Corporate Eye

The Intersection of Marketing Theory and Investor Relations

target by segmentBoiled down to its essence, investor relations is consultative selling.

Investor relations professionals want the right type of customers (investors) to buy a piece of their company (stock) and to have a good ownership experience (own the stock for a long period of time).

The potential market for a company’s stock is vast, covering institutional investors and individual investors, who can be either domestic or foreign. Because the market is far larger than can be reached by a typical investor relations department, it requires careful application of available resources. This is where the marketing tools become useful.

Often, when you speak to people in the profession of investor relations, they speak about “targeting” investors. However, marketing theory teaches that targeting is only one-third of a process of segmentation, targeting and positioning.


Segmentation refers to the process of breaking down the investor base into distinct groupings so that an investor relations department can deal with a clearly identifiable classification. There are a number of ways to whittle down the investment universe, starting with separating active from passive shareholders. It obviously does no good to pursue index funds as they will simply hold you in proportion to your weighting in the index. Next, you can classify investors as either short term or long term. Considering the time and effort it takes to get an investor to buy your stock, many companies will consider it far preferable to have investors who will be around for a while, but as discussed below, this may not always be the case. Next you might wish to consider the groupings of institutional versus individual shareholders and how to divide your time and efforts.

At this point, the process should be clear that regardless of how you wish to divide up investors, you will need to clearly break them down in to manageable groupings.


Once segments are identified, marketing principles state that the attractiveness of each segment needs to be evaluated. For many companies, the obvious choice here is the segment of investors that are active, long term investors. These may be institutional, because that is where much of the investible funds reside, however, some companies may also wish to consider individual shareholders for the desirable qualities of low turnover and loyalty to company products. Some companies, particularly those with low trading volumes and visibility might wish to target more active short term investors in order to raise their liquidity profiles. The point here is that companies need to consider their individual situation before making a judgment about their optimum target investor.


The final step in the three part marketing process is positioning – what is the appropriate information about what the company is and where it’s going and that can be presented to the target investor that will resonate with the investor’s style, portfolio constraints and investment philosophy. For example, new, quickly growing companies will be presenting to growth investors who will want to know about market growth, new products, research and development spending and other items that will further enhance growth. On the other hand, mature companies will likely be marketing to Growth at a Reasonable Price or value investors and will choose to emphasize financial returns, margins and operational efficiencies.

There you have the basic marketing principles applied to investor relations in a nutshell – segment your investors, target the most attractive segments and position your company message to fit the investor profiles you have targeted.

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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.