How free publicity increases your profits - Wallace Baker Public Relations, Sydney

How publicity yields higher profits

By Wal Baker

Publicity is free in that when you distribute a press release, the media publishes it free. That is you do not pay the media for publishing it.

Yet good publicity is better than just free – it is profitable! That means it pays you the business owner in increased profits. It reduces your selling costs. It enables you, the business owner or manager, to increase your prices and widen your margins. It increases your volume of sales, sales turnover and increases profit.

How free is publicity? If any publicity is free, free as dirt, then good publicity is more than free, it is like pay dirt. As a mining company hires engineers to help extract ore from the earth, other companies hire publicists to achieve publicity. Like you, they invest money in expertise and expect a return on that investment.

So your business pays the cost of gaining good publicity, that publicity increases your profit and that profit more than pays for the publicity.

If all the publicity you receive in a year does not increase your profit enough to cover the cost of achieving that publicity, then that publicity is not free. If the publicity campaign does not improve your annual profit then you may need to either change your public relations consultant or publicist or improve the way you market your goods or services.

Good publicity, like other aspects of public relations and business in general, usually requires a long-term strategy and perspective. Some publicity campaigns continue for months or years before they achieve a satisfactory return on investment.

Credible publicity

Publicity can be defined as a form of promotion which informs the public and which is apart from advertising. The most credible and pervasive publicity usually is that generated by distributing news releases to the media.

Most businesses need publicity as well as advertising. Imagine a small shop with a display window either side of the entrance. Say that the retailer displays advertising in one window and publicity in the other. The retailer keeps a mix of both advertising and publicity and does not leave either window empty. A business that fails to advertise and publicise is like the man who winks at a woman in the dark.

You need to appreciate the difference between advertising and publicity. Publicity stands midway between advertising and news. Advertising is that clown waving to you from the side of the road. News is the clown being hit by a bus. Publicity falls somewhere in between.

Most businesses need publicity to survive. They need to publicise or perish. That is why not publicising a business can cost more than publicising it.

You want to know how much publicity is costing your business and how much it is increasing your profits.

Estimated return

How do you measure the return on your investment in publicity? You can only estimate it.

First you may want to estimate the value of your media publicity compared with advertising. This sort of comparison is somewhat relevant when the objective of your publicity project is to increase sales turnover.

In comparing these two very different forms of promotion, bear in mind that publicity generally earns more merit and credibility than advertising and can benefit your business in many ways that advertising cannot. So publicity generally is worth more than advertising. Still most businesses, particularly those selling consumer goods, must rely more on advertising than on publicity to turnover their sales.

You monitor the publicity you receive and record the size of your publicity clippings from newspapers, magazines and newsletters, printouts from the internet, broadcast time from radio and video clips from television. You then calculate how much that coverage would have cost you if you had bought an equivalent amount of advertising space and commercial broadcast time in the equivalent media. Multiply printed column centimetres or seconds air time by the advertising rate for the same media.

You may compare the cost of gaining coverage on internet sites to the cost of banner or text ads on those sites. When the publication of your news releases on the internet increases your ranking with search engines, you may compare that to the value of advertising with the search engines.

Then you estimate the cost of achieving the publicity. This includes the fee you pay to your publicist or public relations consultant and the cost incurred by your marketing department in contributing to the publicity campaign.

You need to separate general costs incurred by your advertising, sales and marketing departments from costs incurred in gaining publicity. You may not need to separate the costs of designing, printing and distributing sales brochures, writing and distributing news releases about new products and other promotions which are all included in the same publicity campaign being conducted by the same public relations consultant.

Investment value

Next you compare the value of your publicity with the cost of achieving that publicity. So if the value of your publicity exceeds the cost of gaining it, then you may consider that your publicity campaign is successful in itself.

Now you want to determine whether the publicity has increased your sales turnover. You estimate this not so much by monitoring the coverage achieved from your news release but by monitoring the market response to it.

