Monthly insights for investment marketing and sales professionals
May 2014
"Dear Investor" letters are perhaps the most vital communication between a portfolio manager and his or her clients. The best such letters generate excitement and instill confidence. The worst are dull, complacent and filled with generalities, clichés and jargon. This month’s issue of Excess Returns explores best practices in letters to investors.
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 while back one of my clients, a portfolio manager who runs his own firm, asked me to review a quarterly letter to investors penned by a member of his staff. I agreed to help and opened the letter as soon as it landed in my in-box. The letter was sloppily written, devoid of specificity and larded with the standard, self-satisfied clichés that often characterize such communications: "we are long-term investors" … "we don’t practice market timing" … "fundamental research is our guiding light" … yadayadayada.
I honestly did not know what advice I could give to improve the letter. "Look," I said when he called me, "You know this letter is dreadful. I know this letter is dreadful. There is absolutely no point in editing it. You just need to rewrite it yourself from scratch, and then you need to write the letters to investors yourself from now on. You write well and, most important, you know the portfolio."
The advice to write it yourself, I learned later, is a best practice endorsed and lived to the letter (pun intended) by none other than the king of investor communications, Warren Buffett. As most readers of this newsletter will know, Mr. Buffett himself writes the now-legendary annual Berkshire Hathaway letters to shareholders.
What you may not know, and what I learned only recently through Investing Between The Lines, is that Mr. Buffett grades a company higher if the CEO writes his or her own shareholder letter. When asked why by Investing Between the Lines author L.J. Rittenhouse, Mr. Buffett explained: "I look for someone who talks to me frankly and honestly about the business, the way a partner would. If the CEO doesn’t write the letter, it’s a black mark against them for one reason — they may not know their business very well."
Best Practices in Letters to Investors
In addition to "write it yourself" (as the portfolio manager, CIO or CEO), the following best practices also may be helpful to you and your firm in writing effective letters to investors.
Bring the Portfolio to Life. The portfolio is not made up of sectors and statistics. It consists of companies and the people who run them. Who can ever forget Rose Blumkin, founder of the Nebraska Furniture Mart, a company that joined the Berkshire Hathaway fold in 1983? Mrs. B, we learn in Mr. Buffett’s 2013 letter to shareholders, emigrated to the United States from Russia. She never spent a day in school and she worked at the company she founded until the age of 103. Investor letters need more such information about the companies in the portfolio and the people behind them.
Provide Historical Context. In 2008, the per-share book value of Berkshire Hathaway declined 9.6% while the S&P 500 declined 37%. In the opening paragraphs of the 2008 letter to shareholders, Mr. Buffett soothes investors with the balm of historical context:
Amid this bad news … never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21 1/2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges.
Without fail, however, we’ve overcome them. In the face of those obstacles — and many others — the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.
Investor letters can thus instill confidence even when the world seems to be coming to an end.
Communicate a Point of View. When asked to provide the confidence-inspiring historical context and future perspective noted above, however, many portfolio managers are unable to do so. They hide behind the assertion that their investment orientation is exclusively bottom up and long term. They protest that they never address what’s going on in the larger market as this would smack of market timing. A consistent theme in Mr. Buffett’s writing is investing in stocks as if they were "small portions of businesses" and then holding them for the long term. Reading his letters, however, it strikes me that his bottom-up, long-term focus has often been misinterpreted by those who glibly disavow the importance of big-picture perspective. If I were a Berkshire Hathaway investor who met Mr. Buffett in a coffee shop and asked him what was going on in the portfolio, he would provide (just as he does in his letters) an in-depth, thoughtful description rich with detail about the companies, the industries where they operate and the larger world that supports them. He would offer, in other words, a point of view. He would not scold me for invoking the evil of market timing.
Put Performance in Perspective. When it comes to the business of investing and communications about investing, any form of excess should be avoided — excessive pride or excessive penitence. The tone of investor letters should be factual, forthright, and humble, neither overdramatizing weak numbers nor aggrandizing strong numbers. When the numbers are fantastic, remind investors when and why they are likely to be less fantastic. When the numbers are disappointing, admit mistakes and do not make excuses. The explanatory detail and modest tone of earlier letters will serve you well when your numbers are down.
