If you are planning to use a PR agency for the first time, you are doubtless wondering how much this move will cost you. Unhelpfully, but inevitably, the truth is ‘it depends on what you want’. However, we thought it would be helpful to explain some of the basic principles of how PR companies charge, so you can begin to get a sense of the possible ballpark cost and how it is arrived at.
The biggest cost element for a PR programme is generally the agency’s professional fees. Most firms charge fees on an hourly basis, with each member of staff having a different rate depending on their seniority.
An agency team will normally have a (more expensive) senior person to devise the PR strategy, advise you and oversee the programme, and one or more junior (less expensive) staffers to implement the programme and act as day-to-day liaison for routine matters. The work of juniors should normally account for a greater proportion of the total hours – provided the juniors are skilled and well managed, this is the best and most cost-effective way to deliver the PR results you want.
Hourly rates are calculated on the basis that each staff member (or account team) should be able to generate at least three times as much income for their firm as they cost to employ, thereby covering employment costs, overheads, investments and a reasonable profit. The rates also reflect the fact that, because of the normal mismatches between supply and demand, PR firms are seldom able to work to their full available capacity.
Other factors that can impact a firm’s hourly rates are:
- Quality of staff. Although there is no shortage of people in the PR industry, employees with excellent minds, superior skills and high-quality experience are in short supply (as with any industry). There is consequently a very competitive job market for the best people, which drives up their salaries.
- Overheads – particularly office rents. If a PR agency has impressive offices in a very smart location, there’s a good chance this will impact its fees.
- Training. PR demands a diverse range of skills and must respond to rapidly evolving media and social trends. PR companies should therefore be setting their rates at a level that enables them to invest in staff training.
- Specialisation. Certain types of PR, such as M&A and crisis communications, are by nature more expensive than others, with the premium explained by a variety of factors including the seniority of staff and urgency of tasks.
- Competition. As members of the Public Relations Consultants Association, we take part in the PRCA’s annual benchmark survey which, among many other things, examines average hourly rates across the industry. This provides an ideal way of confirming that our rates are appropriate and competitive.The results reveal wide variations between large and small agencies, and those based in and outside London. Unfortunately, as the PRCA charges non-members for access to this data we can’t divulge it here. However, to give a general sense of the landscape, rates for senior consultants at the largest firms can be more than £200 per hour, while at smaller firms rates can be quite a bit lower. Junior staff, meanwhile, will generally fall somewhere between £50 and £100 an hour.
Retainer or Project?
The next factor that determines your total PR cost is the type of support you need – is it a retainer or a project?
A retainer is a relationship of at least 12 months in which the agency charges a fixed sum every month to cover its time. Invariably, some months see the agency work more hours than are covered by its retainer, but this is fine provided these instances of ‘over-servicing’ are balanced out by quieter months of ‘under-servicing’. By its nature, the process of communicating on behalf of a client is ongoing, which means that many PR programmes work best as retainers.
However, some communications requirements are more short-lived, such as major product launches, training or managing media crises. For such requirements, which have a natural ‘beginning, middle and end’, it may be more appropriate to engage a PR agency on a project basis for a period of weeks or months. (You may also bolt a project onto an existing retainer relationship.)
After you have briefed the agency, it should use its experience to gauge how much time will be required to meet your requirements. Then, multiplying the time requirement for each team member by his or her hourly rate, the agency will be able to propose a budget.
All agencies expect to negotiate over budgets and you should not be put off by an initial quote that is higher than you expect. Hopefully, by discussing the proposal you can clear up any areas of misunderstanding and/or eliminate programme elements to bring the agency’s quote more into line with your funds. However, as explained above, also remember that some firms will necessarily be more expensive than others, so consider this as you compile your agency shortlist.
The last major PR cost element is expenses. These are the costs incurred by the agency on your behalf as part of the programme, and which the agency will be entitled to recover from you.
Long gone (sadly!) are the days when PR was one long line of expense-account lunches. Expenses today are likely to include bought-in items such as online video production, infographic design and market research. Nevertheless, media entertaining costs may still figure amongst the items the agency will recharge to you.
The crucial thing is that the agency should never surprise you with unanticipated costs. It should be agreed at the outset which types of cost the agency may recover from you. While many items may be minor (such as coffee with a journalist) and therefore best treated as discretionary, some expenses may be far more substantial (such as international travel or venue hire charges). You should therefore agree the price beyond which the agency needs your prior approval before committing to a purchase, and whether expenses should be recharged to you at cost or with an agreed agency handling charge.
Mutual understanding is the key to a successful business relationship. We therefore hope we have shed some helpful light on why PR companies charge as they do and what you can expect in return. However, should you have any questions, please don’t hesitate to get in touch with us here.