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Thoughts on the Pay-Per-Placement Model of PR

I was scanning some PR questions in LinkedIn Answers today and I came across a user looking for referrals to PR agencies or professionals that work on a pay-per-placement model. While there are firms out there that use this model I always hated this topic when I was running my agency. While it’s a seemingly fair request from the client’s point of view, it’s the wrong way to go about pricing and managing PR campaigns.

I thought it would be a good topic to through out there for discussion. First, my perspective on the topic – I’ll debate a couple different angles for you.

Why Pay-Per-Placement Makes Sense for Clients

PR can be expensive. While PR is about much more than clips or placements, a lot of clients don’t see it that way. Most of the time, they hire a PR firm to generate publicity for them. So why not expect that a firm would be willing to work on a contingency basis? Why should clients take all the risk, shouldn’t the agency put some skin in the game. If you hired a new sales manager, and the manager wanted to receive their entire salary, commission and bonus regardless of how many sales they closed, they would quickly be shown the door. Why should it be different for a PR agency? If the firm has extensive experience in media relations, with solid relationships in your industry, shouldn’t they be able to capitalize on this structure to earn more fees? Why are firms hesitant to adopt this model?

Why Pay-Per-Placement Doesn’t Work for Agencies

There is a lot of work that goes into developing and executing PR strategy for a client. An agency should be compensated for that work. Whether it’s research, strategy development, messaging and positioning, or the tactical work of pursuing and securing coverage, there’s a lot of legwork that goes into the process. It’s not just picking up the phone and getting somebody to write about the client’s news.

Secondly, it’s near impossible to develop a pricing structure based on the results generated. There are too many variables. What is a one sentence mention worth in TechCrunch, versus a product review in a trade magazine? Do you get paid more for quotes or mentions of a phone number or URL? What if a journalist does an interview, but doesn’t write a story? The client now has a valuable relationship they can leverage down the road, and isn’t that worth something? Even if the client and the agency can agree on compensation for specific types of coverage secured, there’s always going to be disagreement after the point – and agencies will be hard-pressed to collect those fees.

Finally, the PR reps have no control over what gets covered. This is where the real problem lies – many PR firms don’t do a good enough job at educating clients and setting expectations. Many clients don’t understand the ins and outs of PR, and what they should expect for results. If some clients truly understood the realistic amount of coverage that could be generated for them, based on the news value of the stories they give the PR firm to work with, many wouldn’t sign-up. PR firms are in active competition with each other, and projected results often get inflated during the proposal stage. If you don’t promise to deliver a certain level of results for the client, your competitor will – and they’ll get the business. Clients want to believe you can get them in BusinessWeek and The Wall Street Journal. If they believe you’re the firm to deliver, you’ll probably get the business… for a while at least.

Why It’s Not Fair for Journalists and Bloggers

When you work on contingency, you only get paid when the placement happens. This puts even more pressure on the PR teams to get results – their fees are directly tied to placements. As a result, it’s likely that they’ll be more aggressive in their pursuit of stories with journalists and bloggers. They’ll demand coverage and want to know exactly when and where a story will appear – or they won’t take “no” for an answer from the journalist or blogger. This will only create more conflict between the media and PR pros, ultimately hurting everyone involved in the process. This is already happening today, and the problem is only magnified when you put media relations pros in a commission mindset.

Isn’t Media Relations Really Pay-Per-Placement Already?

Most firms are already working on a pay-per-placement model, whether they know it or not. Every agency generates fees from pursuing media opportunities. They are paid to pitch the media and to secure coverage. If they don’t deliver the goods, they’ll quickly be resigned by media-hungry clients. While an agency may deliver a lot of value beyond the clip book, they’ll often be judged by the volume of coverage they generate. There is no other option for firms but to pitch their hearts out and hope to retain clients as long as possible.

The pay-per-placement model may help some firms land clients faster, because the terms are more favorable for the client, but the outcome will ultimately be the same. If you generate a lot of coverage for the client, they’ll keep paying their bills. If you fall short of their expectations, they’ll move on. Plain and simple.

