Monthly insights for investment marketing and sales professionals
December 2013
Where are the Apples and Starbucks and Whole Foods of the investment world? Companies you know you can count on to deliver what you want consistently? That’s the essence of a brand, right? Standing for something consistent in the mind of the consumer. Given that investment companies are charged with delivering a product that is, by definition, inconsistent — investment performance — one might pose the question that is the topic for this newsletter, “How can investment companies brand effectively?”
With best wishes,
Liz Hecht
Founder, Principal and Director of Research
Alpha Partners is an investment marketing firm specializing in research and presentation strategy. Our goal is to create alpha (excess returns) by helping investment firms win, keep and diversify assets under management.
This happened over 10 years ago and only now can I bear to think about it without a frisson of self-loathing. I had been hired by a European hedge fund manager to give a presentation during the company’s annual off-site and I found myself in a beautiful sylvan spot surrounded by fresh-faced new hires eager to learn about marketing as well as a few obviously skeptical veteran fund managers eager to be done with all this touchy-feely marketing stuff and get back to managing money.
I somehow let the topic drift away from the prearranged focus of the meeting — branding in general for investment companies — to the specific, thorny theme of branding for this particular hedge fund manager. To spark some audience interaction, I posed the question, “What does your company stand for? When people in the market think of your firm, what ideally should spring to mind?” After a really long silence, one of the new hires said, in a small, timid voice, “innovation?”
That’s when I knew I had lost control of the meeting. I soldiered on boldly anyway, still seeking answers to this big branding question, “What does your company stand for?” People said things like “integrity,” “a global footprint,” “research,” “risk awareness” and the like.
The reality is, most investment companies have not developed enduring brands. Some have tried and given up. Some never even bothered to try. Some succeeded for a short time, then drifted back into the sea of clichés that still characterizes so much of investment marketing. But a few inspired companies have created enduring brands — despite the complexities inherent in branding an intangible, volatile product that by law must wear the warning label, “past performance is no guarantee of future results.”
Here are five essential components for success in investment company branding:
1.
Define what you are branding. The firm, the investment strategy or both? For start-ups, the strategy and the company often are the same, but start-ups should consider their brand in light of likely growth opportunities. For investment conglomerates representing diverse global asset classes, the challenge of branding can be significant precisely because of this diversity.
2.
Stand for something different. Investment companies that say they stand for “in-depth fundamental research” or “a long-term view” concern me. Surely they know that all of their competitors make the same claims. And if they market their companies with zero regard for competitive realities, I reason, it’s also possible that they make investments with a similar lack of perspective. In all the years I have helped investment companies with branding, I have encountered only two firms without any source of competitive differentiation. Beneath the surface, there almost always is some compelling aspect of an attribute such as “in-depth research” that genuinely defines an investment firm’s competitive advantage in generating alpha.
3.
Verify external perceptions. Standing for something different is important, but it has to be something different that matters to your clients. Why did your clients hire your firm and why do consultants recommend it to their clients? If your answer is “performance,” that’s partly right. But what about how you generated that performance appeals to the market relative to approaches available from competing managers? What stories did you tell during a preliminary meeting and what ideas did you share in a finals that caused your firm to be selected for a competitive mandate? Interviews with clients, consultants, prospective clients, funds of funds, registered investment advisors and other consumers of a company’s investment products should be a required part of any investment company branding initiative.
4.
Create a brand that guides the actions of the firm. An effective brand isn’t just about logos and tag lines and advertising campaigns. It’s about how a company acts on a day-to-day basis, especially when the going gets tough. The brand might affect decisions such as where to cap assets under management, when to close an investment strategy, whether to avoid or pursue a certain type of investment, when to sell, the need to report malfeasance and if it makes sense to merge with a given suitor. One of the biggest compliments Alpha Partners ever received was a private wealth management company that told us the brand identity we helped it create ultimately steered the company away from a potentially disastrous merger.
5.
