Corporate Eye

Finding the Hook – More on Marketing and Investor Relations

In marketing there is a concept known as the “hook”, which is the theory that a product or service needs to have a catchy saying or phrase to grab customers’ attention. An extreme example of this is the story about American popular/country singer Mac Davis who after one of his songs was rejected by his record label because it didn’t have a hook, got mad and wrote the song, “Baby Don’t Get Hooked On Me” which went on to become a number one hit for him in America in the 1970s. The relevance to this in investor relations comes in two forms. First, a company’s stock is marketed by the sell side to the buy side through very compressed information bytes followed by extensive research. Second, differentiating your company often requires that you find a simple way to express complex strategies.

If you read the blog post preceding this one, you may recall that a sell side analyst, after much work to produce an industry piece, has exactly 3 – 5 minutes on the morning call to compress his investment findings to a viable investment thesis to his sales force. The sales people, in turn, usually have 60 – 90 seconds to present the idea to buy side analysts and portfolio managers when they call them to pitch the idea. If the investment idea can’t be expressed succinctly within those compressed time spans, chances are that investors will move on to the next investment idea.

So the takeaway here is to find a concise, pithy description of your company that captures its most salient points and work at getting the Street to think of it when they think of your company. It’s another form of branding, but expressed in a more subtle way. To take an example from the energy industry, if your company has the engineering technology to take on exploration in the harshest environments and situations that other companies can’t approach, then that is the first thing you want investors thinking of so that you can stand out from a crowded field.

This concept should also be applied to other differentiating aspects of your business. Sometimes the product offerings of companies are clearly differentiated by price or service levels, but other times the difference is not as clear-cut. For example, many years ago I worked for a drugstore chain, a retailing concept that has many competitors that sell much the same merchandise. Discount chains such as Wal-Mart and supermarket chains such as Kroger all offered not only the same types of general merchandise and over-the-counter medications but even offered prescription departments where you could get your medications.

The question that constantly came up was “If everyone is selling the same products, what makes you different?”

In this case the hook is not so much about getting information out quickly, but more about creating a phrase that will stick with the investor. The catch phrase we came up with to describe the differentiating point of our business was “We sell healthcare and convenience.” We followed it up with factoids that showed how our customers were in the store 15 minutes or less and bought fewer than 5 items. This clearly set us apart from the big box retailers and gave investors a mental picture of why customers viewed our stores as a different shopping experience.

In short, snappy catch phrases are not just for the marketing department. Marketing also occurs at the investor level.

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John Palizza

John recently retired as a Lecturer in Management at Rice University’s Jones Graduate School of Management, where he taught investor relations. Prior to that, John was in charge of investor relations for Sysco Corporation and Walgreen Co. He holds a MBA from the Kellogg Graduate School of Management at Northwestern University and a law degree from Loyola University of Chicago. You can learn more about John’s thinking about investor relations at his blog, Investor Relations Musings.