Four years ago, while working at a Top-5 global public relations agency, I thought about opening a firm that catered exclusively to small and emerging tech companies. My goal was to offer industry-best practice media and influencer relations, for startups, while delivering the highest ROI for building clients’ industry thought leadership.
In addition to offering these services, I was looking for a pricing model that would be profitable for the firm and best serve the needs of startup clients.
The firm we envisioned would rely heavily on fostering and nurturing client relationships with industry influencers. This forced us to examine the billing models from a different perspective. Which turned out to be hugely positive.
So, a little more than three years ago, we opened the doors to a new firm. It leverages what we call a hybrid pay-for-performance model. As discussed in my previous article — there are a number of valid pay-for-performance pricing model criticisms. We believe the hybrid pay-for-performance model that we evolved successfully addresses those shortcomings.
We have a very small retainer that ensures our clients are incentivized to engage with us. It also covers small tasks like managing influencer and media lists, weekly calls, etc.
Course-of-Business — Client Strategy & Counsel
For larger strategy and counsel activities, we’re investing in our clients’ businesses. Excellent strategy and counsel are essential elements of any successful PR campaign. Therefore, our firm is incentivized to provide the best strategy and counsel available, because it will help generate a higher quality and frequency of coverage. So, we don’t directly charge for strategy and counsel.
The firms that solely leverage the budget / retainer-based pricing models have failed to see, or admit, that billing 30-40% of their fees for strategy and counsel is outdated. If they don’t provide excellent strategy and counsel, they won’t generate coverage for their clients. And you can see where that would lead.
Flat Fees for Secured Media & Influencer Meetings
We charge a fee for the media or influencer meetings we schedule. If the client cancels a meeting, they still pay — after all, we did the work. If an interview is conducted and, for whatever reason, an article is not generated, we still charge the interview fee. If the reporter or influencer cancels, we don’t charge the client, because we didn’t complete our assignment.
Flat Fees for Secured Coverage
For coverage, we charge a flat fee for all client, pre-approved media. For bylined articles that we edit, submit and have published; we charge the same amount. This eliminates the hassle and client confusion of trying to price coverage for different outlets. It also ensures that clients receive a good mix of coverage across their targeted media. Additionally, it means we must be very good at keeping track of media we have approached.
We have even gone one step further. If we conduct an interview with a reporter or influencer, and an article or report stems directly from that briefing, we only charge for the coverage.
For special projects like positioning or messaging sessions, we offer a la carte (service fee) pricing, just like the more traditional firms.
Monthly Budget Ceilings
In order to ensure that a single month of heavy coverage is still affordable for clients, we put a pre-determined ceiling on charges. The larger the client, the higher the ceiling.
The one area I have not addressed is social media. Public relations firms could price for coverage based on a certain number of shares or some other message penetration metrics. While we offer social media consulting tailored to each individual client — we do not offer tactical, social media relations services. Nor do we plan to do so in the future. So we can’t speak to the effectiveness of leveraging the pricing model for social media.
Delivering the ROI
The goal in developing our hybrid pay-for-performance pricing model was to deliver the highest public relations ROI. It fairly compensates the public relations firm while ensuring that clients have a PR partner that is optimally incentivized to generate coverage. It also means that clients are getting an optimal strategy / outreach mix.
You won’t find any reference to hybrid pay-for-performance pricing on our website. We believe that our influencer and media relations services are the best in our industry. Although our firm is just three years old, we have had a very positive experience with this model, albeit with startups and emerging businesses, our firm’s sole focus.
I believe that as clients demand ever more accountability, the entire public relations industry will evolve toward hybrid pay-for-performance as its standard pricing model. It is likely to be painful, but change exacts a price. The PR firms that don’t innovate and transform their businesses in order to leverage the hybrid pay-for-performance pricing model will be left on the wrong side of history.
Source: Business 2 Community