Have you ever worked on a pay-per-placement basis with clients? Did it work? Do you think this approach can work? Do you think it creates more problems? Let us know.

About Jeremy Porter

Jeremy Porter is co-founder and editor of Journalistics, a lively blog about public relations and journalism topics.

  • Jeff Rappaport

    You hit the nail on the head. There are clients who get it and understand the process, and there are others who only judge the clipings. We have found that the pay-for-play model needs to modified to accommodate compensation for bringing the opportunity to the client. Clients then need to meet the reporters requirements, and say something that adds value to the story.

  • http://www.allseasonscommunications.com Rachael Biermann

    So true… clients not only want print clips, but expect them (and base success off of them). They don’t understand that in this age of the Web and social media, Internet should be a high focus! As sad as it is, newspapers are dying. That makes it harder and harder to get clients the print clips they want. The result is more PR people pitching to less newspapers. Great blog!

  • http://www.edsonevers.com David Spencer

    Great blog and very interesting. We work largely in B2B PR and have been asked by a couple of clients to look at a modified payment by results – 80% as fee 20% based on defined targets. Problem is you are sometimes driven to achieve these targets regardless of the value to the client. Also the model is largely based on print media – how do you calculate the value of online media, number of clicks etc.

    While it would be nice to have market research to benchmark and back up the value of the PR, in the real world the client is not willing to pay for this. In these hard times they want easy to understand figures that they can present to the purchasing manager/financial controller to justify the investment. Alas AEVs still predominate.

    As an industry we need to work hard on what metrics we use that are easy to understand by the client and accurately reflect the value of the PR undertaken. Any thoughts?

  • http://www.thebravermanbrief.blogspot.com Alan Braverman

    Here’s what I’ve been doing. I prepare a proposal with a project or retainer and leave it to the prospect to bring up the issue of pay-per-placement. What I’ll then do is divide the fee into “base” and success” fees. This way I know a certain amount is coming in and if we hit certain coverage goals, we get the rest.

    It completely avoids the issue of what a specific placement is worth and it makes the client feel like their opinions are being taken into account.

  • http://www.inflexion.com.au Matt Long

    Alan. That hybrid approach seems pretty sensible and a good middle-ground. I have recently started my own PR firm and have been thinking of that approach as a solution when faced with the performance-based rem question.

  • Erin Franco

    I absolutely agree that pay-for-placement is no way to run an agency.

    Let’s say that your firm is hired to promote a monthly event, and the agreement is that the club will pay you all revenue the event generates over and above a certain amount. Well, let’s say that it rains on the night of the event–two weekends in a row. Or, one month you’re competing with a wildly popular, month-long music festival that targets your same demographic. The PR team has to do the same amount of work for an unstable amount of money. Their time and energy “costs” them as well as it costs the client, because every hour the team spends on a project costs the firm money. Especially if the PR firm is a small shop, pay-for-performance makes it more stressful to ensure that employees get paid and principals get some sleep.

  • http://www.bookiestore.com Pay Per Head Sportsbook

    Pay-Per-Placement it’s highly inefficient and creates a lot of problems between the parts.

  • http://www.linkedin.com/in/jeremyporter jeremyporter

    Thanks for your feedback David.

    I come from a B2B PR background myself and always ran into the pay-per-performance issue. Firms can’t ignore this request, as I think they’ll see it more and more in the years to come. As analytics tools become more prolific across other marketing initiatives, clients will expect the same from PR. While measurement and pay-per-performance are two different issues, they’re also closely tied.

    I agree, clients don’t want to pay for research to back up the value of PR – however, I think agencies should invest in technologies to better track and prove the value of their programs for clients. There are several Web automation platforms out there (Atlanta based Pardot for example) that make it easy for organizations to tie PR results to traffic and subsequent sales or other tangible results. Firms that integrate these technologies first will not only be better positioned in the market, but also better able to take the risk of working on a performance basis.