Circle Back Often. In this same vein, remind your investors what you wrote in past letters and how it turned out. Were you right or wrong and why? What did you miss? As I have written in the past, one of the best ways to understand how a portfolio manager works is to understand past mistakes and how the manager learned from his or her mistakes.
There are many reasons why portfolio managers and CIOs do not write their own letters to investors. They may simply not write well enough or they may be unwilling to make the time to communicate with their investors. In his 2013 letter to shareholders, Mr. Buffett writes, "[We] like your company’s prospects. We feel fortunate to be entrusted with its management." In other words, "This is your company and we are the faithful, hard-working servants of your money." Such language has permeated his communications with investors over the years, and is likely well received precisely because it is rare. After all, Mr. Buffett operates in a world where some believe that communicating effectively with investors is not sufficiently important to merit their time.
Between the Lines
Investing Between The Lines: How to Make Smarter Decisions by Decoding CEO Communications is a fascinating, necessary, eye-opener of a book. Author Laura Rittenhouse, President of Rittenhouse Rankings, has made a formal study of the "linguistic clues" embedded in letters to shareholders. This 2013 book shows how companies that communicate with candor outperform their peers and how investors can learn to identify lack of candor in companies such as Enron before they declare bankruptcy.
Investing Between the Lines documents how words can be just as important as numbers in understanding a company’s long-term investment potential.
College Stress Solutions
Alpha Partners’ Strategic Partner Kelci Lynn Lucier has written a book, College Stress Solutions. As soon as I heard about her new book, I and apparently many other people said, "Wow! I wish I had a book like that while in college!" If you have children, grandchildren or siblings in college now, you might want to make them aware of Kelci’s new book. College Stress Solutions considers different sources of stress for students — academic, financial, social and family, among others — and then proposes commonsense solutions. The book can be read cover to cover or kept on a shelf and referred to as needed.
Kelci Lynn has assisted Alpha Partners for many years with a variety of editorial projects, and we have come to rely on her expertise as an editor. We are delighted that she has written such an important book. Congratulations, Kelci!
College pressures can be daunting, especially in a difficult job market. This book is filled with practical advice for students who want to combine academic success with enjoyment of all college has to offer.
Alpha Partners LLC Marketing for Excess Returns®
1062 Oakridge Road South | Park City, UT | 84098
You are receiving this newsletter as a member of the investment community. If you no longer wish to receive it, please respond to this email with “No More Penguins” in the subject line. To subscribe to this newsletter, send an email with your request to info@alphapartners.com. Your privacy is important to us. We will never rent, sell or share any information that you provide.
Monthly insights for investment marketing and sales professionals
May 2014
"Dear Investor" letters are perhaps the most vital communication between a portfolio manager and his or her clients. The best such letters generate excitement and instill confidence. The worst are dull, complacent and filled with generalities, clichés and jargon. This month’s issue of Excess Returns explores best practices in letters to investors.
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 while back one of my clients, a portfolio manager who runs his own firm, asked me to review a quarterly letter to investors penned by a member of his staff. I agreed to help and opened the letter as soon as it landed in my in-box. The letter was sloppily written, devoid of specificity and larded with the standard, self-satisfied clichés that often characterize such communications: "we are long-term investors" … "we don’t practice market timing" … "fundamental research is our guiding light" … yadayadayada.
I honestly did not know what advice I could give to improve the letter. "Look," I said when he called me, "You know this letter is dreadful. I know this letter is dreadful. There is absolutely no point in editing it. You just need to rewrite it yourself from scratch, and then you need to write the letters to investors yourself from now on. You write well and, most important, you know the portfolio."
The advice to write it yourself, I learned later, is a best practice endorsed and lived to the letter (pun intended) by none other than the king of investor communications, Warren Buffett. As most readers of this newsletter will know, Mr. Buffett himself writes the now-legendary annual Berkshire Hathaway letters to shareholders.
What you may not know, and what I learned only recently through Investing Between The Lines, is that Mr. Buffett grades a company higher if the CEO writes his or her own shareholder letter. When asked why by Investing Between the Lines author L.J. Rittenhouse, Mr. Buffett explained: "I look for someone who talks to me frankly and honestly about the business, the way a partner would. If the CEO doesn’t write the letter, it’s a black mark against them for one reason — they may not know their business very well."
