(Originally published July 13, 2010, in O’Dwyer’s Inside News)

Imagine the electric company told you that to get power you’d have to sign up for a year and commit to paying a pre-fixed amount each month. And that these terms would stick regardless whether you canceled service or used less electricity.
Would you sign up?

If you had a choice of utilities, the answer would be a very loud and unequivocal, "No."

From energy companies to telecommunications vendors, it's every service provider's goal to lock customers into a recurring payment model, whereby the consumer is billed a set amount each month for services. Because there is startlingly limited competition for products like electricity and cable TV, consumers are mostly stuck with this model.

Fortunately, there's plenty of competition in the PR industry. So, why do clients allow themselves to get locked into rigid, expensive contracts with PR services firms?

During the past decade, the software industry began a slow, steady march to refining the way it sold and delivered products. The movement, known as cloud computing, on-demand or software-as-a-service, is popular for many reasons. But the most obvious is that it switches the balance of power away from the vendor to the customer.

In the new paradigm, customers pay month-to-month for software and can cancel agreements with vendors at any time, in most case without financial penalty.

Thankfully, the same business model is finally beginning to show up in the PR services industry. Forever burned by long-term contracts and oversized retained services agreements that often don't deliver value commensurate with cost, clients are starting to insist that PR services firms provide greater flexibility in the way they become engaged.

Increasingly known as "utility PR," clients simply crank up or down the PR dial as they need more/less service. In this new model, clients are not saddled with long-term guaranteed contracts and it's up to the client to decide, day to day, exactly how much PR service—and cost—they want to absorb.

There are a number of benefits to this model for the client as well as the PR firm. The primary advantage to clients is the ability to align costs with results. If a client is preparing to launch a product, it's likely going to need more time/service from the PR firm. On the other hand, when the launch is finished, needs diminish for the time being. In the utility model, they would reduce PR spend accordingly without sacrificing results.

A second benefit to the client is accountability. Knowing that the PR firm has to earn the client's business each and every month, the client can logically expect greater and more consistent effort on the part of the PR firm. Any client who has ever felt like his/her PR firm is slacking off can appreciate this point. When the PR firm knows its neck is constantly on the line, rest assured it will be more accountable.

Another important result of the utility model is that clients can enjoy the benefits of PR firm competition. No one likes to switch PR firms, but it happens all the time. Too often the switch is painful for the client, which must absorb whatever cost is associated with canceling the old firm's contract.

This problem goes away in the utility PR model. Here, clients are free to move from one firm to the other, without added cost. This means clients can more easily and cost-effectively engage with a PR firm and PR people that are right for them at any given time.

PR Firm Benefits

There are a number of benefits to the PR firm in the utility model as well. PR firms don't have to over-hire or increase overhead (office space, computers, etc.) to support clients. Instead, they can outsource work to PR contractors, thus retaining the flexibility to ramp up or down as client situations require.

PR firms can also use the utility model to their advantage by employing it as a tool to incentivize account staff. If a PR person knows his or her progress is being monitored on a month-to-month basis, and that positive results likely means the client will stick around, the PR firm can offer to increase the wages of account staff who deliver most.

Finally, PR firms win in the utility model because they have freedom to take on a greater amount of business. Because clients are not locked into a set fee every month, it's understood that the level of activity is going to fluctuate. As such, PR firms don't need to allocate a large sum of account staff hours to a client on an ongoing basis. Instead, firms can spread their PR people more leniently across multiple, and many more, clients.

The utility model should not be confused with "pay by the project" PR. In fact, project work is a bad PR model in general because, as most PR professionals know, PR is a process, not an event. It's the kind of thing that needs to be done every day, for a long period of time, to truly be effective.

Rather, utility PR is all about increasing PR firm and client flexibility by allowing both parties the freedom to balance cost and resources on a regular basis. This model is the future of outsourced PR. And I encourage clients to insist that their firm get on board with this movement right away.

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Kevin Wolf is founder and president of TGPR, a Silicon Valley firm. He can be reached at kevin [at] toolguypr.com.