Ross founded Copylab in 2005 and is now leading the team in the UK and leading the company’s charge into new markets.More articles from Ross Hunter
Think of companies who are most admired around the world and who have happy customers: Amazon, Apple, FedEx, Walt Disney.
What do they all have in common? They all have vivid brands that we can identify with. And none of them trade predominantly on price. Of course, pricing is important to some of the companies in FORTUNE magazine’s annual survey. But take a look at amazon.com’s site and you’ll find they advocate customer convenience and service. Meanwhile, FedEx plays on the idea of connecting people more than it does shipping rates.
Stop trading on short-term performance. Stop it now. It’s crack cocaine for your company – you’ll get a terrific high, but the cold turkey is going to be nasty.
Ask any fund management executive and they’ll tell you they’re long-term investors. It makes perfect sense – you’re mostly investing money for people saving for retirement.
Yet every day, asset managers continue to publish marketing content peddling better returns and higher yields. They can’t help themselves. When the numbers are good, you have to take advantage and attract new assets. So what’s wrong with that strategy exactly?
Rate tarts. Carpetbaggers. Remember them? Well, that’s the kind of customer you’re attracting when you sell on short-term performance. Not only that, you’re likely to alienate more-sophisticated investors who appreciate a more thoughtful approach and a long-term commitment to your values, philosophy and process.
So, to reverse the analogy, when the tailwinds become headwinds, your new price-sensitive customers are going to move on to the next-door manager with better returns.
When markets are high, fund managers prioritise customer acquisition. Indeed, as I wrote recently, research with CMOs shows that their biggest challenge in 2019 (by far) is gaining new customers.
However, I’m delighted to see that customer retention is in the top three in terms of importance for senior marketers. And I know that when the next economic downturn and bear market appears, retention will return to the top of the priority list, particularly for those managers who have been attracting price-driven customers.
But marketers are missing a trick. Customer retention should be the ongoing number one priority. The benefits are clear. One, you will build a customer base that is less likely to head for the exit at the first sign of trouble. And two, this more loyal group means your company’s revenues and profitability will be more stable.
You don’t believe this is true? Well, take another look at the FORTUNE magazine list of most admired companies. The only investment company in the top ten is Berkshire Hathaway. Do some research into what’s made Warren Buffett’s fund so successful.
Here are some of the things that have helped Buffett build a successful business focused on customer retention over more than 50 years.
Their operating model is blindingly clear and they’ve stuck to it since 1964: they buy large stakes in solid businesses and hold for the long term. Are you clear about the single unifying vision for your firm? Can you explain your philosophy and process in a concise way that will get customers excited?
Over the decades, Buffett and his colleague Charlie Munger have embedded a brand value of trust throughout the business. They trust the CEOs of the companies they invest in. And they have allowed their clients to trust in them. What will it take for your customers to trust you?
You can’t become an authority overnight. You have to earn that. And it took Buffett a number of years to do so. But you can set the foundations for creating an authoritative brand now. Be clear what it is your business is going to stand for – in good times and in bad – and stick to it religiously. What’s going to make your customers care about what you say?
You need to stop focusing on shiny performance numbers and express your brand values. I often see ‘transparency’ cited as a fund manager value. I happen to think that’s a good one. It allows you as a marketer to have that running as a thread, even implicitly if you like, through much of your marketing communication.
As the stories highlighted in this article show, when they’re in a hole they stop digging. And they are transparent about their missteps in their communications. This works well in the context of a ‘transparency’ value. It also humanises your business, which brings me to…
Berkshire is not ashamed about highlighting the individuals that make up the firm. Note nowadays that this is not just Warren Buffett; many of his disciples have public profiles too.
As I write this, I can hear the wailing about ‘star manager cultures’. But that’s not what I mean. The way to get around this is simply to tell more stories about more people. Let your customers get to know all the analysts and managers in your US equity team.
Profile CEOs of businesses you’re holding in your US Large Cap portfolio. Interview investors in your portfolios and ask them what they think of you; if they’re nice things, you could even publish your customer stories.
Ironically, this is something that Berkshire Hathaway doesn’t do much of – by volume at least. But they don’t need to because they’ve built up a ton of trust and value over five decades of trading.
You’re going to have to work harder to get there. And the way to do it is to communicate. No, over-communicate. That doesn’t mean spamming your clients and customers. It means communicating with surgical precision about the right things to the right groups of people at the right time.
Do that, and maybe one day your firm could be up there with Jeff Bezos, Walt Disney and Warren Buffett on the FORTUNE list