The ROI Conundrum

A future path for PR measurement was charted on June 9 when nearly 200 delegates at the AMEC and IPR Measurement Summit in Lisbon, Portugal voted on the 2020 Measurement Agenda.

A future path for PR measurement was charted on June 9 when nearly 200 delegates at the AMEC and IPR Measurement Summit in Lisbon, Portugal voted on the 2020 Measurement Agenda.

One of the top priorities that emerged was the question of how to measure the return on investment (ROI) of PR. The conundrum that we face as an industry is that PR's achievements for an organization or business are often intangible, or have a long-term effect, which cannot necessarily be captured or immediately defined in monetary terms. Yet ROI, as defined by financial textbooks, is the calculation of the net gain from an investment (i.e. the total gain minus the cost), divided by the cost of the investment. In other words, to calculate ROI, you need to be able to demonstrate "money in, money out."

The view taken by the Council of PR Firms ROI task force is that the calculation of any PR ‘ROI' has to fit within the standard accounting formula. However, the group also defines the total value of PR as being much greater than just financial ROI. The total value includes the tangible plus the intangible benefits, and the near-term plus the lasting benefits of PR activities. Clearly, not all these benefits can be captured in a simple formula.

Pegging ROI solely to financial results has been criticized by some as ignoring the vital role that PR plays in building relationships with key stakeholders. It's true that ultimately stronger relationships or engagement with customers/employees/local communities/regulators will lead to a stronger business by providing increased revenues, or decreased costs, or a license to operate, or all three. But, if that value cannot be captured in the financial terms that the rest of the business community uses to calculate ROI, then we simply shouldn't call it ROI. Other metrics demonstrating PR's contribution to value creation should indeed be measured; but they should be captured under a different term, such as the "total value of PR" or the "impact of PR." It may seem like semantics or splitting hairs, but if we don't use the right terminology, we erode our credibility with other functions within the organization.

The underlying question in this debate, however, is should we even try to provide inputs for an ROI formula if the formula does not adequately capture the full value of PR's contribution? I would argue that we should, wherever possible, because although we understand that there is so much more to PR than financial results, demonstrating ROI can be useful for making the case to the C-Suite for greater PR investment. We can also strengthen this case with other metrics to show the outcomes achieved against the objectives of the program in a balanced scorecard approach. While the term ROI should only be applied to a financial assessment of ROI, that does not mean we cannot demonstrate the impact of PR in other ways as well.

Ruth Pestana is worldwide director of strategic services at Hill & Knowlton.

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