What’s Good PR Worth?
How much a company should spend on a PR firm is a matter of great debate.
Unfortunately there’s no official rule of thumb, but there are many things you can take into account before bringing on a PR firm to manage your media relations efforts
Factors to consider include
- Company revenue – Odds are you don’t have a money tree planted out back, so basing spend off of money flowing into your business is a great start.
- In-house expertise – How much help you need will depend on what kind of talent you already have (or plan to have) in house.
- What you want to accomplish – If securing coverage in top-tier media outlets is at the top of your PR wish list, then it’s important to understand those activities will probably take more effort than submitting a speaking abstract. Another consideration is whether or not you need (today or sometime in the future) a firm that provides integrated marketing services.
Let’s take a look at each factor to better determine your PR spend.
Show Me the Money
According to a 2016 survey by SiriusDecisions, B2B software companies under $100MM are putting a lot toward marketing efforts. Most companies are investing in the range of 8 percent to 16 percent. In comparison, back in 2006, they reported that they spent 7 percent to 9 percent of their revenue on marketing. A lot can certainly change in just a few years!
Meanwhile research firm Gartner falls pretty much in line with what SiriusDecisions uncovered. Gartner found companies spent 12 percent of their revenue on marketing in 2016, up from 11 percent in 2015 and 10.2 percent in 2014.
Still not convinced what you should base your spend on? Third time’s the charm because according to the CMO Survey, sponsored by the Fuqua School of Business at Duke University, Deloitte LLP, and the American Marketing Association, marketing budgets now comprise 11 percent of total company budgets on average, up slightly from 10.4 percent in February 2012, when the CMO Survey first asked this question.
Looking at marketing budgets by industry (Figure 1), not surprisingly consumer packaged goods companies allocate by far the largest percent of total company budget to marketing (nearly one quarter), followed by consumer services, tech software/biotech, communications/media, and mining/construction. Companies that spend the smallest portion of their budgets on marketing include transportation, manufacturing, and energy.
The same study found B2B companies marketing spend as a percentage of company revenue averaged 7.88%. In the technology/software/biotech vertical that number jumps to 12.2%.
Scope of Work
Thinking about what you want your PR agency to do is also key to what you’ll pay for services. These days, many PR agencies offer a variety of marketing services beyond PR — from lead generation and nurturing to search and advertising – to create an integrated offering.
When comparing PR to other marketing initiatives, The Holmes Report found that marketers are spending more money on PR. The reasons for this could be many. Maybe you need to create awareness now and don’t have the luxury of time or money to hire and train an in-house PR team. You need seasoned PR pros who know your industry inside and out and have established media relationships that can drive immediate results.
Or maybe you need to find a powerful way to add meaning to your brand’s story. Sometimes looking for an outside perspective can be the most valuable exercise a company can explore.
Another interesting data point from The Holmes Report showed that on a global stage, the Americas and Asia were most likely to report demand for non-traditional services – that’s anything outside of PR.
With North American companies ranking at the top for PR spend and likelihood to turn to PR firms for non-PR services, the data seems to suggest that marketers are more broadly embracing integrated marketing. That means that when you’re shopping for a PR firm, it might be a good idea to evaluate firms that offer more than just PR services. Doing so may save you time in the future as your marketing needs evolve.
Other Factors to Consider
There’s more than money at stake when investing in a PR firm. Your time and that of your Leadership team is valuable. If they aren’t on board to support the efforts – e.g. hold strategy sessions with the firm, participate in media interviews and share company updates – then the idea of engaging with a PR firm should really stop here.
Another thing to think about is your competition. What is your nearest competitor doing in terms of PR and marketing? If they are investing a lot, then you may want to ramp up your efforts too.
Once you’ve decided hiring a PR agency is right for you, here are a few questions to ask yourself when comparing firms.
- What’s their expertise? Are they focused on B2B or B2C? Or do they do everything? You’ll get more value for your spend if they have experience marketing to your buyers.
- Do they understand the new marketing reality? For instance, if you are in the B2B space, your buying cycle tends to longer and involve multiple decision makers. Make sure the firm you choose understands how buyers make purchasing decisions and how marketing can support that.
- Are they easy to do business with? Life has enough complexity. Working with an agency shouldn’t come with any surprises.
Working with an outside agency can be fun and provide many benefits. If you have any questions along your journey, feel free to let us know. We’re happy to help.