What is the value of PR?
One in-house communicator has established a framework to calculate the value of his team's output
It is the question that dominates industry conferences but Thierry Nicolet, senior vice president, press relations at energy management company Schneider Electric, believes he has developed a framework that goes some way to solving the Holy Grail of PR – what is its value?
The Paris-based communicator, who has a background in marketing communications and business administration, had spent years finessing a framework to measure the value of his team’s output, but the ‘moment of truth’ occurred six years ago, when Nicolet could finally assign a figure to their contribution.
Nicolet joined Schneider Electric in 2007 when it acquired American Power Conversion Corporation (APC), which produces uninterruptible power sources, such as batteries and generators, where he had been director of media relations.
For almost ten years previously, Nicolet had been experimenting with quarterly dashboards that monitored four metrics that he felt most demonstrated the value of media coverage and highlighted movements in the underlying trends.
The dashboards considered the number of articles about each product, the editorial space dedicated to coverage, the readership of each publication and the product’s exposure in the IMtx index, a proprietary tool Nicolet developed with an agency that considers factors such as whether a headline carries the brand name or an article carries a picture. ‘We were trying to answer the question Is it better to have a big piece in a very targeted niche publication that is read by your target audience or just a quote in a major publication with a million readers? How can we mix everything together? Each article therefore has a score and we can compare these against the competition,’ explains Nicolet.
Each metric was compared to those of all competing brands in the sector, and the product’s share of voice for each calculated. So, for example, if there were 250 articles on Schneider Electric in the first quarter and 750 on the whole industry, its share of voice calculation for coverage would be 33 per cent.
‘For every statistic, what is important is variance rather than absolute number. So, if everything is measured in the same way, share of voice is completely accurate,’ says Nicolet.
PR makes money
In May 2008, the dashboards revealed that one particular product – the APC Back-UPS ES 700 – was ‘achieving significant visibility in Germany’, recalls Nicolet. ‘I wanted to know what had happened, so I went to the clippings book and I found that Computer Bild, which has a circulation of more than one million readers, had reviewed the product, and given it the ‘Editor’s Choice’ award.’
The key then was to discover whether this ‘significant visibility’ had resulted in any additional sales. Further analysis revealed that monthly sales of that specific product had averaged €28,000 prior to publication of the article. Two months after publication, monthly revenues peaked at €62,000, but for the rest of the year they averaged €50,000 per month – representing a 78 per cent increase.
In short, that one article was responsible for sales worth almost €400,000
The incremental income directly attributable to the favourable review amounted to €147,000 in the seven months following publication, according to Nicolet.
But unexpectedly, the article also had a ‘significant knock-on effect’ on other products within the range.
Average monthly revenues rose from €62,000 to €97,000, with a peak of €120,000 two months after publication. Incremental revenue until year-end totalled €244,000.
In short, that one article was responsible for sales worth almost €400,000. Nicolet recognised that a combination of marketing communications and PR had played a significant role in securing the recommendation, although it was ultimately an independent endorsement which, he points out, ‘is the most powerful of all’.
While the scale of the impact was surprising, Nicolet had already established that independent reviews in publications generated sales. He believes one of the easiest ways that communications departments can determine the value of PR is to ask customers what prompted their purchasing decision.
Customer surveys by Schneider Electric had previously revealed that purchase decisions were driven by factors including dealers, advertisements, peer recommendations, price and reviews. Indeed, the company had accepted that editorial reviews, which were predominantly generated by PR, were responsible for, on average, two per cent of all sales in Germany.
In May 2008, however, when asked why they had bought their APC Back-UPS ES 700, six per cent of all customers cited product reviews.
It was the scale of this increase that led Nicolet to refine his dashboard and also to reappraise publications with which Schneider Electric had dealings. It also prompted him to establish a more formal structure for tracking and monitoring press coverage, which is still in place today.
‘We need to focus our attention where it matters,’ explains Nicolet. ‘We had to tier the media landscape. We can’t go after every publication so we have to prioritise the media that has the largest impact with our target audiences.
