There are several schools of thought surrounding payment by results (PBR). Many feel that the idea of quantifying something that by definition is not entirely measurable and then paying on that basis is unjust.
The arguement goes: how can you pay for something that cannot be measured? The other school says: yes it can be measured, but there is no reliable consistent standard that the industry is agreed upon. As a result only a minority express enthusiasm for the concept and currently work on a PBR basis.
The primary driver of PBR lies, not surprisingly, with the client, as it is the client who wants results, and if it pays on that basis, so much the better. Guaranteeing a return on investment is the Holy Grail.
Part of the problem for the PR industry is agreeing an answer to the fundamental question: what is a result? The answer hinges on the client/agency relationship and what both parties have agreed constitutes a result. Logically, this must be established at the planning stage, or even earlier. So a result can be anything from the weight of coverage resulting from a media relations campaign (although AVEs are discredited) to measuring the change a campaign has created in public perception.
The Institute of Public Relations recently conducted a survey on attitudes to PBR that contained some illuminating data. Its key findings were that only two per cent of agencies currently use PBR, while 77 per cent use flat fees and retainers. Fifteen per cent use a mix. A third said it was a joint client/consultant decision to introduce PBR, while 32 per cent said their clients had suggested it. Unsurprisingly, only 27 per cent of agencies suggested it. But PBR is on the increase, according to 52 per cent of respondents in the survey. A further 21 per cent of respondents say the introduction of PBR is being considered, while 78 per cent said it is not under consideration.
That the vast majority of respondents said that PBR is not under consideration does not bode well for those in favour. Especially galling given that respondents said that the introduction of PBR tends to have a positive impact on the client/agency relationship on areas such as evaluation, accountability, motivation and planning. But few thought it impacted positively on areas such as creativity, budgeting, professionalism, trust, partnership, profitability, and resource allocation.
Sara Pearson, founder of PR agency The SPA Way, says that her agency is paid on the basis of the coverage it achieves. This is agreed at the planning stage of negotiations and if targets are not reached within a specifically designated time period then the agency is given another two months to complete the programme. If at the end of this period the target still has not been reached then the client is reimbursed according to the shortfall.
At the first stage of working with a client it is agreed how many pieces of coverage will be generated in key media and that a minimum of two or three key messages appear in that coverage. 'The client knows what they are getting, I know what I am selling and the team knows what it is delivering,' Pearson says.
Egg director of corporate communications Emma Byrne says that the internet banking firm incentivises its agencies. 'At Egg, PBR is built into the evaluation of all our PR campaigns when we use agency support. This is not on an all-or-nothing basis: usually, the PR strategy has been set by us and the agency has to help with the execution - putting an element of the fee subject to performance and results criteria usually ensures that energy and input levels from the agency remain high - from start to finish,' she says.
Given the current economic environment, clients have tightened their purse strings and this inevitably means an impact on measurement spend. Catherine Hastings, a consultant at Strategic Communications, highlights this point: 'In a recession, companies are even more wary about spending money on measurement. While it's true they would love more ammunition on how well the communications is performing, most are unwilling to spend money on this - particularly since they're sceptical about the measures currently being used.'
A question that many feel is pertinent is whether there should be an industry-wide PBR standard. Mark Westaby, chairman of the Association of Measurement and Evaluation Companies and joint MD of evaluation consultancy Metrica says: 'There is no way that the industry can have a standard. Campaigns are so complex that it's impossible to do. If it ended up with a standard then it would be worse because companies would be forming a situation to suit the standard. You can't shoe-horn results - a standard oversimplifies the problem.'
He suggests the industry should be focusing its efforts on education so that PR people understand the complexities and issues in planning and measurement.
Managing director of specialist PR measurement company i to i Research Claire Spencer agrees. Her background is in advertising, an industry long known for its advocacy of PBR. She says that the ad industry drove to adopt PBR about 15 years ago: 'Their interest in creativity was more about winning awards than reaping results for the advertisers. PBR consolidated the need for rigorous pre-testing and meant that planning and measurement became more important.'
