Over the past ten years, the successful players in most industries have been those who restructured their business models to meet the changing demands of their markets. Many manufacturers, for example, have moved from mass production of standardized goods to just-in-time production of customized, high-value products.

In addition to redefining their value propositions in radically different ways, firms in most industries have also restructured their pricing, compensation and incentive strategies to align pay with performance. Given the advanced performance measurement and profitability analyses that have become available over the past dozen years, these firms have been able to identify the real drivers of their profits. Consequently, they have instituted new practices designed to reward those key individuals and business units that are actually producing results. 

It seems like every industry in the contemporary marketplace has undergone a radical restructuring, both in the ways that business actually gets conducted and in the ways that performance gets rewarded. Every industry, that is, except public relations.

Most public relations firms today operate according to a business model that would have seemed perfectly comfortable to the gray flannel suits of the 1950s. No matter that repeated waves of mergers, acquisitions, and divestitures have disrupted the networks of personal ties and personal trust that once drove the industry; firms continue to propose agreements that mandate unvarying monthly retainers in return for a broad slate of poorly-defined services, regardless of the actual benefits delivered in any period. Rates may be negotiable, but the basic delivery model is not. PR firms sell hours, not outcomes. 

This “trust us” value proposition still works well for clients who want a broad and diverse range of services to supplement their own in-house capacities across a broad range of evolving marketing and PR programs. And it is probably the ideal arrangement for firms who seek to outsource the entire public relations function in order to focus all in-house resources on their most critical core competencies. 

Properly-structured retainer contracts will always provide high value for these clients.  But the retainer contract can no longer serve as the only alternative. For many of today’s clients, who have just spent the past several years struggling to survive a prolonged economic slump, it’s manifestly inappropriate. For some, the retainer contract is simply no longer a topic for discussion. 

Media Relations: The Critical PR Function

Media placements have proven their value over the past 10 years, both in their own ability to generate awareness and leads and in their critical credibility-providing role that makes every other component of the marketing mix work better. Yet effective media relations is the one public relations capability that clients are most likely to lack in-house, principally because the it has become such a sophisticated and specialized activity.

Today, effective media relations requires a deep knowledge of each editor’s and each publication’s specific needs and preferences, and a proven track record of delivering appropriate and newsworthy material on deadline. Furthermore, the successful media relations outfit must be able to deliver the goods across an increasingly diverse range of print, broadcast and online media. Some clients, like retailers and manufacturers of consumer goods, must target mass media venues like broadcast networks and metropolitan dailies. Others, like specialty electronics manufacturers, must target specialized professional and industry trade publications for the industries they serve.

What these companies have desperately wanted is a media relations provider that will give them the publicity they want in exactly those venues that reach and influence their particular customers. That’s why public relations firms need to start offering pay-for-performance options.

Enter: Pay-For-Placement PR

Like many major innovations, the pay-for-performance service is based on a simple concept: namely, that the most effective way to get what you pay for is to pay only for what you get. Usually, a pay-on-delivery operation charges a set fee for each element of coverage clients receive. Fees are based on the depth of coverage and the circulation or audience rating of the venue in which the coverage appears.

This pay-for-performance option is completely client driven. Clients specify in advance the message to be delivered, the target media, and the type of coverage they are willing to pay for. They pay only for the results they actually receive, at fixed and predictable prices.It really is that simple, and anyone can play. Clients can vary from large corporations to small businesses, private individuals, associations and other not-for-profit organizations, and even PR or marketing agencies.

The great advantage of the pay-for-performance model is that clients can tailor PR services to their exact needs and available budgets. A large corporation might want a time-limited effort to secure coverage for a newly-appointed CEO in major newspapers and national business journals. Alternatively, the same firm might want an ongoing campaign to secure coverage for a new financial software product in leading banking and securities industry trades. A biotech start-up venture might want a brief campaign directed at the investment press to announce the award of an important patent or a commitment from a prestigious investor. In each of these examples, the client designates the message, the target media, and the desired forms of coverage, at no risk, and the pay-for-performance service can give them exactly what they want.

Budgeting is simple, too. Establish how much you can spend, then identify and prioritize the media types you want to target. Your pay-for-placement PR firm will then focus that budget on your most desired media targets and bring you opportunities that you can either accept or reject. If you like and want more of what you’re getting, you can increase your budget. You maintain complete control.

Enables Marketing Firms to Outsource PR Without Financial Risk

PR, marketing and advertising agencies represent a growing class of clients for pay-for-performance PR services. Many of these firms, especially smaller ones serving local markets, will not have the expertise or established relationships required to conduct effective media relations campaigns at the national scale. Even very large firms may lack the domain knowledge necessary to get their clients extensive coverage in some very specialized industry trades, particularly in the more arcane areas of finance, health care or technology.

Especially for the more generalist marketing and advertising agencies, the pay-for-performance specialist may represent a welcome alternative to developing costly in-house capabilities. They can circumvent expense and delay by engaging a results-based specialist, either directly or on their client’s behalf, to generate coverage in their targeted media.

Client Benefits

For clients, pay-for-performance is an option that is long overdue. They get to construct a media relations program tailored to their exact needs and priced according to their approved budgets. It’s simple and easy to do. Basic online agreements take only a few minutes to complete and submit. No RFPs to produce, no lengthy negotiations, no protracted selection cycles. No more wasted time. No more wasted money.

For marketing, advertising and PR agency clients, pay-for-placement media relations offers a strong competitive edge that enables them to provide their clients the expertise and contacts of seasoned PR professionals. Agencies who recognize the value of adding high-quality PR services while maintaining the client relationship and retaining freedom from any financial or time commitments will build loyalty from their clients, stand out in any agency search, and improve profitability.

Based on the results seen among early adopters, clients are eager to explore this alternative model for delivering public relations services. They should be, since they have much to gain and nothing at all to lose. By offering clients the pay-for-performance choice, we in the PR industry are making it easy for new types of clients to test the waters and see just how much an effective media relations program can do for them. We’re also encouraging disillusioned clients to try the PR strategy again.  

Some of these clients will find that they actually prefer the retainer model, working closely with a trusted agency that intimately understands their aims and business environment.  Most will probably find that both the retainer model and the pay-for-performance option can work well for them, at different times and for different business objectives.

No matter which way they decide to go, the pay-for-performance option will be good for clients and good for the public relations industry, which has been clinging to its single business model too long. The switch to results-based pricing and pay-for-performance services will give everyone invested in the industry – clients, agencies and employees – the pay-back we really need.

In Closing -- Tips for determining if "pay as you go" PR is appropriate:

For your agency:

• Would you like to work seamlessly with a PR agency that’s willing to stay transparent to your clients?
• Would you like to expand PR services to your clients without incurring the financial burden of developing in-house expertise?
• Even if you already provide basic PR services, would you like to extend your capabilities to cover publicity in all media types?
• Would you like to encourage a client to try adding PR to their marketing mix at no risk to them?

For your clients:

• Do they have their messaging established?
• Do they know their target markets?
• Do they have their overall strategy in place, or do they need extensive counsel, planning and meetings?
• Is publicity their primary need?
• Do they have some familiarity with PR?
• Could they use some additional short-term bandwidth to help with product launches, extended staff leaves-of-absence, etc.
• Do they need expertise and contacts in a particular media type such as broadcast or national business press, or in a particular vertical industry?
• Do company policy or finances prohibit them from committing to a monthly retainer or a contract with extended time requirements?

This has been a special contribution by Richard Virgilio, Managing Director, PayPerClip Public Relations. He can be reached at rvirgilio@payperclip.com or (908) 439-9587