Best Practices in Letters to Investors
In addition to "write it yourself" (as the portfolio manager, CIO or CEO), the following best practices also may be helpful to you and your firm in writing effective letters to investors.
Bring the Portfolio to Life. The portfolio is not made up of sectors and statistics. It consists of companies and the people who run them. Who can ever forget Rose Blumkin, founder of the Nebraska Furniture Mart, a company that joined the Berkshire Hathaway fold in 1983? Mrs. B, we learn in Mr. Buffett’s 2013 letter to shareholders, emigrated to the United States from Russia. She never spent a day in school and she worked at the company she founded until the age of 103. Investor letters need more such information about the companies in the portfolio and the people behind them.
Provide Historical Context. In 2008, the per-share book value of Berkshire Hathaway declined 9.6% while the S&P 500 declined 37%. In the opening paragraphs of the 2008 letter to shareholders, Mr. Buffett soothes investors with the balm of historical context:
Amid this bad news … never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21 1/2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges.
Without fail, however, we’ve overcome them. In the face of those obstacles — and many others — the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.
Investor letters can thus instill confidence even when the world seems to be coming to an end.
Communicate a Point of View. When asked to provide the confidence-inspiring historical context and future perspective noted above, however, many portfolio managers are unable to do so. They hide behind the assertion that their investment orientation is exclusively bottom up and long term. They protest that they never address what’s going on in the larger market as this would smack of market timing. A consistent theme in Mr. Buffett’s writing is investing in stocks as if they were "small portions of businesses" and then holding them for the long term. Reading his letters, however, it strikes me that his bottom-up, long-term focus has often been misinterpreted by those who glibly disavow the importance of big-picture perspective. If I were a Berkshire Hathaway investor who met Mr. Buffett in a coffee shop and asked him what was going on in the portfolio, he would provide (just as he does in his letters) an in-depth, thoughtful description rich with detail about the companies, the industries where they operate and the larger world that supports them. He would offer, in other words, a point of view. He would not scold me for invoking the evil of market timing.
Put Performance in Perspective. When it comes to the business of investing and communications about investing, any form of excess should be avoided — excessive pride or excessive penitence. The tone of investor letters should be factual, forthright, and humble, neither overdramatizing weak numbers nor aggrandizing strong numbers. When the numbers are fantastic, remind investors when and why they are likely to be less fantastic. When the numbers are disappointing, admit mistakes and do not make excuses. The explanatory detail and modest tone of earlier letters will serve you well when your numbers are down.
Circle Back Often. In this same vein, remind your investors what you wrote in past letters and how it turned out. Were you right or wrong and why? What did you miss? As I have written in the past, one of the best ways to understand how a portfolio manager works is to understand past mistakes and how the manager learned from his or her mistakes.
There are many reasons why portfolio managers and CIOs do not write their own letters to investors. They may simply not write well enough or they may be unwilling to make the time to communicate with their investors. In his 2013 letter to shareholders, Mr. Buffett writes, "[We] like your company’s prospects. We feel fortunate to be entrusted with its management." In other words, "This is your company and we are the faithful, hard-working servants of your money." Such language has permeated his communications with investors over the years, and is likely well received precisely because it is rare. After all, Mr. Buffett operates in a world where some believe that communicating effectively with investors is not sufficiently important to merit their time.
Between the Lines
Investing Between The Lines: How to Make Smarter Decisions by Decoding CEO Communications is a fascinating, necessary, eye-opener of a book. Author Laura Rittenhouse, President of Rittenhouse Rankings, has made a formal study of the "linguistic clues" embedded in letters to shareholders. This 2013 book shows how companies that communicate with candor outperform their peers and how investors can learn to identify lack of candor in companies such as Enron before they declare bankruptcy.
Investing Between the Lines documents how words can be just as important as numbers in understanding a company’s long-term investment potential.
College Stress Solutions
Alpha Partners’ Strategic Partner Kelci Lynn Lucier has written a book, College Stress Solutions. As soon as I heard about her new book, I and apparently many other people said, "Wow! I wish I had a book like that while in college!" If you have children, grandchildren or siblings in college now, you might want to make them aware of Kelci’s new book. College Stress Solutions considers different sources of stress for students — academic, financial, social and family, among others — and then proposes commonsense solutions. The book can be read cover to cover or kept on a shelf and referred to as needed.
