CIPR Ethics Measurement and Evaluation PRCA public relations 12

The PR measurement myth of ROI

By Stuart BrucePosted on
Time to Read:-words

 

Avoid fake ROI to measure PR

Yet another interesting question from a potential client wanting help to measure the ROI of public relations.

It’s the wrong question as nearly everyone I’ve seen who claims to be able to measure the ROI of public relations activity is either confused about what it is they are doing so accidentally misleading people, or what’s worse trying to obscure the truth and deliberately misleading people. Usually it’s the former.

ROI stands for Return on Investment. Nothing else. And it’s a fixed formula:

return on investment = (gain from investment – cost of investment) / cost of investment

It can be relatively easy to calculate the ‘cost of investment’, although you often see basic mistakes such as not including all of the costs of overheads such as offices, staffing etc. Therefore the ROI figure is nearly always artificially inflated.

It is almost impossible to calculate the genuine ‘gain from investment’ as despite improvements in attribution analysis it is still almost impossible to track the individual contribution made by a myriad of different tactics and external factors.

That’s why I counsel PR professionals to never fall into the trap of trying to justify ROI.

It is unethical for PR professionals to attempt to present their results as ROI if that’s not actually what the numbers really represent. You would potentially be guilty of breaching the professional codes of conduct of the Chartered Institute of Public Relations, the Public Relations Consultants Association and the codes of most professional PR bodies and trade associations around the world.

It is better to focus on numbers that are robust and honest. There are lots of financial numbers you can report on that aren’t ROI. For example you replace one tactic with another lower cost one that generates the same or better results and measure the financial saving. You can calculate the cost per acquisition or cost per lead.

The three main reasons for this mistaken faith in ROI are:

  • Bosses or clients who don’t understand PR ask for it because they think they need to know it. They don’t need to know it and the best response is to help them understand what more meaningful business metrics they need to be examining. That means you’ve got to understand and use those metrics yourself.
  • PR people who want to impress bosses or clients and think by talking about how they can evidence the ROI of their work they will impress them. This rarely works as most CEOs and CFOs actually know what ROI really means and will just dismiss you as a fluffy PR person if you pretend another number is actually ROI.
  • The biggest reason in my experience is those PR people who genuinely don’t know what ROI is and aren’t trying to deliberately mislead, but just trying to improve how they measure and evaluate their work in order to get away from the weak metrics of the past.

So the next time you’re tempted to dabble with the dark side of ROI I’d urge you to instead find some real metrics that matter and to make sure any financial ones you use are presented as what they actually are rather than masquerading as ROI.

And for the last word on ROI I’ll leave you with this epic ROI rant from David Meerman Scott, author of the New Rules of PR and Marketing.

You might also want to read ‘How to measure PR’ on why you shouldn’t search for a silver bullet.

If you want help with improving how you measure and evaluate your PR then please get in touch.

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12 Replies to “The PR measurement myth of ROI”

  1. As a follow-up then Stuart, what would you say are the “real metrics that matter”?

  2. Craig this is one of those “it depends” questions. The “real metrics that matter” are going to vary depending on the specific circumstances of the organisation, its environment, its objectives etc. That’s deliberately why I didn’t specify them as they are likely to be unique which is what I wrote about last year in a post about searching for the silver bullet of PR measurement. Quick answer there isn’t one, there never will be one and there shouldn’t be one.

  3. If ROIs are unique –to what? each company, each campaign?– then can they be meaningfully compared? More important for corporate leadership, can they be compared with the ROIs on other uses of company resources? To say that each PR ROI is unique comes close to saying there is no value in trying to measure ROIs. That’s a legitimate point of view –not everything that counts is banally countable– and worthy of discussion. But best not to say that ROI can be calculated if in fact it can’t in any meaningful, comparative way that supports decision-making.

  4. Nigel, I’m not entirely clear what you’re asking. My point is that real ROI can NOT be calculated. There are lots of other things you can measure that provide real organisational and business benefits, instead of just counting vanity metrics. However, these lots of other things are want tend to be unique as if your objectives could be as varied as improving hygiene in a food factory, securing planning permission for a housing estate or blocking legislation that would make it harder to recruit highly skilled immigrants. You can measure outtakes and outcomes for all of these, but they’d be very different ones. My second point would be that corporate leaders never calculate the ROI of everything a company does is a comparison between use of company resources in this way is never going to be possible. That’s what the ‘rant’ I linked to is about.

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