The best practices of marketing, whether for a product, a service, or a stock, consist of four basic elements . . .
• Know your market
• Know your product
• Know your marketing tools
• Manage your tools
These elements translate, for investor relations, thus . . .
Know your market. Your market, in this case, is the investor. This includes the professional investors—institutions, money managers, mutual funds—and private investors. In investor relations, it includes, as well, those who function as intermediaries—the analysts, the brokers, and the institutional sales force—who recommend and who sell the stock. But as might be expected, each category of investors has its own requirements for investing, its own needs for information, and its own techniques in pro- cessing that information.
To know your market, then, means more than having lists of institu- tions and money managers. It means understanding the nuances of each group—its special purposes, its needs, its accessibility and significantly, the means to reach each group. It means understanding, as well, the relation- ship between what your company has to offer to each of these investing groups, and how well their needs are met by your company and its stock.
Knowing your market means understanding that the dynamics of the stock market change at a rapid pace, and that what was true yesterday may not be true today or tomorrow. The circumstances affecting a finan-
cial market are in constant flux, affected by myriad events, such as the nature of the market itself, the economy, weather, war, geography, and dozens of other factors.
Until not too long ago, corporate business and financial information was punctuated by defined time frames. Annually and quarterly. Frequently, by the time the information about a company became available, the infor- mation had changed. Today, through technology, data is available dynami- cally—as it changes, the changes are known instantly. The investors know this. Corporate management should know it too.
Essentially, there are three general categories of investors that are the sources of capital, and that comprise your target audiences . . .
• The professional investor—the institutional investor and the money manager
• The investment advisor—the analyst, broker and other advisors who recommend stock and influence decisions
• The individual investor—the retail stock buyer and the 401(k) investor Each group has its specific needs, and each is accessible in different ways, and with different techniques. Each is able to transform information into action to its own purposes.
Know your company.Yes, you know your company. But the point is to know your company in terms of the potential audience—the market—for your stock is to see it in terms of the market’s needs or interests.
There are four basic elements that define a company’s value in the cap- ital markets and that influence buying decisions . . .
• Financial data—the numbers, the performance, the stock values in the market. This is now commonly called the metrics—a fad word to describe traditional data.
• The industry—the company’s position in the industry, the strength of the industry itself, the company’s markets, the company’s plans for the future
• The economy—the broader context against which investment decisions are made
• Management—its strength and depth, its capabilities, its credibility, its ability to make plans a reality and to cope with changing environments (e.g. AOL’s ability to cope with a saturated computer market and a decline in advertising revenues)
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We will explore these elements in Chapter 6, but in terms of knowing your company, they give us a specific view that relates what you are to what the market for your securities needs. These four points give you a clue of how to present your company to your market in ways that specifically address their needs.
It really is a form of self-examination. Are your financial results—rev- enues, earnings per share, cash flow, balance sheet items, stock float, and so forth—consistent with the needs of your target audience (read potential investors)? We have always understood that there are different investors for small cap companies and for large international companies, but by match- ing who you are with the groups of potential investors that are partial to companies with your financial configuration allows you to focus your mes- sage to those groups.
Most companies are part of a specific industry, and are judged by spe- cialists in those industries. One need only look at the rise and fall and rise again of high tech companies to understand that there is a tide in industry analysis that tends to bring the same judgment to good companies in a declining industry as to bad companies. This is a problem that can only be addressed, though, by recognizing, first, that this kind of judgment exists, and second, that there are ways it can be overcome. In any marketing con- text, distinguishing one company from its competitors is a substantial aspect of marketing.
Obviously, the economic context makes a difference. When the econ- omy is booming, faith in the rise of the market, and in the cornucopia of return on investment, is high. Buying decisions, whether made by institu- tional or individual investors, tend to be made more on hope—on riding the wave—than on analysis of principles. When the economy is static, declin- ing, or uncertain, faith is tempered by anxiety. The stock market, remem- ber, is a function of future—of a promise of good things to come. When the economic factors that seem to be beyond any individual’s control offer less hope, then stock purchases are made more cautiously, if not more ration- ally. Economic conditions pose different relationships between your com- pany’s message and the target audiences.
Of the four elements, the most important to project is management. To a large degree, the first three factors are readily discernable. The facts about a company’s performance are readily available to everyone, as they should be, although every investor interprets the data differently. The state of the economy is rarely beyond anybody’s ken. The wild card—and the factor that must be projected most carefully—is management. At the same time,
the techniques for using all four factors to shape the perception of the com- pany as a viable investment vehicle must be meticulously defined and pre- sented to the investing public and those who advise them.
Know your marketing tools.The tools—the mechanics—of projecting the elements of your company are all standard. They are as available to you and every other company seeking to sell its equities. And while we will dis- cuss these tools in greater detail further on, it is important to realize that, like carpenter’s tools in the hands of a master cabinet maker, they are merely tools. The cabinet maker makes masterpieces with the skill and artistry with which those tools are used, and it is the skill and artistry that makes the masterpiece—not the tools. This is the secret of all marketing.
This is the secret of successful investor relations.
Manage your tools. Assuming a grasp of the skills and techniques of investor relations practice, the successful investor relations program—the one that helps you compete best for the investment dollar—is a function of strategy and planning. It is a function, as well, of understanding all of these four elements, and using them strategically and artfully.
In the final analysis, an effective investor relations program is an effec- tive marketing program.
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