How much should you spend on PR?

I was asked by someone this week how much they should spend on PR in the US for 2011 (yes it’s that time of year again).  They’re a small business with a small budget and they feel they’ve not been getting the results they want.  My answer was that they were spending too little with the wrong agency.  Now you’d expect me to say that given Next Fifteen is parent to a bunch of PR agencies.  But this common question got me thinking and so in order to help prospective marketing heads, here’s a simple scorecard that you could use to try and figure out what you need to spend:

1.  Are you:

A.  A start-up

B.  A mid sized

C.  A very large company that has an atrium at its head office big enough to house five startups

2.  Is your business:

A.  Doing really well

B.  Making it but not flying

C.  Struggling.  I know my friends wonder why I stay at the company.

3.  Is your senior management:

A.  Really engaged in PR

B.  Does it when asked

C.  Too busy talking to customers/playing golf

4.  Is your management:

A.  Good at talking to the media and always gives great perspective and quotes

B.  OK at talking to the media but sometimes over complicates things

C.  They’re too busy playing golf – they don’t give interviews

5.  Is your company:

A.  The market leader in a recognized space

B.  The business that is trying to catch the market leader

C.  A business trying to create a new category so that it doesn’t have to compare itself with the market leader

6.  If someone reviewed your product would they give it:

A. 5 stars (out of five)

B. 3.5 stars

C.  We definitely wouldn’t let them review it but we’d direct them to a real cool demo on our web site

7.  Does your CEO:

A.  Have a really great blog that everyone reads

B.  Have a blog but they are poor about maintaining it

C.  Think blogging is just a fad and that newspapers will rise again to push them out of existence

8.  Does your business have something genuinely interesting to say/announce:

A.   Every few days

B.  Every month

C.  Interesting to say?  Can you give me a bit more detail on what you mean by interesting?

9.  Does your company:

A. Put out news, links etc on Twitter every day

B. Put out news and links etc on Twitter every week

C.  What’s Twitter?

Now, for every question you answered A to give yourself 10 points.  For B’s score zero and C’s score -10.  When you have the answer you are then ready to calculate your spend.  So, if you answered all As, then you would have scored 80.  In this instance you would be a startup and should spend $15,000 per month plus 90%.  In other words you should spend $28,500 a month.  If you answered A to question one and Cs for the rest, then you’d have a score of -70.  This means you should spend $4.5k a month.  Given this is a stupidly small amount to spend with an agency you shouldn’t bother.  If you answered B to everything you would be a mid sized business that turns the handle.  In this instance your PR spend should be around 5% of revenues.  If you answered C to the first question and all the rest, then you are about become a B company.  You are probably looking for a new job so I suspect PR spend is pretty low on your list of priorities.  If, by some miracle, you are interested in PR spend, you should be aware that your company doesn’t care about PR and it seems highly likely PR isn’t going to solve the issues it faces (note your CEO is too busy playing golf to worry about PR, so you should be too busy interviewing to worry about the PR budget).

As I hope you can tell, the point I’m trying to make here (somewhat lightheartedly), is that there are some normal amounts that companies should spend on PR and that they relate to their revenues AND their ability to fully leverage what PR is capable of doing for them.  Spokespeople that aren’t willing to commit the time, crappy products and a business that is struggling don’t make for a great PR campaign.  Struggling companies can make a great story IF the management is seen to be engaged and has a plan etc.  but they also need to believe that PR is a key part of the plan to get the business going and invest in it properly both with time and money.  Some of you might feel that you need to spend more if you have an average company with average products etc.  You can but in this instance, you need to demonstrate PR’s potential and get management to embrace it before asking for more money.  If they believe, you’ll get every dollar you need.  You may also question, why companies that believe in PR and use it well, need to spend more.  I’d argue that when a company makes full use of PR and is getting good results, it should spend all it can and then some.

Good luck with the budget games for 2011!

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Will PR budgets increase in 2010?

The answer is of course that some will go up and some will come down.  But which will go up and which will fall?  Here are some answers:

The winners:

1.  It seems obvious to expect the businesses that are doing well to spend more on PR.  They might but it isn’t guaranteed.  Growing businesses will spend money on marketing that has a clear ROI.  If there is one thing this recession should have taught agencies it is to focus on ROI.  If don’t yet have a measure – get one.

2.  PR that directly links to product sales will do well in any economy.  The trick is making the connection.  That is easier said than done, especially when you are working with larger businesses that have comprehensive marketing programs.  In this situation everyoe wants to take the credit.  What is still surprising to me is how rarely PR people do some simple analysis that shows the results they generated on a graph that connects to sales a company has made.  It isn’t a perfect solution but in the absence of anything better…

3.  IPOs are set to bounce back in a big way in 2010.  Investor focussed PR will clearly be immense importance and value.  This isn’t a market you can just jump in to though.  Relationships with investment banks and law firms are critical.  If you are not connected to this world, don’t expect to see many opportunities.

4.  As governments around the world continue to try and drag their respective economies out of recession and fix the problems that got them into the situation, legislation will continue to be passed.  This legislation will affect businesses large and small.  Agencies that offer help to those businesses have a great opportunity in the next year.  If you don’t understand the world of public policy, now may be the time to do some reading.

5.  Efficiency, efficiency, efficiency.  Companies that got hit in the downturn but survived learned how to become more efficient.  The challenge is that they want to carry on finding new efficiencies.  This creates an opportunity for agencies able to offer clients a more comprehensive, global solution.  This is of course an area where agencies will make promises they can’t keep.  But clients want efficiencies, so efficiences will be offered.  The real winners will be those able to actually deliver on these efficiences.

The losers:

1.  Agencies that survived the recession may feel they are owed a future.  But if they didn’t learn anything from the recession then in reality they will continue to struggle.  Make a list now of the lessons you learned.  This should include the things you want to change and the things you believe you did right.

2.  Agencies that paid lip service to their staff during the downturn will pay a huge price as the recession ends.  Staff will be grateful that you gave them a job but if you aren’t offering a career don’t expect to keep them when the good times return.

3.  Digital is the obvious growth opportunity but it is also the area that successful agencies will invest in the most.  If you don’t focus on digital and invest the time and money they do, you will fall behind and that could ugly, fast.  Are you focusing on digital and making the necessary investments?

4.  Agencies have all taken on clients that they shouldn’t have.  During the recession, agencies justified taking on the less than perfect clients by telling themselves it is about survival.  But the reality is that in better times, better staff will leave to work on better clients.  They may not have had that choice in the recession.  In the months ahead that choice will return and they will leave.  Client makeovers are not easy but if you need one, start working on it now.

This isn’t an exhaustive list by any means but if you take one lesson away I hope it’s that we all need to learn from the recession we’ve just been through.  If we fail to learn, we’ll fail to improve.  If we fail to improve, we won’t just stand still, we’ll get overtaken.