You monitor the number of telephone and email inquiries received by your sales department and statistically record responses to the publicity. You study your itemised record of telephone calls to compare the volume of calls received before the release of the news with the volume of calls received after the release. You may continue this comparison for days, weeks or months as your news release is broadcast on radio and television then published on the internet and in newspapers and magazines.

You monitor your web site statistics to determine whether your publicity has increased the number of people visiting your web pages, including your chat pages. You may also use a form page to survey the response to your publicity.

You also consider records of leads and sales generated by your sales staff, retail outlets, distributors or franchisees to observe any statistical increase following the release of the news release.

Also you consider the results of marketing surveys before and after your publicity campaign. You may ask people to complete a questionnaire or to attend a discussion group and survey them to discover whether they remember reading, viewing or hearing news about your new products and whether they have become aware of the features and benefits of those products.

Counted results

If you are a retailer, you monitor any increase or decrease in customer traffic as a result of the news release. If you organise sporting events, you monitor ticket sales or gate receipts. If you stage a trade exhibit or product launch, your may record the number of inquiries and leads generated. If you hold a seminar, you record bookings and attendances.

You may subjectively consider the quality of the media coverage you receive, whether that coverage has been favourable to your business. You may note whether your media release resulted in prime-time television coverage or a text link on a low-ranking web site. You may consider the extent of coverage based on newspaper and magazine circulation figures, internet site rankings, broadcasting reach and so on. You may consider the extent to which the information you have disseminated has reached the readership and audience for which it was intended. You may count how many times your brand name was mentioned in magazine articles or how many times radio stations repeated the news about your business.

When your inquiries, leads and sales increase substantially as a result of your publicity campaign then you may consider the campaign to be successful.

Unless a retailer stocks the goods he promotes in his display windows and employs marketing and sales staff to sell those goods then he cannot recover the cost of advertising and publicity.

So finally, you estimate your return on investment to determine whether you have been able to recover the cost and convert your publicity into profit. Your basic accounting formula for calculating this is sales revenue less cost of sales is gross profit, gross profit less other costs is net profit, and net profit divided by investment is your return on investment.

If you and your accountant estimate that the return on your investment in the publicity campaign is sufficient, then you may conclude that the campaign is indeed successful.

Campaign management

Your public relations consultant or publicist should be the best person to manage your publicity campaign, including the distribution of your news releases and the monitoring of media coverage from those news releases. Your consultant should be an expert strategist who knows exactly how to plan and manage a cost-effective campaign that maximises your publicity and substantially increases in your turnover. A good publicist obeys three rules for success: 1) Tell the news; 2) Never tell all; and 3) …

You and your accountant should be the best people to determine whether your publicity campaign has improved your profit and yielded a satisfactory return on your investment.

For most businesses, advertising and publicity are essential. If that is true of your business then your success depends on the effectiveness of your sales, marketing and promotional campaigns, including your publicity.

So you do not just ask “How free is publicity” or “Can our business afford publicity?” but you ask “How can we use publicity to increase our profits?”

Publicity is a marketing tool. A good publicist is intellectual capital, like capital equipment. A business must invest in equipment and use it to generate a profit. Robots and publicists improve your profits.

A car manufacturer may invest in new robots for an assembly plant. Those robots are an asset only if they are used to manufacture vehicles that consumers buy at a good price, otherwise they are a liability.

Some computers and robots may be classed as intellectual capital because they know more and perform more reliably than humans. But still, like all capital, they must pay for themselves and earn profit.

If you postpone investing in necessary capital for too long, while your competitors invest in it, you soon may find that you cannot afford to invest in it or even afford to stay in business.

Cost cutting is but one part of the business equation. The business man who keeps undercutting his competitors will not be invited to their party when he goes out of business.

A housewife may buy a new fridge just to match the style of her new stove. That is buying a luxury good, not capital equipment. A restauranteur buys a refrigerator to improve the efficiency of his kitchen staff so that they can prepare meals more quickly and cheaply to be sold at a wider margin for profit.

Increasing profit

Good publicity can reduce your overall selling costs, widen your profit margins and increase your sales turnover. To achieve effective publicity you not only need to hire an excellent publicist but also need to manage your business to convert the publicity into higher profit. This return on your investment finances further publicity to increase future sales and profit.

