In an era of economic uncertainty and shrinking budgets, public relations (PR) companies and PR departments within the company must demonstrate the worth of investment in PR. The method by which PR effectiveness is assessed in a retainer arrangement is unclear at its very best. It could be ineffective or erroneous and doesn’t make the agency accountable. The traditional model of public relations based on retainers is being questioned increasingly. It often leads to untruthfulness, unethical conduct, and even over-charges. What’s the cause of this?
Two recent instances demonstrate the issues inherent in the retainer model. The city of Los Angeles and the White House both complained about billing issues with their PR agencies. These cases show what can happen due to insufficient tracking and the inability to present documents supporting billing claims. Why do we behave this way?
The role of public relations has evolved over time from being an optional element of marketing to become a essential component of many companies’ communication programs. The payment model is changing to keep up with changing market expectations that give the companies a chance to use an agency and a reasonable enterprise model. This is evident in the performance-based model, which is prevalent in other fields of business. Consumers pay by the hour for computer time they use, online office spaces are currently accessible through a pay-per-use model, and most of the payment is based upon the performance of their employees. Therefore, why not apply this model in the field of public relations?
Accountability is the most pressing problem facing the field of public relations. The measurement of the value of PR has never been more vital. For public relations departments, demonstrating the value of their PR investments may be the key to obtaining the budget approved or rejected. For agencies, the capacity to keep, attract and increase the number of clients they serve could depend on their ability to demonstrate that their efforts are worth it. There is a chance and a challenge to develop beyond the traditional retainer-based model to new models that provide accountability and outcomes.
Who Pays For Non-Performance?
Traditional public relations firms have always relied on a leap of faith at some point during their work to prove the effectiveness of their work. With the retainer model, the agency receives payment regardless of whether or not. This arrangement makes the client company the primarily liable party in case of not performing. Additionally, the system is prone to errors, inconsistent practices, and the urge to squander an account for every hour that is billable. For instance, some agencies will charge you a whole hour for just 15 hours of labor, comparable to mobile phone companies that charge a customer one minute for a call lasting 15 seconds. Furthermore, management typically pressures the agency’s staff members to ensure an extremely high amount of billable hours. This practice can open to the risk of error, fraud, and over-billing.
Case in Point
In the beginning, when CenterStone Technologies, a Denver software company base in Denver, was looking to launch its latest software for managing sales orders, it knew precisely what it need from a public relations firm that could provide national exposure to trade media. The PR agencies offered monthly retainer charges that could be as high as $10,000 for a wide array of services. None can guarantee any outcomes. This is when Peter O’Neil, executive vice director of sales and marketing, discovered Matrix Marketing Group. “Matrix Marketing Group’s Pay-for-Performance program is a great tool for us. Their unbundled services offer us more flexibility and provide us the highly qualified expertise we are looking for, said O’Neil. Plus, we are a results-oriented company, and with this program, we only pay when Matrix Marketing Group delivers results.”
Is There Another Way?
Buyers are looking to purchase only what they need and want and only. It’s a “have it your way” society. Google and Yahoo’s Overture have changed their Internet advertising model by introducing unbundled, results-based pricing. It’s now moving into the realm of PR. Pay-for-performance programs for public relations give companies a more effective method to quantify and prove the impact of their PR investments since they pay only for outcomes.
The pay-for-performance model is worthy of carefully examining. Pay-for-performance models and retainer-based models fall at the opposite end of the range. Although there is a place for the hybrid model, which offers both performance-base and fixe-fee fees, PR professionals who aren’t confident in the idea of the performance-based model must become at least a little more comfortable.
George Schildge is the president and the CEO of Matrix Marketing Group Inc. Matrix Marketing Group is a full-service public relations and marketing company that assists small and medium-size businesses with branding, marketing, and strategies for growth.