‘My local teams are asked to prioritise the media as Tier 1, Tier 2 or Tier 3. Where do we have to be? Where should we be? And where is it nice to be?’ These lists are updated every six months or immediately following any changes in the media landscape.
Each team must complete a template that records the type of advertising or PR activity associated with each publication, alongside details on the type of publication it is (for example, trade or financial), the type and number of readers it attracts and frequency of publication. ‘It is a centralised process,’ he explains. ‘It is used in every country.’
Producing information by itself is meaningless. The next element of Nicolet’s framework is to track coverage because, as he says, ‘if you don’t know where you are and don’t know where you want to go, then you might end-up somewhere else’.
Dismissing advertising value equivalent (AVEs) out of hand – ‘it’s a measurement technique which agencies usually default to in order to claim for more budget’ – Nicolet considers whether coverage is ‘in the proper publication’ and how does Schneider Electric’s coverage compare to its competition.
This led him to create four tools for his teams to use to track, measure and share.
The first is a monthly activity report, in which they record highlights and lows, number and name of press releases, interviews (who, when and on what topic), contact with analysts, product reviews, events, customer stories and other details, such as budget and upcoming events.
The team must also create a monthly cuttings book, with additional information for each article that includes readership type, number and frequency of mentions of competitor products and circulation data. ‘The monthly reports basically show what we do and what we get,’ he explains.
Nicolet also encourages his teams to share press coverage or feedback swiftly using a pre-defined template, citing the relevant product, information about the media outlet in which it appeared (such as frequency and readership), the type of editorial and a brief summary of what appeared, along with links to the original pieces.‘They have to share the good and the bad,’ he explains. ‘If we know the coverage is bad, then we are prepared for any fall out.
‘We also need to know about good articles about the competition, because we have to understand how they are perceived by the media which will also be read by our customers.’
Nicolet has introduced three specific objectives for his media relations teams: they must achieve a share of voice of at least 30 per cent but also twice the value of the nearest competitor in their marketplace, and they must win 80 per cent of all awards or reviews.
Finally, they receive a centrally –produced quarterly analysis – based on Nicolet’s original dashboard – that reflects Schneider Electric’s share of voice. This is calculated by considering the number of articles, editorial space dedicated to products, how many people would have read the articles either online or in print and finally exposure in the proprietary IMtx index, and then comparing these with identical metrics for the whole industry. Each quarterly share of voice calculation is then averaged to find an annual share of voice for each metric.
Must meet objectives
But there is also a serious point to producing such reports. Nicolet has introduced three specific objectives for his media relations teams: they must achieve a share of voice of at least 30 per cent but also twice the value of the nearest competitor in their marketplace, and they must win 80 per cent of all awards or reviews.
They are also required to track competitors’ coverage. Their quarterly key performance indicator reports also include 25 graphics to track Schneider
Electric’s visibility and its competitors, such as the top 40 products quoted, most active media for all products and most active media for Schneider. ‘It is really just an Excel spreadsheet,’ says Nicolet, downplaying the complexity of the report.
This allows country teams to analyse the top competitors for each product in each marketplace, reflect on how well they are doing in terms of coverage and visibility, particularly against the competition, and to re-assess the Tier 1 publications.
While Schneider Electric employs in excess of 130,000 people in more than 100 countries, it considers the media coverage in just 43 countries even though it is active in media relations in 52 countries, because many are simply considered too small.
The detailed analysis allows Nicolet and his team to constantly refine their activities. ‘It allows us to do lots of comparisons, such as the cost of an article in the UK versus the US,’ he says.
‘Measurement is a management tool. It is not a stick or carrot for the teams. It is way for us to see why we may be performing better in some countries than others. It allows people to call for help – they can’t hide away – and we can look at why their efforts may not be achieving results. If they are not doing well, then they get my attention. It might be time to put more fire behind their activities.’
It also enables Nicolet to allocate budget more efficiently. ‘I can see what the value of spending extra money in that country might be,’ he explains. ‘The returns are clear.’
