Thursday, October 31, 2013

Are You Talking About What You Want to Say or What Your Investors Want to Know?

I confess that I’m not an avid reader of much of what gets churned out in the business press by the so-called experts. I readily admit that this is somewhat of a contradiction in me, because I want people to read what I write about in my area of expertise, but let’s face it, there’s a lot of crud out there. Most business writers seem to approach their subject as if it were the key component to business success. If their readers would simply follow their cookbook formula, everything would be peachy. If only life were so simple. So I tend to restrict my reading to The Wall Street Journal, The New York Times, The Economist and a few other assorted publications.

One of the other assorted publications I tend to pay attention to is the McKinsey Quarterly, and it is an article there that spurs me to write today. The article, which was published early in October, 2013, is entitled “How B2B companies talk past their customers” and it examines the gap between the messages that suppliers send to their customers and what their customers really want to know. The article struck me as particularly germane to investor relations because, stripped to its bare essentials, IR is a business-to-business marketing effort where companies present the reasons to own their stock to sophisticated purchasing managers who are interested in buying a commodity that will benefit their customers, such as mutual fund investors or pension managers.

The article, which is available at, looked at how companies in the business-to-business sector positioned their brands and came up with a list of 13 broad themes and topic areas ranging from the practical (low prices) to the lofty (corporate social responsibility). Then the authors turned around and asked customers how important they thought each theme was in evaluating the brand. What they found was that there was an almost complete mismatch between what companies were saying and what customers thought was important.

This piece of research is instructive to investor relations because IR departments are formulating brand messages all the time, whether it’s in an investor presentation or an annual report, yet in my experience, the vast majority of all such messages are put together based upon what the company wants to say, not what investors want to hear.

So here’s a radical thought. The next time you put together a presentation, stop and think about what investors want and need to hear. This shouldn’t be terribly difficult, as IR departments are constantly bombarded by questions from analysts and good investor relations practice dictates that you should track the types of questions being asked. The data should be there – you simply have to integrate it into your message.

At the end of the day, it comes down to a relatively simple rule of communications – know your audience. Unfortunately, it is a rule that is often overlooked when polishing IR presentations and annual reports.

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