Kelci Lynn has assisted Alpha Partners for many years with a variety of editorial projects, and we have come to rely on her expertise as an editor. We are delighted that she has written such an important book. Congratulations, Kelci!
College pressures can be daunting, especially in a difficult job market. This book is filled with practical advice for students who want to combine academic success with enjoyment of all college has to offer.
Monthly insights for investment marketing and sales professionals
April 2014
Much has been published during the past few years about how human brain function affects investment decisions. But how do the workings of the human brain affect investment marketing? This month Excess Returns examines a few vital marketing rules based on how human beings process and retain information.
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.
I am happiest in life when I am engaged in two good books simultaneously, listening to one in the car and reading one at home. So imagine my dismay recently when, after starting to listen to a book, I realized that I had heard this book before. I had borrowed this same audiobook from the library only about a year ago.
My personal memory shortfall got me thinking about the role of memory in marketing. My job involves presenting information about a complex, intangible product (investment management) in a distinctive, memorable way. If I could forget an entire book consumed over six hours, then how easy it must be for prospective clients to forget an entire investment presentation consumed in 30 to 60 minutes.
So I got to wondering, how does human memory work? And how can understanding human brain function be applied in developing more effective marketing strategies? It turns out that, yes, you guessed it, there is a growing body of work on this very topic.
Rules to Remember
Given the way the human brain operates, prospective clients, consultants and financial advisors are more likely to remember you and your approach to investing if you follow a few simple rules:
Break It Up. This also might be called the 10-minute rule. According to John Medina, author of Brain Rules, after 10 minutes, without a change in the kind of information being presented, the human brain checks out. If given more of precisely the same kind of information, attention dwindles, the potential for learning decreases and, in the context of investment marketing, so does the potential for getting another meeting or making a sale.
At 9 minutes and 59 seconds, writes Professor Medina, the brain needs something new to reactivate — something new with an emotional charge to release the neurotransmitter dopamine, which aids memory and information processing. In his book, Professor Medina describes how he breaks a 50-minute lecture into five 10-minute segments with dopamine-inducing transitions from one segment to the next.
Connect to the Audience. There are several ways to achieve such transitions: a synopsis of what the next segment is about (the brain craves meaning over detail), a specific example, a personal emotional connection or, perhaps most effective of all, an example linked to a personal emotional connection.
Academic studies show that the most persuasive messages are presented in a way that facilitates connection to the audience. One might wonder why scientific studies should be required to document obvious common sense. (People are more interested in information if they can relate it personally to their own lives. Duh.) In my own experience working with investment managers, however, I can see the need for such studies. Many investment companies have great difficulty presenting the story of their firm and their investment strategies in ways that trigger a dopamine-inducing emotional response. The typical investment pitch, in fact, prioritizes the information of least interest to prospective investors (the firm, the firm’s credentials) at the expense of information of greatest immediate interest (the investment strategy and how it fulfills a specific audience need).
Use Examples. We have always told our clients that examples are a key ingredient of strong storytelling, creating satisfaction as a plot unfolds. Because of what Professor Medina describes as “the brain’s natural predilection for pattern matching,” examples also make information “more elaborative, more complex, better encoded and therefore better learned.” Brain Rules describes the following experiment:
Groups of students read a 32-paragraph paper about a fictitious foreign country. The introductory paragraphs in the paper were highly structured. They contained either no examples, one example, or two or three examples of the main theme that followed. The results were clear: The greater the number of examples, the more likely the information was to be remembered.
For more on the power of examples in investment marketing, see the January 2013 issue of Excess Returns.
Use Pictures. Experts in communications, graphic design and human brain function all agree: pictures are much easier to remember than words. According to Brain Rules, “if information is presented orally, people remember about 10 percent, tested 72 hours after exposure. That figure goes up to 65 percent if you add a picture.” There are several reasons, some good and some bad, why investment marketing tends to be text heavy. A good reason is that many marketing documents are designed to be read as well as spoken (the presentation book that often is reviewed as a stand-alone document, for example). A bad reason is that investment professionals fear the subjectivity inherent in pictures; they are more comfortable with text and numbers. Another bad reason is that many in our business falsely perceive pictures as being somehow not sufficiently serious for institutional investors. (For more on this mindset and how to avoid it, see Oh, That Is So … Retail!)
