It’s a question that keeps coming up in the once clubby world of PR. Since I started my company last November, based in part on a Pay-for-Performance model, I’ve been hearing two main reactions to Pay-for-Performance PR.
Customers love it. Especially small companies who can’t afford the steep monthly rates typically commanded by established PR firms. Tech companies get it. After all, they embrace cost-per-click, SaaS software models and fractional marketing.
Veteran PR pros view it with disdain and understandable trepidation. Why? Traditional business models are more vulnerable than ever. Think LegalZoom and Pre-Paid Legal chipping away at the once impregnable Ivory Tower of extravagantly paid law firms.
Many PR firms distrust anything that challenges their comfortable retainer model, and for good reason. Who wants to give up a flat monthly payment of $5,000, $10,000 and up in favor of a lower monthly retainer plus payments based on actual media coverage?
I’m not suggesting that Pay-for-Performance will completely upset the PR apple cart. One veteran PR friend made a great point: the standard retainer model makes perfect sense for large enterprises in need of a vast array of PR services, ranging from brand awareness, brand monitoring, crisis management, and more.
I see his point, and raise. I think as organizations strive to become more nimble and responsive to their customer needs, that kind of rationale appears untenable 5, 10, 20 years out as our economy continues to evolve.
What’s often overlooked is that changing the cozy PR pricing scheme in favor of Pay-for-Performance (PfP) actually has benefits for the marketplace as a whole, including PR firms. Here are some that come to mind:
- Value: PfP increases overall value for customers of PR firms because as much as 50-60% of total compensation is triggered based on results that are measurable: articles in magazines, stories on TV, reviews in blogs like TechCrunch or Mashable. Bottom line – and it IS a bottom-line concern – customers don’t mind paying for PR, they just hate paying for unfulfilled promises.
- Success breeds profit: PR firms who embrace Pay-for-Performance have a chance to make as much money as they do under a standard retainer, maybe even more! PfP pricing is not unlike commission sales in that good sales people always prefer lower base salaries in favor of higher commissions. PR firms stand to make good profits when they hit, and exceed, their media targets, and customers don’t mind paying for media results.
- More companies embrace PR: Don’t forget that one reason why companies don’t hire PR firms is that they either don’t understand PR or find it too expensive to pursue, or both! Lowering the barrier to entry means more companies will be tempted to pursue PR campaigns in addition to their normal marketing activities. I’m sure some new entrants won’t pan out. Not every company gets PR, after all. But more prospects entering the PR marketplace is good for PR and the media alike.
- Good defense against outsourcing: We’ve seen everything from manufacturing to software engineering sent offshore to India and other countries. Who’s to say the same thing won’t happen to PR if we can’t find a way to keep our value proposition the best in the world? Value pricing, tying payment to performance, offering more a la carte PR services are all ways PR firms can ensure they’ll be top choices in the competitive marketplace.
Got any ideas you want to add? Feel free to comment below on this post. You can also tweet me at @davemanzer or friend me on Facebook. Either way, I look forward to your ideas.