Execute broadly and be consistent. The key elements of a brand (see box below) are straightforward. But consistent, inspired execution is challenging; successful execution requires persistent effort by people who understand what the brand means and care about it. One of the biggest challenges to effective brand execution, I believe, is not lack of money or time; it is the human desire for diversity and change. Sticking to a brand requires commitment. You can’t have two brands and you must be faithful to your brand. (“No,” I assured the CEO of a mid-sized investment firm recently, “your company cannot have two tag lines. For maximum market impact, you must select just one.”)
Key Investment Brand Elements*
Internal Brand Components
•
A brand manifesto
–
What the brand means
–
How to act consistent with the brand
•
Execution of the investment philosophy
and process
•
The infrastructure required to execute
•
Culture
–
How clients are treated
–
How employees are treated
•
Growth strategy
External Brand Components
•
Name, logo and tag line
•
Description of the firm and specific
investment strategies
•
Client communications
•
Research, articles and white papers
•
Website and social media
•
Email marketing initiatives
•
Advertising, public relations & sponsorship
•
Presentations and road shows
* This chart was initially presented by Alpha Partners at the 2001 Schwab IMPACT conference.
Through experiences such as that long-ago off-site, I have learned that “What does your company stand for?” is a question that must be answered from the outside in and the inside out, from the vantage point of competitor analysis and a clear understanding of diverse client views. Answering this question as a foundation for action requires the drama of a grand rollout combined with behind-the-scenes negotiations worthy of Machiavelli. It should not be broached casually when all people want is a few marketing tips before they hit the golf course.
Differentiate or Die
For inspiration, I recommend this classic on branding, Differentiate or Die: Survival in Our Era of Killer Competition, by Jack Trout with Steve Rivkin. One of the lessons I learned recently while reading this book is that “you can’t overcommunicate your difference.” Many people, myself included at times, often find the consistency required for effective branding to be hokey or somehow overdone. As in, “Do we really have to have some branding element on our holiday card?” But the realities of intense competition and short client attention spans argue for erring on the side of too much repetition rather than too little.
Another classic in the field of branding is Brand Warfare: 10 Rules for Building the Killer Brand, by David F. D’Alessandro with Michele Owens. Mr. D’Alessandro, the former CEO of John Hancock, accurately portrays the joys and frustrations of getting branding right for a large financial services firm and the obstacles along the way.
The Enemies of Effective Branding
A successful brand can define your company’s competitive advantage, impart a sense of mission to your employees, facilitate expansion, make it possible to charge higher fees and, if applicable, ultimately sell for a higher price. According to Interbrand’s Best Global Brands 2013 report, “CEOs are placing greater emphasis on their companies’ brands in investor communications,” taking their brands seriously enough to report on their value over time to investors.*
But there are many forces aligned against effective branding. In addition to inconsistent and sporadic implementation, there is fear of commitment, absence of useful market research, the tendency to imitate, the problems always associated with too many cooks in one branding kitchen and still, even today, the erroneous belief that the value of the brand cannot be measured. Of course all these obstacles only magnify the opportunity for companies that are able to build a strong brand and reinforce it consistently.
* Interbrand’s Best Global Brands 2013 report provides a look at the financial performance of the brand, role of the brand in the purchase decision process and the strength of the brand. Every year Interbrand applies its brand valuation methodology to rank the 100 best global brands. Interbrand does not rank investment management firms. But in 2013 eleven financial services companies were included in the top 100, including American Express, HSBC, J.P. Morgan, Goldman Sachs, Citi, AXA, Allianz, Morgan Stanley, Visa, Santander and MasterCard.
Monthly insights for investment marketing and sales professionals
December 2012
At every step along the path to asset growth – from introductory consultant meetings to client reviews – smart investment managers seek to communicate one set of consistent messages about their identity. But consistent communications fall under the heading of “easy to talk about, difficult to do.” This issue of Excess Returns considers how to avoid behavioral biases that compromise consistency.
