Monday, August 15, 2005

The "Seven Deadly Sins" of Using Pay for Play Public Relations Agencies and Campaigns

"Pay for Play" - the "commission sales" side of public relations, is condemned as unethical by the prestigious Public Relations Society of America - and for good reasons, not all of them obvious. This brief analysis takes a look at seven of the most common problems/issues tied to Pay for Play.

While it is possible for an ethical and upright public relations agency to execute a legitimate Pay for Play campaign for a client without scamming or otherwise taking advantage of the client, the risks of being scammed are significant, and the potential for abuse by the agency is even more significant.

Pay for Play is quite frankly seductive to some clients - "we only pay for what we get," they say, thinking that they'll save money (they won't) and - perhaps more important, they won't waste money (which they, in fact, will). Like all "something for nothing" schemes, the risk is in the fine print.

Here are just some of the risks:

1. Motivation: This is primarily a risk clients assume when dealing with ethical agencies. Because everyone in business is revenue-driven, agencies that take on Pay for Play clients will quickly lose interest if they don't generate immediate results; and in effective public relations, it often takes months of hard work (laying groundwork, building relationships with reporters and editors, creating background PR materials, etc.), none of which is specifically covered in a Pay for Play agreement. At a point in time (generally six weeks, in my experience), the lack of immediate results causes the agency to lose focus and interest. Senior staff members are assigned to "paying clients," where they can generate billable hours, and only the more junior staff keep working on the client - even then, always giving priority to paying clients and billable hours. The end result is an ultimate loss of interest and activity, and a costly (in terms of time and opportunity cost) failure for the client.

2. Loyalty: Good PR agencies develop strong bonds with their clients, and are constantly looking out for the clients' best interests. They scour editorial calendars (a time-consuming process), then spend months courting editors, ensuring their clients get covered. They seek out opportunities for product reviews (another very time-consuming process), comparisons, "shoot-outs," etc. - things which, when published, add real benefit to the client - but which are, by their nature, both speculative and time-consuming. The agencies do this because they are constantly looking to serve their clients' best interests, knowing that if they succeed, their clients will remain loyal to them. This is a two-way, long-term commitment based on mutual benefit - something that literally can't exist with a hit-or-miss Pay for Play arrangement.

3. Continuity: Public relations is not a "hit-or-miss" activity - most companies, especially start-ups (who seem most attracted to Pay for Play because of budget limitations) need a measured, sustained public relations campaigns. They need to create awareness, generate interest and motivate action - both on the company itself and on their products - and this can not be done on a hit-or-miss basis. This process, from scratch, takes months of consistent, well-funded and highly-focused activity - something that Pay for Play cannot deliver. A company and a product that are both well-known are frankly the best candidates for a successful Pay for Play campaign (because it can build on previous awareness), but they are the least likely to take such a fly-by-night approach, since they've long since learned the benefit of sustained PR efforts.

4. Counsel: Public relations is more than press clips. Strategically, PR offers counsel to clients - up front advice, based on years of professional experience - that can help clients both maximize opportunities and avoid pitfalls. Such counsel can be especially effective in times of crisis - the resignation of a C-level officer, a strike, a product defect/recall, etc. None of this counsel is available from Pay for Play agencies - or if it is, the client must always be aware that the counsel may be skewed by agency self-interest - the client's needs are never first with a Pay for Play agency, and this must always be taken into account.

5. Limited Impact: Public relations is more than just a few fancy press clips. Effective PR involves the creation and maintenance of effective websites (complete with website press rooms that reporters need in order to effectively cover a company or product), press kits, backgrounders, corporate histories, corporate exec bios, etc. One of the most important parts of PR is follow-through - the distribution and building upon individual success efforts - something no Pay for Play agency will do, as there's nothing in it for them. In some instances, companies invest in all of these tools, then let a Pay for Play group come in and skim the cream of the hard work done by others - taking the credit (and the reward) for what is essentially the work of others. However, companies without this kind of resource-base are unlikely to receive useful press coverage.

6. Value Received - 1 - Costly Clips: Pay for Play sounds like a bargain - until you run the numbers. Because there is on ongoing retainer to cover costs, and because this is a highly-speculative (high-risk) effort for the agencies, the fees received for specific and individual pieces of often-disjointed press coverage are - they have to be - extraordinarily high. No agency is not only going to take all the risk AND work for competitive rates - there is no business sense in that at all. As a result, even if the clips are useful, their cost will likely be exorbitant.

