FiftyOneZeroOne

ROI – Where next?

Posted on: June 10, 2011

Getting ready for a blast of papers and industry promotion on PR ROI: The vexed issue of Return on Investment got special focus on the final day of the European Summit on Measurement in Lisbon. I was the academic member of a panel of six that chewed it over.

Although there is a general view amongst practitioners that ROI must have a place in PR, mainly because some clients want to express all organisational activities as financial returns, there is debate as to whether ROI should only be expressed in a financial manner (mainly US) or whether it is applied more loosely to include intangibles (Europe).

In the US, the Council for Public Relations Firms (CPRF) is moving rapidly to offer a definition of ROI with assistance from AMEC. The aim of these organisations is that the ROI formula is adopted world-wide so that there is common language – and clients can see that PR does offer a return on investment. It may be ready by the end of this year.

I still have doubts as to whether ROI, other than in a strictly financial format, can be re-purposed into a more general expression of value creation or contribution to organisational efficiency.  Business managers understand what ROI is, so why would they accept a mixed-concept PR ROI. What’s your view?

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3 Responses to "ROI – Where next?"

Hi Tom, I thought that I might give it a try. ROI, in my submission is a deeply relationship based measure.
It may come as a surprise to the accountants.
It may also come as a surprise to AMEC.
The answer is much more complicated that either might imagine and it may also offer a new way of thinking about public relations (in all its many manifestations).

David: CPRF in the US wants to announce an answer to a 40-year-old conundrum by year’s end, so you’ll have to be quick!

Attempting to find the value of PR based on empirical research will be very hard. Even with a huge research budget, it is impossible to come to any serious conclusion.

If wealth is based on relationships (an historical truth), the idea of ‘investment’ needs the element of relationship measurement. The accountants have not got any where near this which is why ROI in commerce is still not very good at predicting outcomes.

In PR (using the normal accounting conventions for identifying ROI) we have a description of ROI which can be described as (Gain from Relationships minus Cost of Relationships) divided by (Cost of Relationships).

Here is a view of ROI based on Bruno’s research: (Gain from Nexus of Values minus Cost of Nexus of Values) divided by (Cost of Nexus of Values). Where nexus of values represents the actors within what some might call a ‘public'; stakeholder group; market segment etc.

The value of PR is in its ability to lever positive value (convergence) from a nexus of values.

There is not a $ sign to be seen anywhere and so CPRF will come up with, at best, a fudge.

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