Most publicity, even if it aims directly at increasing corporate presence, factory productivity, staff recruitment, employee participation, investor shareholdings, capital value, membership, sponsorships or other objectives instead of sales turnover, still aims ultimately at improving profits.

Once you estimate the value of your publicity and how much it improves your profits, you may discover that the cost of monitoring and estimating the publicity is a large proportion of the overall cost of achieving the publicity. You may even be spending more on monitoring and estimating the publicity than your publicist is charging you to research, write and distribute news releases and liaise with journalists. This discovery may give you confidence to invest more in gaining publicity and less in monitoring and estimating.

Still you need to continue some monitoring and budget estimating to ensure that you do not invest too little or too much in publicity. Your business has an optimum amount to invest in publicity and that optimum varies with circumstances. When you invest below that optimum or above it, you reduce your return on investment.

Optimum expenditure

A good publicity strategist can achieve more publicity to a higher optimum level for most businesses, large or small. Still, the optimum level of expenditure on publicity is usually less than the optimum for advertising. This is because the amount of publicity you gain depends on the amount of news your business can generate

A publicly listed banking institution may be able to generate more news than a private engineering workshop because a bank has more customers and shareholders who rely on it. So more newspaper readers, internet visitors, radio listeners and television viewers are interested to know about the bank.

You budget for publicity by allocating a proportion of your profits for it, just as you do with advertising. You decide this allocation by considering your estimated return on investment.

Most businesses expect to budget between $3,000 and $10,000 a month to pay for a professional public relations campaign. Small businesses expect to pay from $500 to $3,000 a month and large businesses more than $10,000 a month.

As a general rule, a business may expect to spend about 10 per cent of its publicity budget on estimating the value of the publicity. This applies in particular to public companies, because they are accountable to their shareholders.

Budget control

If you are starting a new business, you probably will need to invest a larger proportion of you overall budget on advertising and publicity. Your initial investment in publicity for a new company may exceed your return on that investment

When you are a new client, you may need to pay more to your publicist in the first month than you have allowed for in your monthly budget. This is because the publicist needs to research a new client, plan an overall strategy, prepare customised distribution lists and perform other tasks in setting up a new account. You recover this extra expenditure in months to come by spending below budget.

You pay different amounts for publicity month by month, depending on what news you have to disseminate about your company or its products and services. If you have a record profit or a new range of products to announce one month, you may spend $4,000 on publicity. With nothing so newsworthy to announce the next month, you may spend only $1,000. At the end of the year, this expenditure should average out to your monthly budget of $3,000.

This way you control and cover your publicity costs and gain the publicity you need to achieve higher net profits. Even a big manufacturer of automobiles with a wide international market and a huge budget for publicity must keep converting publicity into sales and profit or lose customers and shareholders.

You succeed in business by earning more profit than your publicist can spend, faster than he can spend it. That would be a bit like a successful husband supporting an extravagant wife in the manner to which she has become accustomed ... except that you need not divorce your publicist.

Final assessment

How much is publicity ultimately worth? Nothing unless it achieves your objectives. If the ultimate objective of your business is to profit, as it is with most businesses, then the publicity you achieve is worthless unless it improves your profit.

You may receive astonishing publicity with wider coverage than you imagined. It may have magnified your corporate presence and brand names. It may have helped you to reduce your overall marketing costs. It may have considerably increased your sales turnover. Yet it is worthless unless or until it increases your net profit.

Improved profit is the benefit to be derived from publicity. Improved branding, turnover, shareholdings, sponsorships and the rest are like the sales features of publicity. You do not invest in a new photocopying machine merely because it features faster output at a higher resolution. You invest in it because it provides the benefit of improves profit.

So all those methods you use to monitor, record, measure and estimate the value of your publicity may be necessary only to the extent that they help you to more accurately determine the return on your investment in publicity and the improvement in your profit.

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Wal Baker is a public relations consultant and publicist of Wallace Baker Public Relations - www.wbpublicity.com.au .