One PR industry preoccupation that doesn’t want to go away is the old return on investment chestnut.  While it is easy talk the importance of ROI up, it is very different matter for the measurement guys like us to sit down and actually quantify this stuff.

One problem is the lack of clear understanding of what it actually means.  To quote Colin Farrington, former director general of the CIPR:

“Ask ten PRs to define ROI and you’ll get ten different answers”.  

However there are opportunities for the industry to prove the effectiveness of media relations and hence demonstrate ‘real’ ROI.

For example we are doing more and more work with Econometric specialists to build marketing mix models.  These are complex statistical models that take data feeds from different marketing channels: Advertising, PR, Online, Direct Mail and so on mixed with other important variables where appropriate such as seasonality, pricing and competitor activity.  These variables are then fed into a computer based regression analysis to calculate their individual contribution to an end result such as sales or website traffic.  By knowing what sales resulted from each marketing channel and building in their relative cost it is then relatively easy to calculate and compare ROI figures.  In doing this we have been able to demonstrate that PR is genuinely more cost effective than other disciplines for a number of clients. 

The econometric stuff also throws up some other interesting phenomena.  For example in the advertising world there is the well known concept of ‘AdStock’.  This is needed to explain the time lag between seeing an ad and then responding by buying the widget.  The resulting model is that once an ad has been aired, the effect of that ad (or ‘adstock’) then decays exponentially over the coming days and weeks.  This works in a similar way to radio-active decay: advertising ‘half-lives’ can be calculated to explain how long it takes for the effect of an advert to reduce by 50%.  By introducing PR measurement into the models we can also demonstrate a similar ‘PRStock’.   In a recent study with a client the PR half-life came out at five weeks which is within the typical figures that advertising throws up (usually two to five weeks).

I have just read on Andy Lark’s blog about a study by two Hewlett-Packard researchers who have shown how the number of ‘diggs’ about a particular news story on digg.com also decays exponentially over time with the half-life depending on the popularity and novelty of the story.  The half-life in this situation is a rather shorter 69 minutes!  I agree with Andy’s point that the implication is that the ‘legs’ of a story can be dictated by how much it infiltrates social media with the resulting online ‘conversations’.

We have also done a recent study covering how a story decays in mainstream media.  The following shows the percentage of coverage that appeared on each day following a major product or campaign launch (the data was amalgamated from a number of different examples).  Apart from a few pieces appearing before the embargoed launch date and some blips relating to some follow up activity, again it shows the old exponential decay.  In this case the half-life is a little more than a day.