With best wishes,
Liz Hecht
Founder, Principal and Director of Research
Alpha Partners is an investment marketing firm specializing in research and presentation strategy. Our goal is to create alpha (excess returns) by helping investment firms win, keep and diversify assets under management.
A few years ago I attended a presentation by a consulting firm during one of my client’s annual investor conferences. What immediately struck me about this presentation was that line for line, joke for joke, page for page, almost word for word, it was exactly the same presentation as the one that this same firm had given at this same client conference a year ago. I looked around the room and saw many of the same faces in the audience that I had seen the previous year – the same people, smiling and listening intently. Either this is really happening, I thought, or I am trapped in some awful déjà vu experience, a sort of Groundhog Day all my very own.
But it was really happening. I later checked the packet of conference materials from the prior year and the consulting firm was indeed giving the exact same presentation. And yet no one seemed to notice or, if they did notice, they didn’t seem to mind. I have thought about this experience for a long time and I still don’t know what to make of it. I do know, though, that it says something important about the delicate connection between repetition, sameness and consistency.
Behavioral Biases That Compromise Consistency
Everyone in the investment world agrees that consistency is a good thing. Consistent investment process implementation begets repeatable results and consistent communications beget loyal clients who understand the investment strategy. But there are inherent behavioral biases that make consistency difficult to achieve. Here are three that I constantly confront in working with investment firms as well as in communicating about my own company:
1.
The urge to start all over again. “There’s a big piece of business on the line! Let’s take a fresh look at our presentation and revise it … Let’s reconsider the key points we want to make about our competitive advantages.” The more important something is, the greater the human tendency to overcomplicate it. But the urge to work harder because the stakes are high often compromises consistency. In such cases, repetition is perceived as being stale and dull. But most often repetition is desirable, particularly when a firm already has defined a concise, truly differentiating set of marketing messages. Especially in a marketing context, repeating those messages in the same way, over and over again, is more beneficial than constantly trying out new messages or trying to communicate the old messages in a new way. Many people in the audience I describe above most likely had forgotten the main messages from that same presentation a year ago, just as you or I might likely forget the plot of a movie we loved and saw only, say, a few months ago. Instead of taking a fresh look at everything, a presentation team should rehearse customized delivery of the existing story.
2.
A misunderstanding of what it means to customize. When I say “customized delivery,” I mean that key parts of the same core presentation are customized to a specific audience, paying deference to their identity and their specific investment goals. It took me years to understand that by “customize” some investment firms meant customize the presentation to the personal preferences of different presenters within the same firm. I asked about this once: “You keep saying that you’ve ‘customized’ the presentation and yet there is not one page or even one bullet that addresses a specific audience?” “Oh, no,” I was told, “by ‘customize’ we mean create different versions of the presentation consistent with the preferences of individual presenters.” “Oh,” I said, too dumbfounded even to get on my soapbox and explain why this is such a bad idea.
3.
The inability to be concise. Verbosity makes it impossible for consistency to happen. Someone recently gave me a new business presentation for an investment firm that genuinely fills a niche. But the first page, rather than simply describing this firm’s singular competitive advantage, instead presented 6 bullets and 15 sub-bullets. Such visual and verbal clutter makes consistency impossible. To be consistent, one must first be able to answer the question, “Consistent about what?“
So is the consulting firm giving the exact same presentation practicing a desirable form of repetition, the kind of sameness that creates consistency? Or is it being lazy by repeating the same canned presentation? A bit of both, I suppose.
I do know that I tried giving the same Alpha Partners presentation to an existing client recently, reinforcing up front a set of key messages about our firm. It didn’t work. Or rather, it started off weak because we ultimately did get the business. But at first my client was bored. I salvaged the presentation by picking up on this quickly and shifting gears to focus on his specific project. But I should have customized a few more key pages of the presentation in advance so that it more directly addressed his needs, his experience and exactly what he was looking for … then and only then should I have briefly reiterated how Alpha Partners is different from our competitors.
