Is Your PR Program Worth the Cost?
How to set specific goals for your PR
campaign and calculate your precise ROI
By Al Lautenslager
Q: How can I justify the cost of a PR program, and how
do I know what the ROI is?
A: One of guerrilla marketing guru Jay Conrad Levinson's
credos is, "Don't purchase advertising unless it's
part of a total program or campaign." In this case,
advertising is not synonymous with marketing. In today's
world, advertising is just one element of the marketing
formula. In fact, there is a shift occurring away from
advertising to other marketing that's less costly and
more cost-effective and efficient.
This is especially true at the beginning of a company's
marketing efforts or the beginning of a particular service
or product campaign. One trend is toward more PR. In all
your marketing efforts, your goal is to gain that top-of-mind
awareness position with your prospect/customer. PR can
do this. Advertising can do this once awareness is attained.
PR gets you there; advertising keeps you there.
Without that share of mind, your chance for a sale decreases.
This is especially true when advertising claims are doubted
or when consumers and prospects are inundated with so
much advertising that a good portion is rejected.
Knowing the return of PR truly justifies it as an integral
part of the marketing arsenal. Measuring the effectiveness
of a PR program is something that should begin at the
same time the PR idea is originated.
Measuring PR can be vague; however, the more specific
the objective, the better the measurement. Most entrepreneurs
try to measure PR based on objectives that are not measurable.
Here are some examples of objectives not easily measured:
- Attain top-of-mind awareness by the end of the year
for your brand.
- Introduce your new service with a bang.
- Make your company more visible.
- Increase word-of-mouth referrals.
These are good objectives, but how will you know when
you attain them? That is one of the objectives of good
measurement. Here are some examples of better objectives
to improve the measurement:
- Get three mentions in business magazines.
- Mail your book to 35 book reviewers and get three
favorable reviews published in their publications.
- Ask all new customers how they heard about you,
with a goal of having 40 of them hear about you as
a result of published articles or announcements in
trade publications.
As you can see, one set of objectives is much more
specific than the other and therefore much more measurable.
The key is to get specific in your planning and execution.
The result is specific criteria on which to measure
the PR effort. Once this is done, it's easy to evaluate
where to spend budget dollars. It's very similar to
evaluating the overall marketing plan: List all the
weapons used; evaluate their effectiveness by A, B or
C, with A being superior and C being poor; throw out
the C weapons in the next planning year and repeat the
A and B weapons in order of effectiveness. The key is
making sure each goal is, in fact, attainable. In other
words, you probably won't set the goal of making repeat
appearances on "Oprah."
How to Calculate Your ROI
To calculate the ROI on your publicity program, you'll
need to make certain assumptions. Here are some examples
and the ensuing ROI calculations. Remember the specific
goals.
1. There is a group of potential customers that,
given the right motivation, will be prompted to contact
your company in some way.
2. Every 10 inquiries received results in two
new customers (a 20 percent close rate).
3. The average customer order is US$2,000 (order
$).
4. The average customer orders four times per
year (# orders/year).
5. The average gross profit (GP) on an order
is 30 percent.
6. The cost of a professionally implemented publicity
program is US$24,000.
How many inquiries do I need to generate to break
even (ROI = 0%) based on the above assumptions?
No. of inquiries to break even = program cost/(close
rate) x (order $) x (# orders/year) x (GP)
No. of inquiries = US$24,000/(.20) x ($2,000) x (4)
x (.30) = 50
How many inquiries would it take to achieve an ROI
of 50 percent?
No. of inquiries for 50 percent ROI is 75. (Because
it took 50 inquiries to generate the US$25,000 to break
even, another 25 inquiries would generate an additional
US$12,500 in profits for an ROI of 50 percent.)
What is the lifetime value of a new customer? Of an
inquiry?
Assuming the customer will be with you for two years:
Lifetime value of customer: (order$) x (# orders/year)
x (GP) x (2 years) = ($2,000) x (4) x (.30) x (2) =
US$4,800
Lifetime value of inquiry: (lifetime value of customer)(close
rate) = ($4,800) x (.20) = US$960
Is it possible to generate 50 to 75 inquiries per year
with an effective publicity program, to generate the
numbers above? History has proved that the ability of
publicity to draw inquiries has a high degree of probability
compared to other methods of advertising and promotion.
Keep in mind that the above assumptions are only examples.
Plug in your own numbers and see what might be possible
for your business.
Alfred J. Lautenslager is an award-winning marketing
and PR consultant, direct-mail promotion specialist,
principal of marketing consulting firm Marketing Now,
and president and owner of The Ink Well, a commercial
printing and mailing company in Wheaton, Illinois. Visit
his web sites at www.market-for-profits.com
and www.1-800-inkwell.com,
or e-mail him at al@market-for-profits.com.
This article originally appeared in www.entrepreneur.com,
February 17, 2003.
Discuss this topic with other IABC members at: www.iabc.com/memberspeak.
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