The Wages of Spin

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The Economist Online has an article talking about the rise of PR agencies Do we have a story for you! (January 19, 2005). The centrepiece of the article is an internal analysis conducted by Procter and Gamble that provided an indicator of how much marketing value PR provides in comparison to other disciplines. I first heard about this from Richard Edelman’s blog in December (you can see the blog posting here).

The Hype
In a recent internal study, P&G concluded that the return was often better from a PR campaign than from traditional forms of advertising, according to Hans Bender, the firm’s manager of external relations. One reason is that in comparison with many other types of marketing, PR is cheap. In P&G’s case, it can represent as little as 1% of a brand’s marketing budget. That proportion could now rise, says Mr Bender, although he hastens to add that other forms of advertising and marketing would remain important for the company.

P&G drew the most interest in PR circles with these claims because having an effective apples for pears measurement tool-box is something that the industry has striven for over the past decade with only a modicum of success. This study looked at the launch of six different products, the return was better in four cases. There is a lot of qualifying statements in the article quote.

In addition critics such as Tom Formeski argue (try here and the comments here) that the return on investment for smaller brands is not so impressive. And to build a big brand, a healthy dose of conventional marketing communications helps enormously.

Don’t drink the Kool-Aid

Dorothy Crenshaw, president of Stanton Crenshaw, an independent PR firm based in New York, says that many of her colleagues are suffering from ‘consultant envy’,but that PR remains a very inexact science. There are also limits to the miracles it can be expected to achieve. She claims to have turned down a $1m commission from a client desperate to boost his business-to-business website in the midst of the dotcom boom because he had nothing much to tell the world. Sometimes a PR firm can indeed shape or create a buzz about a product, but not always. For PR to work, she says, “you have to have a legitimate story.”
Interesting numbers
  • Spending on PR in America reached some $3.7 billion in 2005 (source: Veronis Suhler Stevenson)
  • Forecast growth in PR spend 9% a year (source: Veronis Suhler Stevenson)
  • Forcecast for the overall US market for advertising and marketing, now worth a colossal $475 billion and growing at 6.7% a year

This growth rate is still below the magic 10 per cent that venture capitalists would look for in a business.

The UK
  • The PR industry there employs 48,000 people (source: Centre for Economics and Business Research)
  • 80% were working ‘in-house’, for companies or other organisations
  • Just over half of Britain’s in-house PRs work for the public sector, health organisations and charities.
  • These organisations are also the biggest users of PR consultancies

On traditional PR

“Companies can try to serve up a tight, straight message through the media by issuing a one-way press release, but that’s as flawed right now as a 15 or 30-second TV ad,” says Pam Talbot, Edelman’s chief in America.

Which is why agencies and inhouse PR staff are looking to expand into website design and participation media including blogging, leaving comments on other people’s blogs, pod casts etc. In the longer-term this subversion of participation media may kill the goose that is laying the golden eggs in the same way that the advertising industry is now struggling to get cut through.

Media covering the following sectors are most dependent on PR
  • Electronics
  • Fashion
  • Travel
  • Beauty
  • Food
  • Celebrity / entertainment
The article didn’t cover issues like the power of direct communication with consumers through search engine advertising (while this won’t build your brand, it is extremely measurable). Increasingly I am asked not how would my programmes deliver against TV or print advertising but against search engine marketing. 

Also the power of search engines as the measure of reputation was not covered (it doesn’t matter if you have a great CSR programme in place and your CEO had a profile piece in the FT if the first ten hits on Google say that your company blows). 

PR is a useful part of the marketing communications mix and can help you reach your audience through a multi-channel approach, however it is not a silver bullet to broader business issues like a product or service that is a dog or to build a brand on a shoe-string. 

Kudos to Steve Rubel of the Micropersuasion blog.