Will I ever again give exactly the same presentation to the same audience? Tempting as it is, given a demanding schedule, the answer is no. I still believe it is critical to find just the right balance between consistency and customization.
The Penalty Box
The slightest sign of inconsistency – in investment process implementation, for example – and an investment firm might find itself in the penalty box with a given consultant for several years. In my experience, there are several areas where an investment firm may be vulnerable in this regard:
•
Inconsistent marketing literature. The RFP response, for example, might describe the investment process in terms that vary from the description provided by the presentation book.
•
Inconsistent responses during the Q&A. One member of the investment team might reveal a different intellectual slant relative to a teammate (e.g., a growth bias in a value firm or a different approach to portfolio construction). Such diverse perspectives may in reality be healthy for the investment process, but your firm still needs to present a consistent face to the world.
•
Misinterpretation. If not presented correctly, new information about the investment process (or even old information presented in a new way) might seem indicative of a major change to a consultant.
Consultants like investment managers who are relentlessly, even boringly the same. Building consistency with repetition and sameness is particularly critical given the importance placed on repeatable results. Investment marketers should weigh this carefully the next time they consider that fancy new process diagram.
Custom Nation
Of course I had to read this book: Custom Nation: Why Customization Is the Future of Business and How to Profit from It by Anthony Flynn and Emily Flynn Vencat. The book explores successful customization strategies employed by companies as diverse as Shutterfly, Chipotle and Procter & Gamble. It wasn’t only the penguins on the cover that drew me in; it was the following claim on the back flap: “What’s the secret of a successful 21st century business? Customization. For every industry and every product. Embrace it or get left behind.” Hmmm … Why can’t more investment firms successfully customize their communications with clients and potential clients – especially firms that already do a good job of customizing their portfolios to specific client investment objectives? As suggested earlier in this newsletter, maybe because “customization” sometimes still is confused with a lack of consistency.
Monthly insights for investment marketing and sales professionals
December 2011
Marketing and sales professionals, even veterans with decades of experience, can still learn vital lessons about their own discipline through everyday life. Communicating with the checkout person at the supermarket, visiting your doctor or hiring a contractor — all such interactions, small and large, yield a wealth of insights about do’s and don’ts. Last year, a major purchase taught me a few new lessons and reaffirmed some old truths regarding how human beings make big decisions.
With best wishes,
Liz Hecht
Founder, Principal and Director of Research
Alpha Partners is an investment marketing firm specializing in research and presentation strategy. Our goal is to create alpha (excess returns) by helping investment firms win, keep and diversify assets under management.
The time is late July 2010 and I am standing in the center of a riding arena in Virginia, watching as three horses are being ridden around and around again. In a moment, it will be my turn to try each of these horses. I am on a mission to buy a new horse as a partner for my sport, three day eventing. During the course of this same week, I will try 18 horses and take careful notes about each one. It occurs to me that this process is rather like a finals competition for institutional asset managers. All of the competitors are well trained and offer a strong track record. I have studied the performance statistics for each horse, and I am confident that virtually any one of them would be an excellent partner. So which one will I choose and why? My ultimate decision, like the decision to hire an investment firm, will depend in some measure on rational thought but also in large part on emotion, sales skill and purely situational factors.
Helping Buyers Decide in Your Favor
My experience buying a horse underlines several key decision factors in any sales process: seller responsiveness, skill in managing the relationship, the enthusiasm of the seller for the product, the importance of diverse sales media and good old-fashioned timing.
1.
The Seller’s Responsiveness. A few sellers did not return my initial call for several days and, when they did so, managed to sound bored and indifferent. In his investment marketing classic, Marketing Institutional Money Management Services, author Philip Halpern defines responsiveness as the "promptness, courtesy and extensiveness with which money managers fulfill requests." The lack of responsiveness, writes Halpern, is "perhaps the most important hurdle that gets money managers into trouble" and, paradoxically, the only hurdle that is "completely and always under the control of the money manager."
