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Feb 25, 2005
How To

5 Best Practices for CMO's Role in Investor Relations

SUMMARY: Only 9% of investor relations departments report to the marketing or marcom department. 66% report to the CFO and 28% to the CEO. How can, and should, CMOs be involved in investor relations messaging? Plus, how can you make sure that the two different departments -- marketing and IR -- aren't sending varying messages to the marketplace? Here are the five best practices from top IR experts.
By Jennifer Nastu, Contributing Editor

"I had a woman come to me, who worked for a golf club manufacturer. She said, 'Do the marketing materials have to be truthful?' I said, 'It sure helps, why?' She said, 'We have a brochure out that says that such-and-such a golf club is the fastest selling line in the country, and it's not. And the analysts are calling us on it.'"

"That's a true story," says Louis Thompson, President and CEO of the National Investor Relations Institute. "Now, I'm not suggesting that all marketing is hype, but you've got to be careful that when you make statements, you can back them up."

The audience for investment analysts is investors. In other words, the information that comes from the investment analyst will be used to make buying and selling decisions on the company's stock.

"And because that's a highly regulated industry, there are very strict rules about the flow of information from the company to the marketplace," says Mary Scholz Barber, Executive Vice President of Kupper Parker Communications. You can't selectively disclose to analysts anything that you don't put out to all investors.

We spoke with Thompson and Barber to learn how marketers can help Investor Relations reach out to investment analysts -- without getting into trouble.

-> Best Practice #1. CMO's should not be in touch with analysts directly

"A company should limit its spokespersons to the CEO, CFO, and the IR officer," Thompson says.

That's not to say that a marketer should not ever speak with an investment analyst -- but it should happen only in controlled circumstances. For example:

--Launch parties, conferences, breakout sessions, etc. Some companies invite investment analysts to attend these types of things, and sometimes analysts proactively visit on their own.

"The smart Investor Relations Officer will prepare [marketers] in advance, remind them of the rules of disclosure, and repeat what has already been publicly disseminated, and what shouldn't be shared," Barber says.

--Investor days When companies bring analysts and portfolio managers in to hear from all members of management, the CMO will have the opportunity to make presentations, reveal marketing campaigns, and demo products to show how the company plans to take the product to market. Again, it should all be planned and approved by Investor Relations.

--Meet-and-greets Can you call an investment analyst and ask to meet with them in the hopes of having them cover your company (as you may do with an industry analyst)? Yes and no, says Barber. You can suggest meetings to the CEO, CFO, or IRO, who should coordinate with the analyst. The marketer may be invited if marketing is an important piece of the story that will bring more insight.

-> Best Practice #2. Strong commitment to integrated messaging

Every company's organizational chart differs from others. Thompson mentioned a survey that represented 2,400 companies, asking about their organizational structure. He found that 66% of IR people report to the CFO; 28% report to the CEO; and 9% report to the head of communications.

"But the organizational chart doesn't really matter as long as you have a strong commitment from the CEO supporting integrated messaging," Thompson says. "As long as there's coordinated messaging, it doesn't matter who they're reporting to."

A close working relationship between IR and marketing might look something like this, Barber suggests:

--Open access to sharing of information (a two-way relationship, not a gatekeeper-type situation).
--Frequent phone calls and monthly meetings to share market insights and information about the marketplace, among other things.
--Formal meetings quarterly as the earnings announcement is being developed.
--IR reviews news releases, product information, or anything that goes to the press.

If a company outsources Investor Relations, it's most often the CFO who handles the relationship, says Barber. In that case, the CMO should still have a relationship with both IR and the CFO.

"Without truly understanding what the market drivers are, the IRO is missing a very big piece of the company's story. And without the CMO understanding Investor Relations, they can't be as effective in terms of sending clear, consistent, well-branded messages into the marketplace. The two have to work very closely together," Barber says.

-> Best practice #3. Be able to support any claims

Analysts look at all sources of information when they're analyzing a company, so when you write materials, be aware that the analysts will be reading it.

"If those claims need to be changed -- if you have a claim that the XYZ line of golf clubs is the fastest-selling line in the country and that changes -- you need to pull those materials," says Thompson. Of course, he acknowledges, it's not practical or possible to do a recall on marketing pieces, but you do need to stop using the materials and make necessary changes.

-> Best Practice #4. Create tools to keep communications open

Status reports or emails detailing what was covered in meetings and conversations between IR and marketing help keep the flow of information running smoothly.

Barber also suggests that an intranet on which the most recent documents are posted and updated can be extremely useful. "It's hard for executives to keep track of what's been released or broadly disseminated. When there's a single repository for the documents, everyone can be assured that they're looking at the most recent."

-> Best Practice #5. Yes, you can still be proactive

"A lot of the tactics and techniques that work for general marketing can also work for approaching analysts," says Barber.

First, as with approaching journalists, you need to know what industries they cover and what parameters they have. If you're very thinly traded, for example, there are analysts that won't be able to provide coverage because their clients, the investors, may not be able to invest unless there's a certain level of volume.

"It's really knowing the audience," she says. If you want to get on an analyst's radar screen, you can send kits via regular mail or email (again, only after coordinating with IR).

Remember that analysts read the same media your audience does. Case studies and profiles in industry trades are an important way to reach them.

Useful links related to this article:

Kupper Parker Communications:

National Investor Relations Institute:

See Also:

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