PR: The Cost-Effective Choice

B-M Knowledge
PR: The Cost-Effective Choice
This presentation includes research and case studies which support the cost-
effectiveness of using PR to generate sales and to drive change in attitude,
awareness, etc. This document can help inform discussions with clients about the ROI
of PR, including:

• PR is considered to have a higher ROI than other forms of marketing, including

advertising.

• PR is particularly cost-effective during difficult economic times because of its

relative affordability in terms of value/dollar.

• PR is becoming even more cost-effective in the digital age as digital PR (blogs,

social networking, viral word-of-mouth, etc.) continues to evolve.

According to Mark Weiner, CEO of PRIME Research and author of “Unleashing the
Power of PR,” Fortune Most Admired Companies have PR budgets 2.5 times larger
than comparable companies of the same size! As part of a well integrated marketing
program, PR is an extremely cost-effective communications tool.
 Public Relations vs. Advertising Spend (Version 1)

What it was:
Through Veronis Suhler Stevenson research and data published by TNS Media,
Burson-Marsteller assessed marketers’ relative spend on advertising and PR.

What it proved about PR spend:

Including all types of advertising (but excluding consumer promotions), spend on
advertising outpaces spend on PR by a 1:56 ratio.

Advertising & Direct Marketing = $56

PR : Internet + Magazine + Newspaper + Direct + TV

Mail

$1 $2 + $5 + $14 + $15 + $20

Source: Burson-Marsteller analysis on 2004 Veronis Suhler Stevenson & TNS Media data
 Public Relations vs. Advertising Spend (Version 2)

What it was:
TV advertising: $67.8 billion
Through Veronis Suhler Stevenson
research and data published by TNS Direct Marketing: $52.2 billion
Media, Burson-Marsteller assessed
marketers’ relative spend on advertising Newspaper: $46.6 billion
and PR.
Magazine advertising:
$16.3 billion
What it proved about PR spend:
Including all types of advertising (but Internet Advertising:
excluding consumer promotions), spend $6.8 billion
on advertising outpaces spend on PR
by a 1:56 ratio.
PR:
$3.4b

Source: Burson-Marsteller analysis on 2004 Veronis Suhler Stevenson &

TNS Media data
P&G PREvaluate

What it was:
In 2005, P&G developed “PREvaluate,” with partner Delahaye (now Cision)
which combines an econometric marketing mix model with detailed data on
media impressions. P&G used the tool to evaluate the impact (ROI) of each
individual component of the marketing mix (including PR) on revenue for six
of its brands.

What it proved about PR effectiveness:

For 4 of the 6 brands that P&G analyzed with PREvaluate, PR had a
higher return on investment than any other marketing medium. For the
other 2 brands, PR had the second-highest ROI.

Source: Advertising Age, November 2005

Miller Brewing: Marketing Mix Model + Media Analysis
What it was:
Miller Brewing Company incorporated data from Delahaye’s (now Cision) Impact Score
and Net Effect tools into its marketing mix model to analyze media coverage of several
brands of Miller beer as well as comparable brands of competitors over time. This
analysis assessed penetration of public relations program effectiveness.

What it proved about PR effectiveness:

The analysis helped explain previously unexplained sales as being attributable to public
relations.
Based on a 2007 analysis, researchers discovered that for every one dollar spend on
each marketing type, PR generated $8 in sales, compared with trade advertising
which brought in only $2.20 for every dollar spent and TV advertising which earned
only $1.06 per dollar.
Based on a 2003 analysis, Miller learned that its PR campaigns generated roughly 1.2%
of base product sales and 4% of incremental sales, and TV advertising generated 5.3%
of base sales and 17.3% of incremental sales. While Miller did not reveal its advertising-
PR spending ratio, the average U.S. industry average is 61:1 in favor of ad spending,
indicating a much more efficient impact from the PR spend.

Source: Hudson Valley Business Journal, May 2007 and Council of PR Firms 2005
Delahaye & Hudson River Group: Marketing Mix Model + Media Analysis

What it was:
In 2001, Delahaye (now Cision) and the Hudson River Group worked together
to incorporate news content analysis data into an unnamed client’s marketing
mix model.

What it proved about PR effectiveness:

The total marketing return was $2.35 per dollar spent, for a 35% payback.

However, the PR return was $19.53 per dollar spent, for a 293% payback.

Source: Delahaye (Cision) Webinar

AT&T Research: News Coverage Impact on AT&T Acquisition

What it was:
AT&T built a model to assess how various marketing elements influenced new
customer acquisition. The model, which originally included outbound
telemarketing, advertising and direct mail, was adapted to include news
coverage. News coverage was broken down by topic and these data streams
were input into the model.

