One of the communicators I most respect on the planet, Jim Fetig, former head of PR at Raytheon, came to me with an interesting challenge. Some of the folks in his divisions were using Ad Value Equivalent (AVEs) to prove their worth and he wanted to make a standard AVE calculation available to everyone who reported to him. This proved to be an interesting dilemma. Raytheon is arguably one of our most important accounts, and Jim, as I said, is one of my favorite people to work with. On the other hand, since we adhere strictly to the guidelines set forth by the Institute for Public Relations, we refuse to provide AVE data to anyone under any circumstances (as I tell people – only over my cold, dead-for-at-least-a-month body). What's a measurement guru to do?
Invent a new metric, of course. Here’s what I proposed for Jim: The PRV or PR Value Ratio.
What Raytheon's PR people (and presumably lots of other PR people out there) are trying to show is the relative value of PR compared to other disciplines such as advertising. Which is why, for years, PR people have been the counting column inches that PR has generated and comparing the costs of those column inches to what they would have spent in advertising dollars to get the same column inches.
The problem with this approach is that there is no scientific evidence anywhere that has ever been done that says that a six column inches ad has the same impact on a human being as a six-inch story in the same publication. Ads typically contain photographs, are supposed to contain the key messages, and are designed to leave the reader more likely to purchase the product or do business with the company. On the other hand, only one in five "earned media" stories contains a key message, or leave the reader more likely to do business with the comp any and fewer than 5% contain a photograph of the product. So to compare these two and call them "equivalent" is a farce.
But the essential goal – i.e. to show the value of that earned media article, is still a noble one and one we acknowledge as worthy of measuring. Our response is to look at the overall goal of the program. In Raytheon's case, and most other entities, I presume, is to use earned media to promote the key messages or the agenda of the organization. So if research reveals that your earned media has reached a million pairs of eyeballs with your messages that would be a significant milestone. More importantly if it reached those million eyeballs at a fraction of the cost of buying the same eyeballs (i.e. advertising), that would show that PR was contributing in a big way to the organizations bottom line.
So for example if the annual PR budget is $100K and the advertising budget is $1 million and both deliver the organizations key messages to 5 million eyeballs a year, PR delivers the same output for a tenth of the cost so the value ratio would be 10:1.
Let's put this into perspective.
A typical KDPaine & Partners client places or earns 1000 articles a year. Of those articles some 30% or 300 contain the company’s key messages. Of those 300, typically 80% or 240 appear in key publications that reach the target audience. For the sake of this example, lets assume that you if add up the audited circulation figures of the publications in which those 240 articles appeared, you’ve reached 5 million eyeballs with your key messages.
Now take the annual PR budget ($100,000) and divide it by 5 million. You get a cost per key message communicated of $.02. Typically advertising looks at CPM which is cost per thousand people reached, so you would multiply the $.02 by 1000 to get a CPM of $20 per thousand people reached with a key message.
Let's now assume that the advertising budget is $1 million a year and according to the media plan, the combined reach and frequency resulted in 5 million people seeing the organization’s key messages via paid advertising. That’s a CPM of $200 – in other words PR has delivered the same value for a tenth of the cost – or a PRV of 10:1.
Sounds good to me.