Companies wanting to make the most of their PR budgets these days are discovering one of the industry’s best kept secrets that is effective, mitigates risk and beats the traditional retainer-based agency in every way. It’s called Pay-For-Performance PR. There are only a handful of agencies that operate on this fee basis amongst the tens of thousands of PR firms throughout the entire U.S.
Most of them offer the same service, if not better, than the big retainer-based agencies, but at a fraction of the cost. They’re driven to perform because they only get paid for what they deliver while retainer-based agencies charge for their time and their overhead, but are not accountable for results. If they get media placements, that’s great, but if they don’t, you’re still left holding the tab.
Here’s how it works. When a company engages a retainer-based agency, they are charged a flat monthly fee based on the number of hours they estimate they need to work in order to get the job done. $10,000 a month is an average fee, but it can go as high as $20,000 or even $30,000 a month.
Once the retainer is established, the money is divvied up amongst the team in billable hours, much the same way a law firm or accounting firm handles its business. The executive who brought in the business bills for “managing” the account, which is usually about 10 hours per month, costing the client as much as $350 per hour, or $3,500 of a $10,000 retainer. The executive sets assignments, approves press releases and written materials as well as handles communication with the client but never pitches the press.
In these large retainer based agencies, the executives are used as sales people and compensated for the amount of business they generate for the company. But, unbeknownst to the client, that executive who closed the deal is the person with the most PR experience, yet does the least amount of work on their campaign. The rest of the retainer is split up among a few junior associates who do the writing, the pitching, the calling and the tracking.
The staff assistants get into the action by billing $75 per hour for activities such as phoning, faxing and organizing documents. They may even charge to create the client’s bill at the end of the month, compiling out of pocket expenses like shipping together with the hourly billing as tracked by the team members. The top executive massages the numbers so they fit the retainer, and it then takes the assistant as long as two hours to compile the bill.
A retainer-based agency may charge clients as much as $125 per month just to assemble their bill.This is a huge difference with how Pay-for-performance PR works. Most firms that operate in this manner set a simple fee for each media placement the firm obtains and the client signs up for a campaign with a specific budget in place. Then, one by one, the placements are made, confirmed and executed and the client is billed weekly or monthly against their agreed-upon budget. The campaign never goes over budget, and every client dollar is counted against a real media placement rather than for “best efforts.”
As marketing budgets are shrinking, companies are pinching pennies and seeking a more quantifiable return on their PR investment. Pay-for-Performance PR not only reduces risk and costs the client less, but more importantly, these firms bring home the PR bacon for clients, or they don’t get paid.