring or even childish this may seem.





Lee Levitt is a management consultant to PR firms.



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