These rules — break it up, connect to the audience, use examples and use pictures — scratch the surface of what brain research has to teach us about marketing. Such rules, in my view, merely ratify common sense. But I have to remember that in our world there are many who would defy common sense: the product expert comfortable only with numbers and facts who will not allow any pictures in a presentation book, the portfolio manager who refuses to use specific examples out of fear of being pinned down and the CEO who enumerates the merits of his or her company without explaining why the audience should care. Perhaps the science of brain research ultimately will convince these investment professionals what we marketers have known all along.
(Oh and by the way, circling back to the origin of this article, I think the reason I did not remember having listened to that audiobook was simply this: it was boring.)
The Rule of One
A friend recently sent me a research study about the optimum number of positive claims in messages designed to persuade an audience. When there is a persuasion motive, the study explained, more than three positive claims arouse skepticism. This adds another empirical rationale for the so-called Rule of Three.
The Rule of Three works just fine, but do you know what rule I like a whole lot better? The Rule of One. Think about it: What is the one distinctive thing you want clients and prospective clients to remember about your investment approach? If you can answer that question, you have the foundation for a strong marketing strategy. Why? Because one is easier to remember than three (or four or ten). Because focus on one thing concentrates and intensifies the message. And because many of your competitors will prove unable to identify, agree on and clearly articulate one truly distinctive element of their investment offering.
Brain Rules
John Medina’s fascinating book and related website offer support for commonsense marketing strategy, along with invaluable chapters on how exercise, sleep and stress affect brain function. The chapter on Rule #4 (“We don’t pay attention to boring things”) offers the best argument I have so far heard against multitasking: “Studies show that a person who is interrupted takes 50 percent longer to accomplish a task. Not only that, he or she makes up to 50 percent more errors.” All of the studies cited in Brain Rules (and in this issue of Excess Returns) can be found at www.brainrules.net/references.
John Medina’s book, Brain Rules: 12 Principles for Surviving and Thriving at Work, Home, and School, provides many memorable lessons for investment marketers.
Monthly insights for investment marketing and sales professionals
April 2014
Much has been published during the past few years about how human brain function affects investment decisions. But how do the workings of the human brain affect investment marketing? This month Excess Returns examines a few vital marketing rules based on how human beings process and retain information.
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.
I am happiest in life when I am engaged in two good books simultaneously, listening to one in the car and reading one at home. So imagine my dismay recently when, after starting to listen to a book, I realized that I had heard this book before. I had borrowed this same audiobook from the library only about a year ago.
My personal memory shortfall got me thinking about the role of memory in marketing. My job involves presenting information about a complex, intangible product (investment management) in a distinctive, memorable way. If I could forget an entire book consumed over six hours, then how easy it must be for prospective clients to forget an entire investment presentation consumed in 30 to 60 minutes.
So I got to wondering, how does human memory work? And how can understanding human brain function be applied in developing more effective marketing strategies? It turns out that, yes, you guessed it, there is a growing body of work on this very topic.
Rules to Remember
Given the way the human brain operates, prospective clients, consultants and financial advisors are more likely to remember you and your approach to investing if you follow a few simple rules:
Break It Up. This also might be called the 10-minute rule. According to John Medina, author of Brain Rules, after 10 minutes, without a change in the kind of information being presented, the human brain checks out. If given more of precisely the same kind of information, attention dwindles, the potential for learning decreases and, in the context of investment marketing, so does the potential for getting another meeting or making a sale.
At 9 minutes and 59 seconds, writes Professor Medina, the brain needs something new to reactivate — something new with an emotional charge to release the neurotransmitter dopamine, which aids memory and information processing. In his book, Professor Medina describes how he breaks a 50-minute lecture into five 10-minute segments with dopamine-inducing transitions from one segment to the next.
Connect to the Audience. There are several ways to achieve such transitions: a synopsis of what the next segment is about (the brain craves meaning over detail), a specific example, a personal emotional connection or, perhaps most effective of all, an example linked to a personal emotional connection.