2.
The Seller’s Skill in Managing the Relationship. Just as in the investment world, several of the more responsive horse professionals also had a well-defined process for getting to know me and what I wanted to accomplish. These sellers moved to the top of my list as I began to see them not merely as sellers of a product but as a resource. One trainer suggested that I sit down and create a list of what I was looking for in a partnership with a horse; she then discussed my list with me in a thoughtful, caring manner. I did not buy a horse from this trainer, but I almost did and I will recommend her enthusiastically to others in the future.
3.
Enthusiasm for the Product. Another trainer was so enthusiastic that I found myself thinking, "Gee, she really loves this horse. Maybe she should buy him herself." As it happens, I bought her horse, in part because of this woman’s infectious enthusiasm. I tried another horse who, on paper, was equivalent in experience and price. But in this case, by contrast, the seller seemed more interested in negotiating the sales price than she was in the horse.
4.
Diverse Sales Media. The strongest candidates were advertised actively via every conceivable channel: the Internet, the classifieds and word of mouth. But one trainer told me that she did not believe in creating sales videos for horses, as the videos could be taken out of context. "Wow," I thought, "that’s like a hedge fund with one of those super-secretive websites that seems to say, ‘We’re too cool to be bothered with marketing.’" (Do these still exist, I wonder, given the current premium placed on transparency?) Anyway, as you will see in a moment, a sales video ultimately proved decisive in my own final purchase decision.
5.
Good Old-Fashioned Timing. Our clients often ask me whether it’s best to present first or last in a finals. I used to say, "If you give a great presentation, it doesn’t really matter." And there can be advantages to going first. Based on my experience buying a horse, I now say "If you are given a choice, choose to present last." I tried 18 fantastic horses in one week and I bought the last two that I tried on the last day of my search.
Yes, that’s right, I bought two horses. In investment industry parlance, I "split the mandate." My first choice, based on his sweet personality and the quality of our test ride together, was Vintage Trial (aka "Little Vinnie"), described in the May 2011 issue of Excess Returns. But I could not get my second choice, Larkrullah (aka "Big Luke"), out of my head. During my test ride on Luke, when I put him into a gallop and then asked him to slow down again, he seemed simply not to notice my request. Based on this first ride, the risk (being unable to stop him) clearly outweighed the reward (his fantastic athleticism). If I had based my decision purely on this ride, I never would have seen Luke again. But I kept thinking about Luke’s sales video, which showed a keen, powerful horse in good control.
I am taking a calculated risk here, I thought, but if I can learn to ride him like that, then I will have something exceptional … So I bought both Luke and Vinnie, and the only thing I now have trouble deciding on any given day is whether to ride them both or just give them a big hug.
Going last in a finals competition is by no means always the best option. In his popular blog, marketing expert Seth Godin notes that showing up first can be an advantage — if you believe that you are in a position to set the bar higher than your competitors. In situations where the competition is tight, however, last may well translate into the most positive lasting impression.
So should you make an effort to get your time changed to last, as some marketers recommend? I say no. Show up when you are scheduled to show up and give a standout presentation. If you appear to be changing the time to harness some small situational advantage (and, trust me, the key decision-makers in your audience will be onto this), then you run the risk of simultaneously (1) annoying people and (2) conveying that you lack confidence in what really matters: your firm’s ability to generate consistent long-term investment returns.
Just in case you still believe that human beings make their best decisions based mainly on rational thought, you need to read How We Decide by Jonah Lehrer. The book documents research on the role of emotions and reason in decision-making. Mr. Lehrer explores how we decide in fields as diverse as investing, football and piloting a plane.
Yes, that’s right, I bought two horses. In investment industry parlance, I "split the mandate." My first choice, based on his sweet personality and the quality of our test ride together, was Vintage Trial (aka "Little Vinnie"), described in the 