Schneider Electric’s global network of 47 PR agencies works closely with his in-house team. Nicolet will not disclose the number of in-house marketing experts employed by Schneider Electric, but concedes that – in some countries – his PR agencies act as de facto in-house. He is keen to promote teamwork and encourages the agencies to feel part of the process. The agencies are heavily involved in producing the monthly and quarterly reports, and receive regular updates on progress and achievements.
Measurement is a management tool. It is not a stick or carrot for the teams. It is way for us to see why we may be performing better in some countries than others
Recognition for agencies
But seven years ago Schneider Electric introduced a scheme to recognise the best agencies that it works with. Every year, each country president, marketing communications and PR manager is invited to assess and evaluate their agency. ‘The purpose here is for you to evaluate the areas of improvement which you sense your agency should focus on and share it with them,’ states the invitation. ‘It is a good opportunity to identify your agency’s strengths and weaknesses.’
Country managers are required to grade their agencies from one (poor) to five (role model), but they are also asked to justify decisions for each grade four and above, providing examples of work or other evidence.
‘Our country teams have to really ask themselves Am I getting the service I expect from my agency? If they only award them an average score, then that provides an opportunity to talk about it.’
While Schneider Electric’s agencies are not compelled to take part, Nicolet suggests that refusing to do so could lead to the local performance being graded by the head office.
There are four aspects of each agency’s work that must be graded. The first relates to the value of its work, which takes into account factors such as strategic input, creativity and knowledge of Schneider Electric and its products.
The second considers how well the agencies work, taking into account their knowledge of the industry, contacts in trade press and business media, and how efficiently they follow through on leads.
The third aspect considers the timeliness and quality of their monthly reports, while the final aspect considers their impact on key performance indicators, analysing the role they played in boosting Schneider Electric’s share of voice.
Each of these four aspects is weighted. For example, an agency’s performance when it comes to monthly reports is worth 30 per cent of the total mark, while the value of its work and its ease in doing business are both worth 15 per cent. KPIs account for 40 per cent.
‘We grade the agencies and then we send the results to the Institute of Public Relations Association (IPRA),’ explains Nicolet. The top agencies are invited to present their activities to the IPRA, who then decide on the top three. ‘It is great to get this third party endorsement,’ he adds. ‘We receive a report saying This agency should receive gold, explaining why and so on.’
The marketing communications managers working with an agency ranked in the top three then receive €500 to spend on team-building activities with them, while the winning agencies receive a plaque highlighting their gold, silver or bronze medal achievement.
‘The awards scheme have gone down extremely well with our agencies,’ says Nicolet. ‘It forces a yearly evaluation, allows us to identify and discuss areas of improvement and also we get to share best practice among our PR community.’
One size does not fit all
‘We do not employ a single agency globally,’ explains Nicolet. ‘I am not in favour of that as a concept, but I also want my PR managers in different countries to own their results. They are fully responsible for their relationships with PR agencies; that isn’t possible if I tell them to take my choice.
‘We use small agencies and some of the biggest PR agencies in the world. Sometimes it is better to be a large account in a small and happy agency than a small- or medium-sized account in a big firm, where their priority is their biggest clients.’
Today, Schneider Electric works with 47 agencies worldwide, ranging from small agencies, such as Eva Ventures in West Africa and Co-Workx in the Netherlands, to local branches of global organisations, such as Burson Marsteller, Ogilvy and Weber Shandwick, and is active in media relations in 52 countries.
There are processes in place to help senior management, marketing communications and PR managers make their decisions when it comes to selecting PR agencies, and on occasion Nicolet is happy to take part but will not overrule a selection.
But any agency keen to work with Schneider Electric must recognise – and accept – that they will be considered part of the in-house team and, as such, will be set specific targets that will be continuously tracked and monitored.
‘It is all about teamwork. The agency and country operation must work together as a team,’ says Nicolet. ‘They contribute together.’
This article first appeared in Issue 89