Using Ad Data To Estimate PR's Contribution To Sales

Measurement Tip of the Month

Using Ad Data To Estimate PR's Contribution to Sales

Warning: This technique is a quick and dirty estimate only, see below.

Advertising people sometimes use measurement techniques that give themselves all the credit for sales. The general approach is, "We created X ad impressions this month, and then the next month the company sold Y widgets, so now we know that each ad impression will result in Y/X sales." Crude? Yes, but when done year after year with products that are sold in large numbers (toothpaste or cat food, for instance) this approach can result in useful predictions of how many sales will result from a typical ad campaign.

How could we apply this technique to PR? Let's assume that if earned media (coverage that results from PR efforts) includes photos and key messages, then it ought to get sales results more or less like an ad that includes the same ingredients. So we can use earned media impressions instead of ad impressions in the above measurement technique.

The trick here is that if your consumer company or organization has an ongoing ad budget, you can probably figure out how much media exposure is necessary to generate a certain number of sales or responses. (Your ad department may have those numbers already.) Then use that ratio on your PR impressions. Here's the process step-by-step...

Step 1:
How many impressions did your ads make?
Gather the last two year's worth of advertising media schedules and calculate the reach of your ads (impressions) on a quarterly basis.

Step 2:
How have impressions influenced sales?
Gather the last two years worth of sales figures and use them to calculate, for each quarter, the overall ratio between reach and product sold (or whatever response you are trying to get). That is, how many ad impressions does it take to sell one unit of product? (Your ad department may have already done Steps 1 & 2 for you.)

Step 3:
How many impressions did your PR make?
Determine how many impressions you've generated via PR that contain the same message elements (brand benefits, recommendations, favorable positioning) that advertising includes.

Step 5:
What is PR's contribution to sales?
Now use the ratio (do it quarter by quarter, or take the average over all the quarters you had data for) from Step 2 to estimate how many sales you have influenced with your PR: Multiply the number of PR impressions times the ratio of sales to ad impressions:
PR Impressions x (Sales/Ad Impressions) =

Sales from PR, approximately

Warning: This is a quick and easy exercise that will result in a crude estimate only. It's fun to do if you can get the necessary data easily, but don't go thinking you've found the Holy Grail, or spending time on this that you ought to be spending on more valid measurement techniques.

If you are really excited by this sort of analysis, there are far more sophisticated ways to do it. Take a look at this post on the metricsman blog, and then look up "marketing mix modeling" if you still want more.