Four ways to set a PR budget

We talk to a lot of businesses and the overwhelming majority don’t know what they should budget for PR. And that’s not surprising. The PR industry is largely to blame for this situation, having embraced the concept of retainers – a fee paid in advance to someone to secure their services when required. That’s nice business if you can get it, but delivering professional services in the 2020s should be grounded in value-based pricing and service level agreements rather than asking a business to pay a highly variable monthly sum for the privilege of you working with them.

It might be comforting to know it’s not your fault, but it still leaves you with the problem of ‘how to set your PR budget?’ The four approaches below vary widely in their usefulness and we highlight some of their constraints, but nevertheless they should help guide your thinking.


1.  Budgeting as a percentage of revenue

There are a few of ‘rules of thumb’ that suggest investing a percentage of gross revenue, or total spend, into marketing. For example, this Deloitte survey found that B2B marketers spend an average of 6-7% of gross revenue on marketing. The average marketing budget as a percentage of total company spend is 11.8%.

However, percentages vary enormously between sectors. Some manufacturers allocate as much as 30% of their company spend on marketing, while in other sectors, like commodities, it’s just a couple of percent. Also, as an overall budget value this approach is not useful in helping to understand what you should spend on each marketing channel, such as PR. Other factors including the company’s maturity, product status and intensity of competition all influence how much you need to spend to achieve your business goals.

And while start-ups are expected to grow fast but without the brand visibility of an established business, early-stage start-ups may be pre-revenue, which makes the turnover percentage rule of thumb impossible to apply.

Given the number of variables, rules of thumb approaches to marketing budgets are just that – guidelines that are helpful for benchmarking within sectors rather than being pragmatic ways to set a budget.


2. Budgeting based on quantifiable ROI

Another approach to budget setting is to allocate spend to your most effective channels – those that deliver the most ROI, for example, in terms of leads or sales. It’s relatively easy to measure marketing ROI for channels that get a direct response such as email, Google ads and direct web traffic.

Quantifying the ROI from PR is more challenging because it enhances so many other channels. For example, a lead you capture on your website may be the result of someone reading an article that was written and placed in a relevant publication by your PR agency. PR stories should provide a regular stream of content that can also be repurposed for use with your direct response campaigns. And nurturing your brand equity through positive, consistent PR has been shown to increase profit margins. In all these cases, PR acts as a marketing ‘force multiplier’.

If you allocate your budget exclusively to campaigns that are easily quantifiable because they are attributable to direct leads, you will ignore the other activities that build your brand, while nurturing and closing those leads through other touchpoints.

3. Budgeting based on agency proposals

Another option is to set a campaign brief outlining what you want to achieve and invite PR agencies to pitch with their budget recommendations.

This approach will hopefully give you a range of budgets, but it can be difficult to do a like-for-like comparison of proposals unless you provide a very detailed brief (which, in our experience, hardly ever happens). You may be able to compare activity levels for a given budget, but it’s hard to forecast results until you start working with your chosen agency.

It’s also worth remembering that working with an agency that really understands your sector has the potential to add significant value to your business through its ideas, advice and network.


4. Budgeting based on a test campaign

A short, planned campaign is a good way to assess the value that PR and marketing can deliver for your business, without the risks that come with signing up to a 12-month contract.

A test campaign needs to be long enough to demonstrate meaningful results without feeling that you are taking a big risk.

You can minimise risk by ensuring that any spend isn’t open-ended; by not signing up to a long-term contract; by insisting that deliverables are well defined, and by working with a partner that has a proven track record in your sector.

Unfortunately, the traditional PR business model, which is based on signing up to a 12-month contract and paying a monthly retainer, puts most of the risk on the client. Signing up to a retainer can feel like an act of blind faith with vague indications of activity levels or outcomes. Often, a PR retainer will buy you a number of agency hours or days per month, but little idea of how time translates to deliverables.