Academic studies show that the most persuasive messages are presented in a way that facilitates connection to the audience. One might wonder why scientific studies should be required to document obvious common sense. (People are more interested in information if they can relate it personally to their own lives. Duh.) In my own experience working with investment managers, however, I can see the need for such studies. Many investment companies have great difficulty presenting the story of their firm and their investment strategies in ways that trigger a dopamine-inducing emotional response. The typical investment pitch, in fact, prioritizes the information of least interest to prospective investors (the firm, the firm’s credentials) at the expense of information of greatest immediate interest (the investment strategy and how it fulfills a specific audience need).
Use Examples. We have always told our clients that examples are a key ingredient of strong storytelling, creating satisfaction as a plot unfolds. Because of what Professor Medina describes as “the brain’s natural predilection for pattern matching,” examples also make information “more elaborative, more complex, better encoded and therefore better learned.” Brain Rules describes the following experiment:
Groups of students read a 32-paragraph paper about a fictitious foreign country. The introductory paragraphs in the paper were highly structured. They contained either no examples, one example, or two or three examples of the main theme that followed. The results were clear: The greater the number of examples, the more likely the information was to be remembered.
For more on the power of examples in investment marketing, see the January 2013 issue of Excess Returns.
Use Pictures. Experts in communications, graphic design and human brain function all agree: pictures are much easier to remember than words. According to Brain Rules, “if information is presented orally, people remember about 10 percent, tested 72 hours after exposure. That figure goes up to 65 percent if you add a picture.” There are several reasons, some good and some bad, why investment marketing tends to be text heavy. A good reason is that many marketing documents are designed to be read as well as spoken (the presentation book that often is reviewed as a stand-alone document, for example). A bad reason is that investment professionals fear the subjectivity inherent in pictures; they are more comfortable with text and numbers. Another bad reason is that many in our business falsely perceive pictures as being somehow not sufficiently serious for institutional investors. (For more on this mindset and how to avoid it, see Oh, That Is So … Retail!)
These rules — break it up, connect to the audience, use examples and use pictures — scratch the surface of what brain research has to teach us about marketing. Such rules, in my view, merely ratify common sense. But I have to remember that in our world there are many who would defy common sense: the product expert comfortable only with numbers and facts who will not allow any pictures in a presentation book, the portfolio manager who refuses to use specific examples out of fear of being pinned down and the CEO who enumerates the merits of his or her company without explaining why the audience should care. Perhaps the science of brain research ultimately will convince these investment professionals what we marketers have known all along.
(Oh and by the way, circling back to the origin of this article, I think the reason I did not remember having listened to that audiobook was simply this: it was boring.)
The Rule of One
A friend recently sent me a research study about the optimum number of positive claims in messages designed to persuade an audience. When there is a persuasion motive, the study explained, more than three positive claims arouse skepticism. This adds another empirical rationale for the so-called Rule of Three.
The Rule of Three works just fine, but do you know what rule I like a whole lot better? The Rule of One. Think about it: What is the one distinctive thing you want clients and prospective clients to remember about your investment approach? If you can answer that question, you have the foundation for a strong marketing strategy. Why? Because one is easier to remember than three (or four or ten). Because focus on one thing concentrates and intensifies the message. And because many of your competitors will prove unable to identify, agree on and clearly articulate one truly distinctive element of their investment offering.
Brain Rules
John Medina’s fascinating book and related website offer support for commonsense marketing strategy, along with invaluable chapters on how exercise, sleep and stress affect brain function. The chapter on Rule #4 (“We don’t pay attention to boring things”) offers the best argument I have so far heard against multitasking: “Studies show that a person who is interrupted takes 50 percent longer to accomplish a task. Not only that, he or she makes up to 50 percent more errors.” All of the studies cited in Brain Rules (and in this issue of Excess Returns) can be found at www.brainrules.net/references.
John Medina’s book, Brain Rules: 12 Principles for Surviving and Thriving at Work, Home, and School, provides many memorable lessons for investment marketers.
Alpha Partners LLC Marketing for Excess Returns®
1062 Oakridge Road South | Park City, UT | 84098
You are receiving this newsletter as a member of the investment community. If you no longer wish to receive it, please respond to this email with “No More Penguins” in the subject line. To subscribe to this newsletter, send an email with your request to info@alphapartners.com. Your privacy is important to us. We will never rent, sell or share any information that you provide.