What it proved about PR effectiveness:

The strongest correlation noted in the news coverage analysis was between
acquisitions and positive news coverage related to price/value of the AT&T
service. AT&T then examined the relative power of each of the marketing
elements on acquisitions. The analysis showed for the first time that news
coverage plays a role in acquisitions. In this case, positive news coverage
related to price/value of AT&T’s service appears to have the same level of
impact as advertising, with about 8 percent of acquisitions attributable to
each of those marketing elements.

Source: Council of PR Firms 2005, although the research is from the late ‘90s.
Watson Wyatt Research: Communications Drives Shareholder Value

What it was:
Every 2 years, Watson Wyatt surveys professionals to rate their organizations’ communication’s effectiveness
and conducts a regression analysis against the organization’s financial performance.

What it proved about PR effectiveness:

The results show that high levels of communications effectiveness lead to greater shareholder value.

 Companies with high communication effectiveness provided a 91% return to shareholders compared
with a 62% return by companies with less effective communications during the 2002-2006 period.
 High communications effectiveness is a leading indicator of financial performance , as the correlation
between communication effectiveness and subsequent financial performance (one year ahead) was twice
as large as the correlation between financial performance and subsequent communication effectiveness.
 Increasing a company’s communication effectiveness by 1 standard deviation in the research correlates to
a 15.7% increase in market premium.
 Companies with highly effective communications programs had a Q Score* that was 21% higher than the
companies with less effective communications programs. (1.37 for high effectiveness companies vs. 1.13
for low effectiveness companies).
 Companies with high levels of communication effectiveness are 20 percent more likely to report
lower turnover rates than their competitors.

* A Q Score refers to Tobin’s Q, a financial measure which represents the ratio of the market value of the company’s equity plus
book value of debt divided by the book value of the assets.

Source: Watson Wyatt Reports, 2007/8 and 2005/6

 Watson Wyatt Research: Communications Drives Shareholder Value, (continued)

What it proved about PR effectiveness, continued:

The chart below shows the hierarchy of communications components as they contribute to a company’s market
value. Improving each component of the hierarchy increases the company’s market value by the percent
indicated. For example, improving each component of effective communication will improve a the company’s
market value by 15.7%.

Source: Watson Wyatt Reports, 2007/8

Case: Southwest Airline Linking SEO* to Sales
What it was:
Southwest Airlines worked with SEO-PR to determine if they could reach consumer
audiences directly through press releases via news search engines. They used
Yahoo! , AOL and Google news to identify the most popular search terms related to
Southwest Airlines and optimized 3 press releases with those terms. They included a
unique trackable url in each press release to measure sales generated by the press
release.

What it proved about PR effectiveness:

The first optimized press release about a Philadelphia launch Directly resulted in
$80,000 in ticket sales, plus stories in more than a dozen media outlets, including
The New York Times, Washington Post, Dallas Morning News, and Philadelphia
Business Journal.

February 2004 to April 2005, Southwest Airlines was able to directly track more than
$2.5 million in online ticket sales to optimized press releases.

*SEO is Search Engine Optimization

Source: Institute for Public Relations, 2005
Case: Sears Placement on Oprah
What it was:
Sears donated gifts to 100 children in a small Texas community; Oprah
discussed it on her show and proclaimed “We love Sears” during the
segment.

What it proved about PR effectiveness:

Using pre- and post show surveys tied to its ongoing brand research, Sears
found the show provided incentive to move viewers from neutral to positive
intent to shop at Sears during the holidays, with about an 11% increase in
positive intent. The amount consumers said they would spend at Sears
during the holidays increased at an estimated 39% per shopper. And
finally, correlating the other research to sales data, Sears concluded the shift
in attitudes led to spending increases estimated at $13 million.

Source: Council of Public Relations Firms, 2005

Research: Advertising vs. Editorial
What it was:
In 2004, two professors at the University of Miami conducted an experiment where respondents
were shown mocked up newspapers with either an advertisement or an editorial piece on a
hypothetical brand, “Zip Chip.”

What it proved about PR effectiveness:

There were no significant differences in brand awareness or purchase intent for respondents
who were shown ads vs. editorial content. The conclusion is that because getting editorial is
less expensive than placing an ad, the editorial (PR) is the more effective communications tool.

Zip Chip Brand Awareness Zip Chip Purchase Intent

Source: Report from University of Miami Professors, David Michaelson and Don Winslow Stacks
Contact
Ashley Welde
Director of Knowledge & Measurement
B-M Knowledge Development
212.614.4924
ashley.welde@bm.com