Many PR agencies are recommending against traditional billing by the hour and instead employing a more results-based invoicing approach. In the past, determining results meant counting clips and comparing column inches of news articles to the cost of similar advertising space. But now media monitoring and measurement tools enable PR agencies to track how their campaigns meet specific client objectives.
Problems with Billing by the Hour
Some PR agencies believe billing by the hour is simple and straightforward. Others say the method has several considerable disadvantages. Billing by the hour is unpredictable and inefficient. Most significantly, some clients fear that billing by the hour encourages PR agencies to work more slowly or deliberately drag out their time. That’s probably not true, but hourly billing certainly doesn’t promote greater efficiency or more productivity or faster results.
Jason Mudd, managing partner at Axia Public Relations, argues that billing by the hour can cause unethical behavior. Experienced PR professionals, having completed many similar projects previously, can estimate quite accurately how much time they need to complete a project. Yet some PR agencies mislead clients by quoting low hourly rates and then increasing billing through additional hours. Despite initial lowball quotes, their billings jump as they run up hours.
While such tactics may not be common, they do exist and not just in PR agencies. Stretching time has been known to happen with many other categories of creative service personnel including architects, designers, art directors, programmers, project managers, and others.
Other unethical billing practices include reporting time inaccurately or inappropriately. Some professional services, including PR agencies, may bill clients for on-the-job training of junior associates. “What about when a firm takes employees to lunch for an hour, discusses a number of clients, and bills each of those clients a full hour?” Mudd poses.
Again, it’s not common, but it has happened.
Billing by the hour is also inefficient. Because tracking time takes time, clients must pay PR firms for time they spend tracking and reporting time. Other service professionals, including lawyers and accountants, face the same issues.
Fearing the potential for escalating billings, some clients may hesitate to share critical information with the service professional – and thus lose out on PR, legal or accounting opportunities or cause problems that could have been averted.
“At our firm, we don’t ask our college-educated and highly experienced PR professionals to enter time sheets. Instead, our team focuses on the activities that drive desired results,” Mudd says.
Monitoring PR Agency Staff Time
Most clients ask agencies to furnish regular reports on activity and results. Some request staff timesheets to monitor how they spend their time. Frequent communication – with formal check-ins at least once a week – is highly recommended.
“But timesheets and meetings only go so far,” says Dorothy Crenshaw of Crenshaw Communications. “The best way for any company to assess its return on investment for PR expenditure is to agree upon success metrics in advance. There isn’t a universal formula for measuring PR success. But with a reasonable investment of time and budget in advance of the relationship, most clients can agree on methods that measure what PR does well.”
In the past, PR firms boasted about their media clips and advertising equivalency values (AVEs). Some now emphasize impressions. However, PR measurement experts warn that AVEs and impressions are highly flawed metrics for measuring PR effectiveness.
Some clients prefer “pay for placement” billing as a form of value pricing that entails paying for each earned media placement or for placements above a given quota. Most PR agencies avoid pay-for-placement because it overlooks the value of strategic PR and rewards a short-term approach.
Modern PR Measurement
Rather than counting media clips, PR agencies now pick metrics to track based on the client’s objectives, such as search engine rankings, Website traffic, brand sentiment, and leads and sales. In measuring PR success against corporate objectives, it’s crucial to implement valid ways to measure success. Leads and sales generated or impacted by PR can be tracked, for example, if the earned media placement contains a unique URL to an order or information page on the website.
To track PR success for billing purposes, PR measurement experts recommend that PR professionals:
Allocate funds for measurement The PRSA recommends that 5 percent of a given PR budget be reserved for measurement. PR measurement experts recommend as high as 15% of a project budget for measurement.
Determine a base monthly payment for strategic advice, program development and standard PR activities. Then, develop a formula for additional compensation based on PR results that are coupled to corporate objectives.
Benchmark awareness at the outset of the campaign, such as prominence of brand mentions, customer complaints, reviews and earned media coverage and overall sentiment. Measure incremental improvement in awareness.
Measure what is most relevant. “Some clients will count clips, but it may be more useful to analyze the message pull-through in the earned media generated by a PR campaign,” Crenshaw says. Most importantly, measure the impact of PR on specific corporate goals.
Monitor your brand’s coverage across all media channels including news and social media, advises Kate O’Sullivan, owner of PR agency, ADPR.co.uk. In addition to conducting quantitative measurement, consider qualitative outcomes to analyze the content of the coverage, O’Sullivan writes. Were key messages included? Was the tone of the article positive? What share of voice did your brand receive versus competitors? Measure not just for media placements and reach, but for positive impact.
Select an appropriate measurement tool. Firms touting measurement tools abound, but few can meet all your needs well at an affordable price. When reviewing media monitoring and measurement services it’s critical to research their media coverage, clip accuracy, customization abilities, graphic depictions and other capabilities.
In the end, billing PR agency services based on results instead of billing by the hour will build greater trust between the client and the agency. With superior results, the agency will earn more and the clients will gladly pay the higher invoices because the agency produced improved business results.
Bottom Line: Many PR agency veterans now recommend against billing by the hour. Although once prevalent and still popular, billing by the hour causes inefficiencies and raises ethical issues. Instead of trying to track hours, PR pros can track results with the help of advanced PR measurement tools.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.