The Dollars and Sense of PR

One of the questions we often hear from clients is this: What is the ROI of PR?

Beginning this month, we’re answering the question. In a series of blogs and infographics we’ll be examining the benefits and value of branding, messaging, media relations, content, influencer marketing, social media and more. We hope you like it, and that if you have questions, you’ll call us to ask for answers.

What is the ROI of PR? Let’s start with brand development.

Public Relations is a marketing discipline that helps to build a brand’s reputation and strengthen credibility for a company, product, service or personality:

  • Uses streamlined, succinct messaging that captures the essence of a company;
  • Establishes and enhances relationships with customers;
  • Handles problems, through crisis communications, when issues arise;
  • Increases the valuation for a company.

It’s that last point that usually catches people’s attention. How does PR increase the valuation of a company?

Consider the following formula:

  • PR = Brand building + Positive perception
  • Positive perception = Consumer trust + Competitive advantage

In other words, public relations uses the power of positive perception to build brand, and brand creates a reputation for a company and its services or products to all its audiences. By investing in consistent reputation management, an organization is rewarded with client or consumer trust in the brand, and therefore, competitive advantage. This competitive advantage leads to a reduction in overall marketing costs, sales growth and higher profits.

PR builds brand through editorial coverage, definitely, and also through development of solid positioning and messaging and distributed content, such as press releases, case studies, articles, advertorials, lead generation campaigns, influencer campaigns and social media posts – all of which build trusted backlinks to a website, the number one factor in increasing domain authority and SEO. Beyond bringing new prospects to a website, thought leader pieces build customer confidence and loyalty, and ultimately, sales.

Once a company has built a good brand reputation, PR has the important job of keeping it positive, because that will help the company to reduce challenges and resistance to change, and will make it easier to introduce new products – hence building additional revenue streams. It also helps them to weather any storms that may occur when a bad decision impacts the company negatively. Loyal customers are willing to give the company a second chance. Look at how well Apple outlived the debacle of the Newton (its first tablet) or the iPhone 4’s antenna issues. You don’t even remember those, do you? The brand wasn’t impacted, nor, ultimately, were sales, because loyal customers assumed that Apple would fix its issues.

Interestingly, a good brand also helps to promote a whole category. Think about this – how many people drank bottled water in the US before Perrier and Evian introduced it here? Not many! But today, do you know anyone who doesn’t drink bottled water? Look at how many different types and brands of bottled water there are! And ALL of those companies are making money. Plus, we all believe that this bottled water is better for us than the water that comes out of the tap, don’t we? Good PR messaging made water a consumer beverage to rival soda, again showing how well PR influences buying behavior.

PR creates expectation and defines the relationship between a company and its customers, again building customer loyalty and higher pricing potential. It promotes the concept of being a leader or innovator in a market. Who does not want to work with the best? 7 in 10 executives reported being more inclined to do business with organizations that are thought leaders, according to The Economist Group. And that loyalty has the added benefit of reducing marketing costs over the long term because loyal customers come back.

Perhaps equally important, employees like to work for a company with a good brand reputation. Happier employees contribute to internal cohesiveness, reduced recruitment costs, and greater innovation – which leads to sustainability – and higher valuation.

And so, the final part of our equation is this:

  • Competitive advantage + Cohesive employees = Greater growth
  • Greater growth + Reduced costs = Higher valuation

Ultimately, the advantages of a positive company brand garnered by good PR lead to increased valuation for a company in multiple ways, resulting in an easier path to fundraising, acquisition or IPO. So next time someone asks, what is the ROI of PR anyway? You’ll know to tell them – it’s the best way to grow a company’s reputation and keep it in the black!

Come back soon for more in our ROI series. Next up: What’s the ROI of Content?

Here’s how an investment in brand perception pays off:

  • Perceived product value = higher pricing potential
  • Higher pricing = Increased margins, more profits
  • Customer preference = competitive advantage, more business
  • Customer loyalty = reduced marketing costs, patience for problems to be fixed
  • Internal cohesiveness = employee loyalty, lower recruitment costs
  • Company credibility = easier path to product/program/location extensions, more revenue streams, negotiating power
  • Perceived company value = higher valuation, easier path to fundraising, acquisition or IPO