The dilemma of budgeting for PR

How much should small to mid-sized companies budget for PR? Unlike the advertising discipline, which used to have an answer of between 2 and 5 percent of gross revenue, there have been no real guidelines for PR spending, and for good reason.

PR has traditionally offered no real guidelines for how much organizations should spend. The truth is that there is no standard, just as there is no standard PR program. In an ideal world, there might be a standard for a category of activity—let’s say writing and distributing news announcements—but even that depends on the size of distribution, the targets, the follow-up within the plan, etc. Is there a price for just social media? Maybe, but social media as a stand-alone PR activity would not carry the bite of a program paired with digital communications, or when it’s a cog in the big wheel of a PR campaign.

I know, not much help here. Is there a standard percentage that companies should consider when weighing the PR cost versus gross revenues? Not really. Costs must be considered against goals and anticipated ROI.

The price of PR depends on the scope of work. Clearly, costs vary between in-house departments versus outsourced agencies, but not one or the other will prove to be more cost effective. So cost analysis matters when budgeting. In-house departments, for example, have to consider the size of staff, the internal costs per professional and the real estate needed. Outside firms have to consider their overheads and mix of senior professionals and junior staffers, among many other line items.

They will however differ as to their PR effectiveness. Can a small to mid-sized organization trust an outsourced agency to be on par with a potential in-house team to understand its niche industry? What is the learning curve for an outside firm, and what costs would be incurred? How does your in-house department’s market intelligence of current trends and cutting edge platforms compare to an outside firm? There are other considerations: Must an in-house staff be reduced during company down times? What are the lasting results to a company’s reputation? All are costs, if hidden at first glance.

Yet organizations are still asking about how much to spend. It often depends on where PR budgets fall. Are they within an overall marketing budget or as a separate PR budget?

In a recent article, Michael A. Monahan cited certain marketing research firms that could help guide the budget dilemma for marketers:

1. SiriusDecisions stated that smaller companies usually spend more on marketing as a percent of revenue than do larger companies. Also, non-software companies with revenues of less than $100 million spent between 3 and 10 percent of revenues on marketing, while larger non-software companies, with revenues of more than $5 billion, spent between 0.5 percent and 5 percent of revenues on marketing.
2. The University of Southern California’s Annenberg School for Communication and Journalism, in its Communication and Public Relations Generally Accepted Practices Study (GAP, 2014), found that PR most often falls within marketing (26 percent), that is, except for companies where public relations reports to the president/CEO.
3. Research firm Gartner says companies spent 10.2 percent of their revenue on marketing in 2014; digital marketing accounted for 25 percent of the total marketing budget.
4. Digital high-end estimates from The Holmes Report suggest that North American marketers spend 6.5 percent of their budget on public relations.
5. The Content Marketing Institute reports that marketers spend 28 percent of their marketing budget on content.
6. IDC, provider of market intelligence, notes that companies spent 3.8 percent of their marketing budget on public relations, 5.7 percent on branding and content, 1.9 percent on social marketing and 1.1 percent on analyst relations, all typically handled by a public relations agency.
7. A 2014 report from Forrester says marketing consumed an average of 4 percent of company revenue and that marketers spend 12 percent of their budgets on content and 5 percent or less of their marketing budget on PR.

What is obvious, is that the function of PR has become an expense on par of accounting, legal, operations, sales, etc., and cannot be put aside by even the smallest of companies. What else is obvious, is that in this landscape constant interconnection, no company can afford to be left out of the industry and social conversations.

And it is PR, whether in its full scope or not, that is the engine that can make this happen.

Therefore it is critical, to any sized-company, to budget for it accordingly.

Noemi Pollack is CEO and Founder of The Pollack PR Marketing Group.