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Public Relations

How Much Should You Spend On PR?

By April 30, 2015 March 27th, 2018 2 Comments

Hiring a PR FirmSo you’re thinking about hiring a PR firm.

If you’ve gotten this far, you’ve probably already evaluated the costs and benefits of bringing in a PR agency to build your messaging and tell your story, as compared to making an internal hire to do the work.

When you think of it, it’s really a rent versus buy comparison.

Just like making a home or vehicle purchase decision, there are costs and benefits to consider. Do you like the flexibility of being able to move into a cool new neighborhood every couple of years? Or would you prefer the stability of an asset whose value grows over time? Do you like having the newest set of wheels on the street? Or are you the type who enjoys life without a monthly car payment?

The same applies when hiring your PR resources.

Companies often call employees their most important asset – a bit of a misnomer as it implies that the company actually owns that individual. However, just like an asset, companies often make investments in their people in terms of time, training, resources and, of course, money. Depending on the level of staff you hire, that investment can run you $5,000 to $10,000 a month or more.

In return for that investment, you expect the people you hire to be fully committed to your organization – learning, understanding and in the case of a PR professional, advocating for your company or your cause.

However, that commitment may come at a cost. Is your PR team staying abreast of the latest trends or the latest technology available? Do they have the capacity to flex to peak periods of activity, or special situations? Can you rationalize their cost when times are slow and you need to pull back the reins on departmental spending? Probably not.

And that’s where the resources of a public relations firm may make sense. You gain, potentially, global resources: professionals exposed to a variety of industries, technologies, scenarios and even writing styles to which your rank-and-file public relations practitioner may not have access to, since they’re spending so much time looking inward; focusing on your story, your strategies and your technology.

But how much should you spend?

The answer, like many things, is “it depends.”

However, prominent research exists that may offer some guidelines as you plan your public relations program.

Outside of those companies where the public relations function reports directly to the president/CEO, public relations most often falls within the marketing function (26%), according to The University of Southern California -Annenberg, in its Communication and Public Relations Generally Accepted Practices Study (2014).

On the high end, research firm Gartner says companies spent 10.2 percent of their revenue on overall marketing activities in 2014, with digital marketing accounting for 25 percent of the marketing budget. Digital advertising, content marketing and website development were the largest components of the digital marketing budget.

Marketing research firm SiriusDecisions, tempers Gartner’s estimate, saying that smaller companies, spend more on marketing, as a percent of revenue, than do larger companies. For example, SiriusDecisions said that, in 2014, non-software companies with revenues of less than $100 million spent between 3 percent and 10 percent of revenues on marketing. By comparison, larger non-software companies, those with revenues of more than $5 billion, spent between 0.5 percent and 5 percent of revenues on marketing.

By contrast, IDC’s look at marketing spending, which include public relations and affiliated activities, says tech companies spend a weighted average of 4.5 percent of revenues on marketing, with a weighted-average high of 7 percent for software companies and a weighted-average low of 1.9 percent for services companies. And it’s a growing category, IDC said 51 percent of IT companies increased marketing spending in 2014. A number validated by Gartner, which said 50 percent of companies planned an increase in 2015.

IDC also provides perhaps the best look into how companies spend on the mix of marketing initiatives, saying 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 functions typically handled by a public relations agency. Similarly, a 2014 report from Forrester says marketing programs consume an average of 4 percent of company revenue. Forrester goes on to say that marketers spend 12 percent of their budgets on content and 5 percent or less of their marketing budget on PR.

Marketing Budget Allocation

When looking specifically at public relations, the high end of estimates suggest that North American marketers spend, on average 6.5 percent of their budget on public relations initiatives, according to The Holmes Report. On the other side of the spectrum, USC – Annenberg suggests in its 2014 report that PR budgets were .06 percent of gross revenues (2013).

Separately, according to The Content Marketing Institute, marketers spend 28 percent of their marketing budget on content.

So, in summary, a $1 billion firm can expect to spend between $40 million and $102 million on various marketing activities, with core public relations work consuming between $600,000 and $2.6 million. Using the various numbers described in these reports, below is a snapshot view of what a marketer at a $1 billion company might expect to spend on various marketing and public relations initiatives:

$1B Company

Gartner

IDC

SiriusDecisions

 

Forrester

USC Annenberg

The Holmes Report

Content Marketing Institute

Marketing

$102M

$45M

$55M1

$40M

N/A

N/A

N/A

Digital

$25.5M

N/A

N/A

N/A

N/A

N/A

N/A

Content

N/A

$2.5M

N/A

$4.8m

N/A

N/A

$12.6M3

Public Relations

N/A

$1.71M

N/A

<$2M

$0.6M

$2.9M2

N/A

Social

N/A

$0.85M

N/A

N/A

N/A

N/A

N/A

Analyst Relations

N/A

$0.5M

N/A

N/A

N/A

N/A

N/A

1 Uses 6.5 percent of marketing budget x IDC-estimated $45M marketing spend

2 Uses 28 percent of marketing budget x IDC-estimated $45M marketing spend

3Uses the midpoint of a $40-70M range for a $1B company

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