Daney Parker, Editor, PRmoment.com
In theory, payment by results should be win-win for clients and agencies, as clients only pay for what they get and good work by agencies gets rewarded. Oh if only it could be a simple as that! Five PR leaders explain why PBR is not practicable.
1. It is a race to the bottom
Giles Peddy, SVP EMEA corporate development at PR agency LEWIS, says: “Payment by results is a model that is liked by cost-conscious start-ups that want some results. However, it more often than not drives the agency to short-term, tactical approaches to getting ‘numbers’. It does not mean the best results or advice as the agency has its eye on monthly billings. If an agency wants to play in that arena then so be it, but for me it’s low-value, tactical work and a race to the bottom. Ultimately, it comes down to what and how you measure effectiveness. If it’s by output then sure, PBR will do the trick. But don’t expect long-term reputational change. If it’s tangible business outcomes and impact you want, then you should steer clear of PBR and look at other models such as retainer plus incentive.”
2. It is too risky
Keren Haynes, joint managing director of specialist broadcast PR agency Shout! Communications, says: “In my view only a really desperate agency would accept work on a purely pay-by-results basis. We're talking PR here, not advertising; PR coverage is never a given and no one can predict the news agenda on any given day, therefore why should an agency take on all the risk? As former broadcast journalists we’re pretty accurate in predicting what coverage we’re likely to secure, but no one is privy to a big spontaneous story breaking.
“We offer guaranteed coverage, but this is generally quite conservative relative to the amount of coverage we generally secure. For example, we may guarantee a minimum of 10-12 opportunities for a radio day, but (story dependent) we average more like 18-20, sometimes more. Our guarantee is enough for a client to be reassured, but not so much that we are accepting a disproportionate level of risk.
“We offer a partial PBR service in that we will charge per-opportunity for any TV opportunities if this is done in conjunction with a radio day. We can do this because the basis of the campaign (the campaign idea, the content creation, the writing of press releases, etc) is already largely covered by the radio day. Plus, we know from extensive experience what is going to work for television – or not. We cannot offer the same PBR service for TV because securing coverage on television is just too high risk.
“Obviously, all agencies need to be accountable for what they deliver, but it does seem, in hard times, that clients push harder for a PBR, agency-take-all-the-risk framework. Now come on guys, that’s just not fair!”
3. It isn’t suitable for PR work
James Kaye, director at B2B PR agency Big Ideas Machine, says: “PBR is entirely sensible, but I don’t think it is workable for the PR industry. It’s like a colleague of mine once said, PR agencies are a bit like lawyers. We can bring all our expertise to bear on a project, but ultimately we cannot necessarily influence the outcome. I know that we’re not exactly like a lawyer as cosying up to a journo you know well is not like trying to influence a jury member, but there is a degree of parity there. If we only work on PBR, then a lot of hard work and valuable expertise loses any kind of value if a result is not secured. Also, you also need to get into the nitty-gritty of placing a value on coverage and how you price up that value, and it can get really messy. As an excellent example of that kind of conflict, we got one client into the FT, but it was online and not print, and so the client complained!
“I think this is ultimately an issue around transparency. For a year now, we’ve been working on a credits system. All the possible things we do for clients have a credit value, and so each month they are buying credits from us. If we over-service, it is our problem, not theirs and it has had an excellent response.”
4 It is hard to know what to measure
Simon Turton, owner of agency Opera PR, says: “As with most things, the devil is in the detail and the reality of PBR is that everything isn’t quite as straightforward as you might think.
“Imagine the scenario in which you have written the most articulate of press releases, which ticked all the editorial boxes, but for whatever reason the story went nowhere. Under PBR you’re not going to get paid, even though it has taken time to be briefed on the story, have it written up and edited, get it approved and then send it out to the target media.
“Your client would be under no obligation to pay you under PBR, but is it your company’s fault that the story hasn’t been picked up? No, of course not, but in this example you would be writing off lost billable hours. But even if the story gets picked up by print and online media outlets, on what basis are you to be paid? The number of outlets who published the story or the physical size of the coverage? Do we revert to he archaic AVEs?
“This where PR professionals need to be offering associated services to their clients, which of course includes press and media relations, but the overall aim of any agency should be offer a broad range of communications services, including copywriting, social media and web content, email marketing, producing marketing brochures and even annual reports. Yes, some of those services may well be offered by marketing, design or advertising agencies, but there’s no reason why PR agencies should not offer services that all relate to how a company or organisation is perceived by its publics – after all, that is part of the definition of PR.
“As communications professionals we need to understand the bigger picture and advise our clients how and where their news items can be used. Some will be taken up by the target media, but we need to have plans in place that ensure that every news item is used one way or another. I don’t think we would survive as an agency if we only offered press and media relations, because the world has moved on and we need to move with it. A press statement might not be taken by the media, but it could be used in a newsletter and on a website, so nothing is wasted.
“In this respect everything we’re doing should achieve results, which can be directly related to improved customer relations, to a boost to sales or an increase in the number of interactions on social media. If we can demonstrate to our clients that we’re an integral part of their on-going success story, then not only are we delivering results but we will continue to be paid – and justifiably so.”
5. It undermines the client/agency relationship
Clare Thompson, freelance consultant at Waves PR, says: “Oh dear, this issue just won't go away. Payment by results makes agencies risk averse – they will neither promise nor strive for anything other than 'safe bets' – or constantly coming back for money for the next new opportunity.
“And define results! If a result is something deliverable like coverage or a written piece it can be made to work, and I’ve noted clients increasingly demanding this, particularly agency clients. And that's fine to a point.
“However if your result is strategically driven, payment by results could be harder to prove without spending a lot of money, you could end up focusing on the wrong metrics and will almost certainly end up with an agency in a constant ‘sales cycle’, asking for extra money for new things. rather than getting their heads down and getting on with the job.
“Asking agencies to offer PBR seems to undermine a relationship built on client/consultant trust, and limits the agency to purely tactical activity. Find a more meaningful 'result' to be measured against, like sales, public opinion, and yes, payment by results could be invaluable, but given that PR is a two way deal, with clients responsible for providing spokespeople, copy, images, etc, and payment by results becomes complex.
“I've worked in some agencies that do it very successfully, and it certainly prevents over promise, under delivery, but it does need proper consideration around what you're truly trying to achieve.”
No doubt, the debate on payment by results will rumble on. But right now, the PR jury’s majority verdict is that it just doesn’t work.
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