What it means
PR professionals work to get accurate and favourable stories about the company into the media, to prepare executives for interviews and to manage the message in a crisis. Unlike advertising, which is paid space the company controls, PR aims to win coverage through credibility, so readers trust it more.
Because the company does not pay for placement, it cannot demand a particular result. There is a financial side to the work.
The cost of a PR team or agency usually sits in marketing or communications expenses, and a large share of that spending is fixed, such as retainers, while some is variable, such as event costs. Finance teams usually budget for the retainer separately from one-off campaigns.
In listed companies, PR overlaps with investor relations, the team that deals with shareholders and analysts. The two must be careful to share the same facts, because a statement made to the press can move the share price and is subject to disclosure rules.
PR becomes critical during bad news such as a product recall, a data breach, a profit warning or a legal dispute. The way a company communicates in the first days often decides whether customers and investors keep their trust, and a poor response can cost far more than the original problem.
Measuring return is the hard part. Typical indicators are the number and quality of media mentions, the tone of coverage, website visits from news stories and, ideally, sales leads, but it is difficult to link any of these directly to profit.
The nuance is that PR cannot repair a weak product or a poor decision. It is best treated as the voice of the business, which only works if what is being said is true.
Credibility, once lost, is very expensive to rebuild.
In practice
Real-world examples.
Example
A fintech company launches a new payments product and hires a PR agency on a monthly retainer. The agency secures articles in three trade publications, and the marketing manager tracks how many website visitors from those articles sign up for a trial. At the end of the quarter, the cost of the retainer is divided by the number of sign-ups to give a rough cost per lead.
Example
A restaurant chain discovers a food safety problem at one site. Its PR lead issues a prompt statement, closes the site, and keeps customers informed, which protects the reputation of its other locations. The finance team tracks the cost of the closure and compares it with the sales lost across the group.
Example
A listed manufacturer is about to announce a profit warning. The chief financial officer, the head of investor relations and the PR director agree on a single message and timetable so that no group gets information early. Legal advisers review the wording so that it meets disclosure rules before it is published.
Case study
Seen in the real world.
Greenway Appliances is an illustrative, fictional manufacturer that discovered a fault in one battery model. The leadership team had to decide quickly whether to announce a recall.
The communications director recommended an early public announcement with clear instructions for customers, and the finance director estimated a recall cost of $4,000,000. Waiting, she warned, could add injury claims and loss of trust that would be far more costly.
The company announced the recall within 48 hours, set aside the cost as a provision in its accounts and saw sales recover within two quarters. Customers and retailers gave credit to the company for acting quickly and openly. The illustrative lesson is that good PR is partly a financial decision: honest early communication can cost less than delay. The finance team now keeps a small contingency for communications costs in every annual budget.
Watch out
Common mistakes.
- Confusing PR with advertising, when PR relies on earned coverage and credibility, not on paid placement.
- Treating PR as only a good-news service, when much of its value comes from handling bad news carefully and quickly.
- Letting PR and investor relations give different messages, which can breach disclosure rules and confuse the market.
Questions
People also ask.
How is PR measured?
Teams usually track media coverage, tone, reach and website visits, and the more advanced ones try to link these to leads and sales.
Where does PR spending appear in the accounts?
It is normally recorded as a marketing or communications expense in operating costs, not as an asset. Costs related to a one-off crisis may be shown separately if they are large enough to matter to investors.
What is crisis PR?
It is the planned response to a damaging event, aimed at limiting reputational harm and showing stakeholders that the company is in control. A good plan names the spokesperson, the approval route and the first-hour actions in advance.
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