News from EUPRERA
ROI and PR evaluation - 16.07.2012
Avoiding smoke and mirrors, by Tom Watson
Measurement and evaluation of communications is an enduring discussion in public relations research and practice. Recently, there has been a move to adopt business and management concepts and language in order to demonstrate the outcomes of PR activity and to demonstrate the creation of value to organizations, brands and reputation.
At the recent International Public Relations Research Conference in Miami (March 8-10, 2012), a special hour-long session was devoted to discussion of the concept and relevance of Return on Investment (ROI) in public relations. This short report summarizes the main points made and debated with an audience of 50 academics and research-minded practitioners from around the world. Accompanying the report is a PowerPoint of one of the presentations.
In 2011, Prof. Tom Watson (Bournemouth University) and Prof. Ansgar Zerfass (Leipzig University) undertook a Europe-wide study of the understanding of the ROI concept and its usage by practitioners. The results of a sample of more than 2000 responses showed there were wide national variations but generally, practitioners took a very loose view of ROI’s application which was very different to business definition of the term as a ratio of monetary value created, divided by the costs incurred and multiplied by 100. Their conclusion was that ROI was an inappropriate term for public relations measurement and evaluation. This conclusion was supported by the eminent PR theorist Prof. James E. Grunig who wrote that he would “cease and desist” from using ROI in the public relations context.
The case made by Profs Watson and Zerfass in Miami was that ROI was being misused and was a misunderstanding of a specific financial management term. In most cases, intangible results such as development of reputation and attitudinal change did not lead to financial outcomes. This was especially relevant in governmental and non-profit organizational communication. Also, the calculation of ROI in public relations usually included campaign but not staff, agency and infrastructure costs, as would be normal in accountancy usage of ROI.
The other main speaker was Mark Weiner, CEO of PRIME Research – Americas, who represented the emerging application of market mix models to track the contribution of PR activity in support of marketing-oriented media relations campaigns. These, he argued, deliver to marketing investment decision-makers a strong if not perfect indication of PR’s impact on the creation of sales revenue and, thus, financial results.
However, he did agree that there was no general consensus among public relations practitioners in defining ROI, which handicaps the profession’s desire to develop a meaningful, reasonable and quantifiable public relations measurement and evaluation methodology. Mark stated that PR practitioners create confusion when communicating PR performance by blurring the distinction between quantifiable ROI and the subjective demonstration of value creation by public relations activity: “While communicating performance is one of PR’s most vexing problems” Mark offered, “the value of public relations is not interchangeable with generating PR ROI”. He further commented that quantifiable PR-ROI planning and evaluation rarely appear, even in PR award entries, which are supposed to be “the best of the best”.
The discussion, not surprisingly for such a knowledgeable group, covered a variety of views about ROI. Some rejected its use while others voiced support but generally, no general consensus was reached on:
- the definition of PR ROI,
- whether ROI is appropriate or even necessary for public relations measurement and
- that efforts to create a “PR ROI” might be confusing to senior management as it varies so much from the ROI calculation used in generally accepted accounting principles.
In supporting the case for more concise and more accessible business measures for public relations, two routes for development were offered:
- the first was that the PR sector could, as has happened in Germany, develop a set of measures in conjunction with accountancy and audit professional bodies;
- the second was that measures such as Benefit-Cost Ratio (BCR) and Cost-Effectiveness Analysis (CEA), which have been put forward by the Canadian public relations commentator Fraser Likely, could be investigated for use as valid planning and monitoring methods.
More details and the full power point presentation are available on the Institute for PR website