Five Massive Marketing Mistakes Small Caps Make
Louise Elyse, Principal Small Caps PR www.smallcapspr.com
It has been demonstrated in research studies that a good corporate reputation, considered an intangible asset, brings considerable benefits to a small cap company.
Research indicates that positive perception of a company by the broader public can result in at least four favorable outcomes: lower cost of capital, an ability to attract new investors, increased market capitalisation and stronger resistance to volatility.
According to Forbes Magazine intangible assets account for as much as 75% of a public company’s market capitalisation.
Small Caps are under-researched, under-invested, and under-valued. They are too small for the large investment banks and fund managers to deploy their expensive resources.
There is always an opportunity to add value in small caps. This is due to poor analyst coverage, which leads to poor market pricing efficiency meaning many undervalued.
Therefore, it is crucial that small cap companies are proactive in increasing their profile via marketing and public relations. It is not enough to rely on investor relations.
Small cap companies must actively promote themselves to the investment community, potential shareholders and general business community.
Yet many are neglecting this vital element and here is where they are going wrong:
Whilst investor relations (the process of interacting with shareholders, the investment community and the financial media) is a very important requirement of all public companies, no matter the size, it should not be primarily relied upon. This can lead to a false sense of assurance that the corporate reputation is being adequately managed via interaction with shareholders, brokers and analysts and the financial media.
By only focusing on investor relations they ignore or discount future customers as well as potential shareholders, most of whom pay little attention to small cap finances and stock market performance.
The implementation of investor relations need not preclude a company from employing an aggressive public relations strategy. The two should be complementary, not competitive.
In fact, an argument can be made that a company that neglects managing its reputation amongst the broader society can create risk and other headwinds for its investor relations efforts.
Being featured in major, credible newspapers, magazines, radio programs, online media, television programs is enormously valuable.
Unlike paid advertising, the readers and viewers of these publications know that a journalist has researched your company and is recommending it. The credibility value is massive.
An article in the Australian Financial Review, Financial Times, The Australian, Wall Street Journal and similar will vastly increase a small caps profile and reputation.
Current shareholders, analysts, brokers, fund managers, potential shareholders will stand up and take major notice.
Once secured it is vital that the media coverage is maximised by featuring it on the website, promoting it via social media and directly sending it to current shareholders, analysts, brokers etc.
Watch the share price and market capitalisation increase as this highly credible coverage in renowned media is secured.
According to the Public Relations Institute of Australia annual benchmark research the average retainer as of 2014 was $12,461 per month.
This was based on research undertaken with 48 consultancies across Australia and showed an increase of 15 per cent from the previous year.
Larger firms such as PPR, Edelman and Ogilvy PR retainers range from $15,000 to $100,000 per month.
Whilst it is important to work with a credible, quality firm there are many very experienced solo operators and boutique agencies who do a great job and are more affordable.
Bear in mind, however, that no skilled, expert PR person or consultancy will charge less than $8,000 per month (financial PR). If they are offering to undertake a campaign for under this price strike them out as it’s just not feasible due to the number of hours required to achieve success.
The issue with mid to large agencies is that once a client has signed they are assigned junior or mid consultants to do the majority of work. Whereas a boutique firm will usually consist of very senior, expert, specialists with vast experience.
Most, if not all, firms will pressure a client to sign a minimum 12 month campaign but that is not necessary. Small Caps PR offer a three month campaign which we are able to do due to our experience, expertise and “work hard, fast and smart” ethic.
In ongoing, 12 month campaigns significant time is wasted and that adds up to a serious amount of money for the client.
Many companies are unsure of the media and choose to not entertain them. However, there is an enormous amount of benefits being lost with this attitude. In the small caps arena we are working with solid, quality media and journalists from credible media which offer enormous benefits.
CEO’s can consider PR as trivial or an expense not required but this is due to not properly understanding the true function and benefits of PR.
The purpose of public relations is reputation management, and smart senior executives at small cap companies will appreciate its relevance to their businesses.
Research and strategy undertaken prior the media being contacted ensures that, for example, no issues can arise during a campaign that could have a negative impact. Any issue or misperception must be identified and a strategy put in place to ensure there is no negative fall out.
However, a negative story can appear on a company, especially a public company, even if they are not undertaking a pr campaign. A journalist can take an interest in a company and write a critical article and without a strong reputation and a PR on board to handle the issue there can be a major, long lasting repercussion. A good reputation built over considerable time can be destroyed in a day.
Social media can be a major challenge for public companies but it is a great opportunity to engage with current and attract potential shareholders.
What creates a fear of using social media is somewhat confusing guidelines on reporting financial information on social media.
Under the ASX Guidance Note 8 listed companies are required to identify and monitor investor blogs, chat sites and other social media sites (whether public or member-only) that regularly contain posts about the business.
Researcher Maria Prokofleva of Victoria University analysed 3,516 corporate announcements from Australian listed companies between 2008 and 2013. She found that companies which tweet corporate news and financial results can significantly affect stock prices even if the company’s tweets contain no new information beyond what is already posted through the stock exchange platform.
The research shows social media is a powerful tool for small companies reach retail investors, who lack the time and resources to track every company and every announcement.
“Companies that put extra effort to reach their investors are rewarded; they are able to grab the investors’ attention and lead them closer to the decision to invest. In line with this, there has been a recent influx in the business use of social media in Australia.” states Prokofleva.