How much your company should spend on PR

If you’re thinking of hiring a PR agency, it might help to know what bigger and smaller companies pay for content marketing, digital marketing, and other hybrid PR-marketing services. Here are the numbers.

You’re thinking about hiring a PR firm.

You’ve probably evaluated the costs and benefits of bringing in a PR agency to build your messaging and tell your story, instead of hiring someone to do the work.

When you think about it, it’s rent versus buy.

Just like renting or buying a home or car, there are costs and benefits to consider. Do you like moving into a cool new neighborhood every couple of years? Or would you prefer the stability of an asset whose value grows? Do you like having the newest wheels on the street? Or are you the type who enjoys life without a monthly car payment?

The same applies when hiring PR resources.

Companies often call employees their most important asset—a misnomer, as it implies the company owns those individuals. However, companies make investments in their people in time, training, resources and money—just like an asset. Depending on the staff you hire, that investment can run $5,000 to $10,000 a month or more.

In return for that investment, you expect the people you hire to be committed to your organization – learning, understanding, and in the case of a PR professional, advocating for your company or your cause.

However, that commitment may come at a cost. Is your PR team abreast of the latest trends and technology? Can they handle peak periods of activity, or special situations? Can you justify their cost when times are slow and you must reduce departmental spending? Probably not.

And that’s where a public relations firm may make sense. You gain global resources: professionals working with a variety of industries, technologies, scenarios and even writing styles to which your public relations practitioner may not have access, since he or she spends so much time looking inward—on your story, your strategies and your technology.

But how much should you spend?

The answer is “it depends.” Research may offer guidelines as you plan your public relations.

Except for companies where public relations reports to the president/CEO, public relations most often falls within marketing (26%), according to The University of Southern California–Annenberg School for Communication and Journalism, in its Communication and Public Relations Generally Accepted Practices Study (2014).

Research firm Gartner says companies spent 10.2 percent of their revenue on marketing in 2014; digital marketing accounted for 25 percent of the total marketing budget. Digital advertising, content marketing and website development were the largest line items in the digital marketing budget.

Marketing research firm SiriusDecisions differs from Gartner’s estimate, saying that smaller companies spend more on marketing as a percent of revenue than do larger companies. For example, SiriusDecisions said that, in 2014, non-software companies with revenues of less than $100 million spent between 3 percent and 10 percent of revenues on marketing. By comparison, larger non-software companies, those with revenues of more than $5 billion, spent between 0.5 percent and 5 percent of revenues on marketing.

IDC, whose marketing spending estimates include public relations and affiliated activities, says tech companies spend a weighted average of 4.5 percent of revenues on marketing, with a weighted-average high of 7 percent for software companies and a weighted-average low of 1.9 percent for services companies. And marketing spending is growing: IDC said 51 percent of IT companies increased marketing spending in 2014, a number Gartner, who said 50 percent of companies planned an increase in 2015, confirms.

IDC also provides perhaps the best look into how companies spend on the mix of marketing initiatives, saying companies spent 3.8 percent of their marketing budget on public relations, 5.7 percent on branding and content, 1.9 percent on social marketing and 1.1 percent on analyst relations, all typically handled by a public relations agency. A 2014 report from Forrester says marketing consumes an average of 4 percent of company revenue. Forrester says that marketers spend 12 percent of their budgets on content and 5 percent or less of their marketing budget on PR.

High-end estimates from The Holmes Report suggest that North American marketers spend 6.5 percent of their budget on public relations. On the low end, USC – Annenberg suggests in its 2014 report that PR budgets were .06 percent of gross revenues (2013).

Separately, according to The Content Marketing Institute, marketers spend 28 percent of their marketing budget on content.

In summary, a $1 billion firm can expect to spend between $40 million and $102 million on marketing, and between $600,000 and $2.6 million on public relations.

Michael A. Monahan is the director of media relations for Tech Image Public Relations. A version of this story originally appeared on the firm’s blog.

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Topics: PR

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