Do You Need Public Relations? 5 Hard Business Metrics Driven by PR
Some executives view public relations as a nice-to-have expense that will always come second to chasing next quarter’s hard numbers. It can be difficult, after all, to justify money spent on longer-term brand building and awareness when investors and board members are always asking about the bottom line. So—is PR worth the investment?
The answer lies in the return on that investment. PR shows its effectiveness over months and years—that much is true—but its benefits need not be abstract. Correlating effective PR efforts with the hard business metrics they impact can give executives firm grounding on which to decide whether PR will ultimately bring up their bottom line. Below is a brief look at five such correlations and how they have played out in the real world.
1. Sales
In the late 2000s, Domino’s Pizza was suffering from poor public perception surrounding its product, even after they had begun to make positive changes. They decided that, if they were to salvage their revenue, they had better make PR a priority. After a brilliant campaign that owned product problems and invited scrutiny, Domino’s reported 14.3% domestic same-store sales growth in Q1 2010.
While PR does not always create revenue directly, being recognized and trusted by potential buyers will invariably remove friction and increase conversion at the point of sale. The most effective sales messaging is often delivered long before the customer thinks to make an order.
2. Share of Market
When the Great Depression brought plummeting sales, market-leading packaged cereal producer Post responded by cutting back on ads and public messaging. Kellogg, meanwhile, bet in the opposite direction by sharply increasing its advertising budget and leaning into radio appearances. By 1933, Kellogg had overtaken Post as the market leader.
The classic Kellogg story demonstrates a basic rule of thumb. If a business’s share of voice (SOV) exceeds its share of market (SOM), the latter will increase over time to close the gap. If SOV is lower than SOM, the reverse occurs. Investing in earned and paid media exposure is often among a business’s most surefire options for edging out their competition.
3. Pricing Power
Apple has built one of the world’s largest enterprises on PR as much as on technology. From the 1984 Super Bowl ad to the intricate narratives of design, innovation, and exclusivity present at every launch, few would argue that the company’s price premium is not owed more to the brand of Apple than to pure technological superiority.
This should come as no surprise; pricing power is one of the strongest correlates of brand strength. A brand with a positive presence in the public awareness prevents the product from being compared as a mere commodity—like weighing smartphones spec for spec—to offer elasticity even when competition is close.
4. Lead Volume and Customer Acquisition Efficiency
The Dollar Shave Club launch is something of a startup fairytale, receiving 12,000 orders in just two days. But it was no accident; the clever, irreverent launch video was expertly designed for earned pickup. After a small but effective distribution effort, founder Michael Dubin watched as his offering became news and orders flowed in.
The extraordinary customer acquisition rate of the Dollar Shave Club video is owed to a simple principle of trust. People are skeptical when they feel they are being sold something. Exposure that is earned—distributed by users or picked up by journalists—has the opposite effect by letting people feel that they were informed of or even recommended the product by an objective third party. The result is more leads that are acquired more efficiently.
5. Market Value
Beyond Meat’s IPO saw stock prices surge 163% on the first day despite reporting $30 million in losses the previous year. This was possible largely because the company had already invested in becoming an interesting and significant cultural story. Their unorthodox philosophy about their product and their environmental mission had won them enough media coverage to make buying into their IPO seem like buying into a movement.
This is not an isolated case; a 2017 study from the Journal of Business Research found that coverage in credible financial media about an IPO firm significantly impacts its stock price. Investors respond to information signals, and PR influences which signals are spread by whom and in what way..
Bottom Line
Is PR indispensable? That’s a question each executive will have to answer for themselves and for their business. Every business does, however, need to drive sales, outperform competitors, maintain profit margins, acquire customers, and appeal to investors in the long term if they want to prosper and grow—and history suggests that public relations can significantly move every last one of those needles.
Be sure to check out our other blogs on useful and interesting public relations topics, like making a media impact at CES.