ROI – Is statistical modeling the answer? Depends on the question.

Back in the saddle after much traveling and more than a few major project deadlines…  On May 23, PRWeek hosted a webinar with Dr. Hans Bender of Procter and Gamble, and Mark Weiner CEO of Delahaye, discussing P&G's statistical modeling efforts to determine the ROI of public relations.  First, here's a brief summary of the discussion:

• P&G employed marketing mix modeling for six brands over a one to three year period.  Three of the six showed public relations with the highest ROI of any marketing tactic.
• They employed multivariate analysis that relates changes in the marketing mix (advertising, direct, PR, etc.) to changes in business results.  The basic inputs were Impressions by week and sales by week.
• P&G spent $5.9B in advertising during 2005 (OMFG!)
• Factors other than quantity/impressions were used to factor PR impressions – primarily quality of coverage indicators like message delivery, type of article – mention/feature/exclusive, competitor mentions, and media type (online, TV, print, Radio)
• The model allows for comparison of PR performance with other marketing tactics (advertising, direct, promotions, etc.), as well the ability to compare various elements/campaigns within PR 

So what did P&G find out about PR ROI?

• PR drives sales, often on a par with advertising
• PR delivers stellar ROI, much greater than advertising
• PR provides a halo effect over other marketing tactics
• Overall, P&G found about a 275% ROI for public relations
• PR delivers high ROI on relatively low levels of spending

The last bullet raises an interesting question – to what degree is the ROI on PR scalable?  That is, can ROI continue at high levels with even higher levels of PR spend?  We would love to be involved with trying to answer this question with all of our clients!

In the promotion of the web event, the question was raised, Has P&G cracked the PR measurement code?  The short answer is No.  Not that the work they did isn't significant, interesting and highly relevant.  It's just that marketing mix modeling is hardly new, particularly with consumer companies.  We currently have multiple clients employing modeling that measures PR ROI.  What is new and significant about the P&G case is that they are on of the world's leading brands, and they were openly willing to share their experience and results. 

Marketing mix modeling is an area that deserves much more attention from the PR community.  It is interesting to note the story about the P&G modeling effort broke in the advertising, not PR, trades. 

The reason why marketing mix modeling is not THE answer to proving the value of public relations is that it really only addresses the media component of public relations.  One could argue about the percentage, but media relations is maybe 50% or a little more of what we do.  Brand PR, reputation management, public affairs, thought leadership, analyst relations, events, grass roots and crisis communications quickly come to mind as significant areas of PR involvement and importance where media coverage may not be the primary objective or measure of success.  Modeling also is limited in that it (mostly) addresses the sort-term, tangible impact of public relations.  PR, as we know, has both short and long-term impacts that are both tangible like sales and intangible like brand-building and reputation management.  Although marketing mix modeling is not THE answer to PR measurement, it is ONE of the answers we should be utilizing more often.  For some companies with large marketing investments, diverse marketing tactics, and visibility into end sales, it may be the best answer for demonstrating return on investment for public relations.   Plus, since PR almost always shows high levels of ROI and superior levels of ROI compared to most marketing tactics, it may be our best weapon to justify higher levels of PR investment. 

Thanks for reading.  -DB