Spencer adds: 'I think the prospect of PBR in the PR industry might have the same effect. It will impose a discipline whereby consultancies can't afford to throw a few press releases out there to see what sticks. They are going to need to craft their messages more carefully to ensure they will make it through the filter that is the media, and meet the acid test of how the target is likely to receive, understand and take out the messages. This points to the need for research at the planning stage. They are then going to need good measurement systems to prove their results.'
On the question: is the PR industry ready for PBR, understandably the industry is divided. One of those who thinks it is is Emma Byrne: 'Very often it comes down to one's definition of results. There are many sophisticated packages available these days - usually fantastically expensive - but quite often, particularly in awareness-raising mass consumer campaigns, the taxi driver test can be equally pertinent and reliable.'
Byrne adds: 'I've had a few raised eyebrows when explaining to an agency that a proportion of its fee is going to be success-related - but most agencies welcome this once they realise that they play a part in deciding upfront what the success criteria will be.
'It's important to keep the agency team interested in a project right until the end - when they know that there is a percentage of the fee at stake and performance bonus criteria, it's amazing how much more focused they can be.
'I've not yet had to ask an agency to forfeit part of the fee - but this is probably because there is a balance between quality and quantity (ie.results) in our evaluation criteria.'
IPR Professional Practices Committee chairman Chris Genasi finds himself in general agreement with Byrne: 'Anti-PBR sentiment propagates the dumbed-down "PR can't be measured" myth and helps justify vacuous incentive schemes based on meaningless coverage and dull releases (to hit quotas and not business targets). Too often quantity is emphasised at the expense of quality.
'Effective PR requires creativity, chemistry and clarity about objectives. The key is setting PR deliverables that complement the business plan. Not only does this improve PR output, by focusing activity on areas that matter, it helps build partnership in the relationship, demonstrates value for money and increases transparency and accountability.
'Payment by results can serve as an agent of change provided: PR objectives agreed are integral to business objectives; PR objectives are realistic and, where possible, quantified; an adequate budget is allocated and controlled; and PR evaluation is a pre-requisite - a message consistent with the IPR's Toolkit and PRE-fix work,' he adds.
There are equally those who see value in PBR, but argue the industry is ill-prepared to move in that direction. Westaby is one of them: 'PBR makes a huge amount of sense because it rewards good PR practice and encourages measurable results.
'The real issue, however, is not about PBR per se but about how programmes are planned and their results measured, for which both clients and their agencies must take more responsibility.
'The problem is that the vast majority of in-house PR departments and their agencies do not properly understand measurement or planning. As a result, attempts at PBR are frequently doomed to failure because the criteria for measurement are often misunderstood, poorly planned or even unrealistic,' he says.
'Ultimately, this problem can only be addressed by dramatically raising the understanding of PR planning and measurement, which are far more complex than the PR industry seems prepared to accept. PBR could have a great future, but only if the PR industry recognises this fact and is prepared to do something about it.'
Mantra DATOPS managing director Saul Haydon Rowe believes it is more feasible to break down adviser's fees into two parts: 'A basic PBR element to ensure sensible minimum media performance - paid only if certain quantitative metrics are delivered.
'And a creative element, much more difficult to measure, but vitally important for the long-term brand equity, which should be paid as a retainer,' he adds.
Hastings says: 'Try looking up "measurement" in any textbook on marketing or communications. There is only about one in ten that even mention the word. It's an aspect of the industry that is still in its infancy.'
Haydon Rowe sums up: 'If the oft-repeated assertion is true, that PR is "better value" than advertising, then surely corporate marcoms directors should be beating agencies' doors down in this period of budgetary stress.'
The first obstacle to widespread introduction of PBR remains the lack of measurement tools. The PBR debate is taking place in a vacuum while the PR industry remains divided or equivocal over the issue of measuring its effectiveness.
Until clients feel their agencies are accountable for their fees and agencies are convinced that a benchmarked, reliable standard is in place, PBR will remain a minor trend. But arguments for greater accountability are still on the agenda for both sides of the debate.