Investor relations professionals are being challenged by the need to find new ways to market their companies to shareholders and potential investors while ensuring they remain as transparent as possible. The companies described in this article are just a few examples of investor relations strategies obeying the new laws of IR – investor relationship management, value-added information, content control and timeliness. As methods of shareholder communication become more diverse, it will be more important than ever for IROs to use all tools at their disposal to ensure that their message is being heard by investors above that of the competition.
The investor as customer – Diageo
Over the last two to three years, customer-facing organizations’ attitudes towards their customers and businesses have been revolutionized by the concept of customer relationship management (CRM). Behind this trend is the notion that without a completely comprehensive list of who your customers are and what it is they want from you, it is almost impossible to sell to them with maximum efficiency, and far harder to ensure that they remain loyal. There is much that investor relations professionals could adapt from this approach.
For example, it is rare for a company to have a comprehensive digital database of shareholders and potential shareholders. In reality any number of disparate shareholder databases are held in different locations and mostly on paper.
The world’s leading premium drinks business, Diageo, is leading the way in applying shareholder relationship management (SRM) techniques to a consolidated database of its investors, both private and institutional. The company encourages visitors to its web site to register online, completing a series of questions that let the company identify and categorize potential investors. Are they institutional, professional or private investors? What sort of company information are they looking for before deciding to invest? It also enables Diageo to observe the requirements of potential investors and build a profile of their needs.
Anyone who registers is offered various options, including news releases, interim reports, annual reports, annual reviews, analyst presentations, media presentations and media watches – all of which can be automatically sent by e-mail. Thus shareholder registration is only the foundation for a number of more sophisticated investor relations strategies.
Once a company has a clear idea of who their investors are and, equally importantly, what they want, it is in a strong position to implement campaigns that aim to increase the confidence of existing shareholders and actively encourage investment among prospective investors.
Virtual site visits – Cookson Group
The use of new technologies as invaluable IR aids is accepted, if not universally embraced, as best practice. But international materials technology company Cookson Group uses cutting edge technology in a way that far exceeds the regular posting of historical financial data onto a web site that so often constitutes an online IR strategy.
Cookson recognizes that it is not only hard financial data that will convince existing and potential shareholders of a company’s value. Often softer information such as the CEO’s vision or company culture can play a role in more accurately evaluating a company’s true worth.
To help investors make such an analysis, Cookson Group’s web site not only includes a broad range of financial information and analyst reports, but also invites them to make a virtual site visit – a virtual tour of the steel mills where Cookson’s products are used, and the ‘clean rooms’ of its electronics customers’ assembly plants. ‘Without actually entering the massive halls of a steel mill or the clean rooms of an electronics manufacturer, it is difficult to see in action the benefits that Cookson brings to our customers,’ Lisa Williams of Cookson Group explains. ‘The virtual site visits take our investor visitors through the processes, benefits and opportunities of our businesses.’
Cookson’s online tours are also a good way to communicate the nature of the company to overseas investors who would otherwise have little to reference besides financial data. As further evidence of a commitment to new technology, the tours are made available in a format that can be downloaded to a handheld computer such as a Compaq iPaq. Cookson management can often be found wielding an iPaq to demonstrate the nature of their business anywhere, any time, making far greater impact than a mere verbal explanation or a company brochure.
Content control – Granada
The growth of the internet as an information resource means that financial journalists frequently refer to company web sites when they are searching for background information for articles or viewpoints.
The problem, from a public relations or investor relations officer’s standpoint, has been managing web site content via intermediaries like webmasters and outside service providers. But today they can ensure consistent information flow to a greater degree than ever before by means of easy-to-use content management tools.
For six months, UK-based broadcaster Granada has been using an online virtual press office facility called the Pressdesk. This lets communications officers update the company web site as frequently as they want, ensuring the information provided to any of the company’s audiences, whether financial journalists, industry analysts or investors, is both relevant and up-to-date.
Journalists visiting the web site who wish to write about Granada can read archived press releases, download print-quality photographs and read information that is regularly updated. For those journalists with urgent editorial requests there is also an SMS facility to alert dedicated company spokespeople to the opportunity for comment on a particular story.
Timeliness
Disclosure is now being much more tightly monitored and regulated, from the timeliness of the information provided to the standardization of financial reporting. One anomaly in this highly policed environment is the lack of regulation regarding the online communication of financial information.
Listed companies are required by law to release details of their financial performance at predetermined times throughout the financial year as well as annual reports. However, there is currently no regulation or standardization regarding the online vehicles that should be used to communicate that information.
A recent survey by Citigate MarchCom shows that in the UK, just over 20 percent of listed companies – mostly small-cap – are not using the web as a financial communications tool. Meanwhile, other research from Incepta Online reveals that people increasingly view the web site as the primary branding vehicle for a company, above television and print advertising. If they cannot find the information they need when they need it, this is going to have a negative effect on how they view that organization.
In the UK, at least, publicly-traded companies will soon be obliged to post their annual reports online – and in a timely fashion. The Department of Trade & Industry’s proposal for a revised Company Law includes this stipulation.
But does this go far enough? Perhaps regulators worldwide should consider enforcing online disclosure, from press releases to earnings reports as well as annuals. In a post-recession market of suspicion and skepticism, promises of financial stability are only as good as the visibility of the information behind them.
Paul Reynolds is development director at Citigate MARCHCom in London