7. Value Received - 2 - Worthless Clips: In any Pay for Play scheme, it is difficult (if not impossible) to set up (in advance) criteria on which clips are useful, and which clips are less-than-useful (or even which clips totally worthless). Even an ethical agency will seek out all the low-hanging fruit, regardless of it's actual merit to the client - while an unethical agency will only look for volume. And every agency knows ways (legitimate for some clients, who understand what's being done, but not useful for all clients) to "salt" the clip files of their clients. A couple of examples of ways that legitimate PR activities can be "cooked" in order to provide Pay for Play agencies with huge windfall profits for services that should cost clients (under traditional relationships) only a small fraction of the Pay for Play reward:

7a. MAT services - in this, an agency will pay a fee to place an article (generally of 500-750 words) with one of several services that provide ready-to-run articles to small and mid-sized newspapers, mostly in "heartland" areas of the U.S. For some clients (those with widely-sold products, for instance), this is a legitimate and useful service. But for specialty companies, tech companies, new product/start-up companies and others, there is little value in this service (unless the release is carefully written and targeted). Still, a typical MAT Service release will land in 750 newspapers across the country - and if an end-user is paying $500 for small clips under a Pay for Play agreement, this one placement could wind up costing $375,000 - a huge sum for something of very little worth. Even if the clip is worthwhile, under a retainer agreement, the entire process could be handled for under $10,000 in most cases.

7b. VNRs - Many Pay for Play agreements place a premium on television coverage, and often for good reason. What end-users don't know is that PR agencies know how to create and place news stories - called "video news releases" (VNRs) - with from 50 to 100 local stations at a time, using companies that specialize in creating such news stories. VNRs are often legitimate; but they are also reasonable in cost for those who need them. However, under a Pay for Play agreement, the agency could create and place a VNR for about $25,000 - then when those 50 uses come in, collect a quick quarter-of-a-million dollars (assuming a "reward" of $5,000 per incidence of local TV news coverage)

7c. Internet - Because of the huge importance of Internet media (ezines, business news websites, etc.), coverage here is almost always included in Pay for Play agreements. What end-user clients don't know, however, is that many of these websites (Yahoo Business, for instance), automatically pick up and republish virtually every business press release sent out over PRNewswire or BusinessWire. If a press release costs $250 to place in a small market, and the reward for Internet placement is just $500 per "hit" (not unusual or unreasonable), literally every press release issued is guaranteed of earning the Pay for Play agency a $5,000 profit - even if the release is never picked up by any legitimate news sources.

7d. Wire Services - Wire services such as The Associated Press, Bloomberg and others (not to be confused with paid press release services, such as PRNewswire or BusinessWire) are useful ways of disseminating news to a large number of local and regional news media sources. When a story has a certain sizzle, it can be picked up by many newspapers around the country, all based on a single placement. One client we worked with had an AP story that was picked up (according to Bacon's media clipping service) by just over 1,000 newspapers, radio stations and other media - all for a single PR placement effort that took about five hours, beginning to end. But under a Pay for Play agreement, those 1,000 clips would have cost the client around $500,000 (instead of the $750 they were billed for the effort). Wire services are legitimate, for sure - but is any one story, endlessly repeated, worth hundreds of thousands of dollars?

Bottom line - It is the business of PR agencies to create news coverage for their clients - and to do this, ethical PR agencies have a wide variety of perfectly legitimate approaches that are routinely used to generate coverage on an ongoing, reliable basis - all with the bottom-line intent of helping the client meet their corporate goals for image, awareness, and business support. Under a retainer agreement, these legitimate approaches provide the foundational coverage that solid campaigns are built on - they are not the end-result, but only the first step. However, by "gaming" the system, a creative and profit-driven Pay for Play agency can cost a client literally hundreds of thousands of dollars in costs, without generating anything like reasonable benefits for those costs. Not all Pay for Play agencies are unethical - many provide a legitimate service for those willing to take the risks involved - but very seldom do they generate sustained PR efforts that, in a cost-effective way, really help their clients.

Effective PR campaigns are well-planned, well-supported, and sustained over an extended period of time. They often include sage counsel (including crisis counseling when a business venture "explodes" in the client's face). Each clip generated is the result of a targeted effort linked to the plan (and ultimately to the client's bottom line goals). They support sales, help launch new products, build investor confidence, or lay the groundwork for future corporate expansion. While any of these things "might" happen under a Pay for Play agreement, all such results are secondary to the agency's primary goal - create clips (of great or little value) in sufficient quantity to generate the kinds of profits that support the risk such agencies are set up to generate.