The Correlation Between Enhanced Public Relations Capabilities and Increased Revenue

■  Contributing to the Visualization of PR Capabilities
 The "PR Octopus Model" Wins the Category Grand Prize at the "PR Awards"

Recently, at the 2014 "PR Award Grand Prix" hosted by the Japan Public Relations Association, the "PR Octopus Model"—previously serialized by our Corporate PR Strategy Institute—won the top prize in the Innovation/Skill category.

Related Article:

Dentsu Inc. PR's "PR Octopus Model" Wins Category Grand Prize at PR Awards Grand Prix
[December 12, 2014]

At the awards ceremony. Kitami (left), Senior Researcher at the institute and author of the inaugural and current columns, and Kanji Sakai, Deputy Director and author of past columns #02, 05, and 13.

First, this award is thanks to all the companies that cooperated with our survey, and I would like to take this opportunity to express my gratitude to each responding company. We are also delighted that the PR Octopus Model, our PR capability evaluation framework featured in this series, has been recognized as an innovation and skill within the PR industry. By decomposing the often elusive and difficult-to-compare PR capabilities of companies into "Eight PR Capabilities" and making them "visible," we hope to be of service to PR departments facing daily challenges.

During the final judging session, we received numerous comments from the judges expressing high expectations for the future and anticipating further development. As we conclude this series, I would like to explore the potential possibilities inherent in this "PR Octopus Model."

■  Precisely because it's listed company data, analysis with public data becomes possible

In developing the PR Octopus Model, we conducted the "First Survey on Corporate PR Activities," targeting 3,503 Japanese listed companies (including those on the Tokyo Stock Exchange First Section, Second Section, Mothers, JASDAQ, Sapporo Securities Exchange, Fukuoka Securities Exchange, etc., excluding advertising and PR agencies). Excluding advertising and PR agencies) using mail and in-person drop-off methods, receiving responses from 479 companies (response rate: 13.7%). This series has explored the reality of listed companies' PR capabilities based on the survey data from these 479 companies.

By categorizing this data into "Eight Public Relations Capabilities" and analyzing it using the "Public Relations Octopus Model" indicators developed independently by our institute, we were able to "visualize" the public relations capabilities of listed companies.

The fact that the surveyed companies are listed enables statistical analysis with various external data sources, such as publicly disclosed financial performance data and image surveys. This represents the further potential for utilizing data within the "PR Octopus Model."

■ Analyzing the Correlation Between "PR Capability Score" and "Financial Data"

(This content was presented at the 20th National Research Presentation Conference of the Japan Public Relations Association in October 2014.)

 

By further analyzing the "PR Octopus Model" using external data, we can reevaluate the PR activities of listed companies. Therefore, our institute conducted a correlation analysis between PR capability scores and financial data. In addition to financial data, we analyzed items such as exposure in newspaper articles and TV programs, and the Nikkei Corporate Image Survey. This paper will introduce part of the financial data analysis.

While some researchers have attempted to analyze the relationship between PR and financial data, no other study has been as large-scale or systematic as this one.

The financial data used for the analysis is as follows.

<Financial Data>
Focusing on the "S-Rank Companies" (73 firms) with the highest PR effectiveness, we utilized the following metrics from their 2013 financial data compiled in "Nikkei NEEDS-Financial QUEST 2.0": "Increase in Operating Profit After Interest Payments (YoY, 5-Year Average*)" and "Increase in Ordinary Profit (YoY, 5-Year Average*)".
*5-year average = Average growth rate over the past five years starting from fiscal year 2013
Companies without published data were treated as missing values.

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The results of the correlation analysis are as follows.

■&nbsp; Improved public relations capabilities correlate with medium-to-long-term profit growth

Please focus on the yellow-hatched sections. These indicate statistically significant correlations. Both the business profit growth rate and the ordinary profit growth rate show significant correlations not with year-on-year changes, but with the five-year average growth rates.

What does this mean?
You may have heard the expression "PR is like herbal medicine." As the correlation with the five-year average indicates, it suggests that improving PR capabilities contributes to medium- to long-term profit growth.

This relationship with financial data was a persistent challenge for PR departments. They struggled to demonstrate the PR department's value to management from a financial perspective. If PR activities can show management how they contribute to profits, the rationale for investing in PR becomes clear.

Furthermore, examining correlations with specific PR capabilities reveals strong links between "information analysis capability" and "strategy development capability" and profit growth rates. While PR departments often focus solely on information dissemination, this suggests that analyzing collected information and strategically constructing PR messages and narratives also contributes to profit growth. This analysis also clarifies the relationship between these PR processes and profitability.

■&nbsp; Providing increasingly meaningful data for the PR industry

In this way, using the PR capability score data from the "PR Octopus Model" to analyze relationships with various external data enables us to reconstruct the significance of PR activities. In recent years, the structure of information flow has changed, increasing the importance of PR in corporate communication activities. We want to demonstrate this not just intuitively, but with factual data. We hope the "PR Octopus Model" can contribute to this effort.

Many challenges remain. For instance, the data used in the analysis presented here was limited to S-class companies (73 firms) due to time and labor constraints. Analyzing the entire sample (479 companies) might yield different results.

The Corporate PR Strategy Institute plans to continue conducting various research and analysis activities, tackling these challenges one by one, to contribute to the PR industry. We look forward to reporting further interesting analysis findings as they emerge.

About the Corporate Communication Strategic Studies Institute
The Corporate Communication Strategic Studies Institute (CSI) is a research organization within Dentsu Inc. Public Relations. It collaborates with experts in corporate management and public relations (including university professors and researchers) to conduct surveys, analyses, and research on corporate communication strategies and organizational structures.