The new millennium has not been kind to investors. After a long run in the 1990s, the bull market finally ran its course, and for the past two years, stock portfolios have been declining. In fact, by the end of 2001, economic data confirmed a recession had begun in March of last year. As we head into the fourth quarter of 2002, optimists think the bottom has been reached and a recovery is on the way. But only time will tell.
Meanwhile, as double-digit returns have been replaced by double-digit losses, many investors have retreated to the sidelines. Lower fund performance is now matched by lower fund inflows. In fact, equity funds had a record outflow of $29.5 billion in September before recovering in the final months of 2001. Still, net new cash flow to equity funds for 2001 was only $32 billion, versus $309 billion for 2000. Better times are in the offing, if not just around the corner.
With lower assets, many funds have been tightening their budgets for marketing, advertising and public relations. This tightening comes at a time when it is more important than ever to keep your fund's name in front of the public. Out of sight means out of mind. As we weather the storm, it is important your fund remain visible not only to current shareholders who are wisely staying the course, but to potential investors who will be coming off the sidelines as the market recovers. With nearly 5,000 stock funds alone at the end of last year, competition for assets is keen, even during bull markets.
With less money to spend for marketing, choices have to be made as to the most efficient way of keeping your fund and your message before the public. Which is most effective - advertising, public relations or other marketing efforts, such as direct mail?
Based on our experience with mutual fund clients, public relations can be one of the most cost-efficient ways of reaching investors, giving you the most value for your marketing dollar.
Advertising exposure usually depends on the amount of money spent. That's why national television commercials cost more than an ad in your local newspaper. Expensive advertising, combined with cutbacks in marketing budgets, means an ad campaign can use up your marketing dollars much faster than a well-positioned media relations campaign. Especially for smaller fund organizations, an ongoing public relations program is a far better route for direct and effective communication with your target audiences.
There is another important difference between advertising and public relations. No matter how clever the ad - and many are quite clever and entertaining - the audience knows it is a self-serving communication. The advertiser bought the time to sell something.
Public relations, however, offers the credibility of a third-party endorsement. You didn't pay for the mention of your company. Instead, the publication's editor printed your release or assigned a reporter to interview your fund manager based on news value. Or, the producer of a television or radio program selected your manager as a guest, again, for news value.
This kind of endorsement is a potent tool in shaping public opinion, especially today when the public is more cynical than ever.
You might argue that you can lose control with public relations. With advertising, you create the message and determine exactly how and when it appears. With public relations, you can determine the message, but you can't always be sure your release will be printed, editors will respond to your media alert, or an interviewer will ask only the questions you want to answer.
This is where a full-service public relations firm can help. They will work closely with your marketing staff and portfolio managers to determine the goals of a public relations campaign, the messages to be delivered, the target audiences to be reached and the media to efficiently cover this market.
An experienced public relations firm has the professionals to assist you in creating an effective media relations program to communicate those messages. Because they understand the issues that drive news coverage and have close working relationships with journalists at financial, business and consumer publications, as well as reporters and producers of financial TV and radio programs, they can maximize the opportunities to get your messages in print and on the air. In addition, they will have contacts at the key financial Web sites.
In summary, most financial professionals are predicting that 2003 will mark the start of a recovery. Although it probably won't be robust and may not occur until the second half of the year, things should improve. Therefore, it's not too soon to prepare for better times by getting your fund's name and message before the public. One of the most effective, cost-efficient ways to do that is through public relations and a media relations campaign tailored to your product, message and market. Better times for the country can mean better times for your company as well.
Laura J. Berger is chairman and CEO of BergerBrown Communications, a Florham Park, N.J., public relations firm. For more than 16 years she was affiliated with several mutual funds as director of operations, shareholder services and as a corporate officer.