Welcome back Public Relations

Another week, another PR musing.  Two blog’s attracted my attention last week, both written by interesting, knowledgeable marketing communications people. The first was from the Econsultancy http://tinyurl.com/2wpuk7a and the second from PR’squared http://tinyurl.com/35ll3dc.

Econsultancy looked at the social media backlash and signed-off with the thought that social media is here to stay and soon we’ll stop calling it social media and I agree. It’s time everyone stopped seeing online, or rather social media, as separate to a firm’s broader communication strategy and messaging.  The right messaging, knowing your audience and finding the right channels to connect with your audience is what counts. It may be that companies identify online, inclusive of own content, commenting on relevant press articles, twitter and facebook are key, it may not. Perhaps networking events and direct mail are more appropriate.  What it should never be is isolated, or treated as being isolated from the whole and no company can afford to ignore a communication channel. Choosing not to engage via a particular communication channel is not at all the same thing as ignoring it.

For example, as Eurostar and BP found to their respective corporate head holding earlier this year, not utilising social media is not the same as not having a strategy for social media. Most companies have strategies in place for picking up on negative media coverage and then choosing whether or not to respond to that coverage. That’s why firms monitor the press, either via an agency service or something like Google alerts. Certainly Eurostar and BP would have had media monitoring in place. So why didn’t they have that in place for social media?  I would be very surprised if they don’t now, but certainly if they had at the time BP wouldn’t have been embarrassed by and then dealt so poorly with the parody BPpressoffice twitter account and Eurostar would have responded faster to customer complaints – effectively chopping off the cobra’s head.

In the same way, embracing online too fully without strategy can be equally ill advised. A few years ago there was the empty blog syndrome, where blogs had been set up by senior corporate spokespeople and then left to whistle lonely in the wind.  Well now its twitter accounts. Worse still, many companies have no presence but their employees do, creating a disconnect between corporate communications and the communication of staff – or rather, the individual is greater than the collective. Not a good look. (http://tinyurl.com/289fab9 interesting look at FTSE 100’s representation on twitter by blogger Lance Concannon).

PR’squared upped the ante on Econsultancy by examining the future of PR.  A learned fellow’s view is that to separate PR from marketing is an approach that is fast dying out and should do so. The two are interlinked and are most effective when harmoniously managed.

“Traditional PR agencies have five to 10 years left in the cycle before they get phased out. Everything is blurring together and traditional PR agencies need to think how they are going to add to their social and digital abilities and how to expand into other areas,” PR industry veteran Aaron Kwittken.

Again, I couldn’t agree more, although 10 years seems rather generous to me. For PR and marketing to exist in isolation of each other can quickly lead to discordant messaging and a lack of harmony does not help maximise the potential of campaigns. How many times have you seen a brilliant concept, even brilliant marketing that lacked visibility because the talkability was left out of the mix?  In the same way, I’m sure you can think of countless examples where chatability was high, but the firm’s delivery on its spoken promise failed to materialise elsewhere.

It’s good to see that the “public” in public relations is back.

How you get from a sharp increase in correlation across asset classes to reputational risk

Research produced by Saltus, (http://www.saltus.co.uk/) the absolute return investment managers, looks at long term correlation across asset classes. Over the last 10 years, a 12 month period from 9 years ago, the last 6 months and the last 3 months, data clearly shows that there has been a sharp increase in correlation across asset classes this year (do drop me a line if you are interested in seeing this data). High correlation makes it difficult to add value through stock picking or tactical asset allocation, and from a communications point of view this is tough timing for the industry on two counts:

Firstly, the active fund management industry continues to come under fire for high charges and low results. This isn’t a new discussion as anyone who was working in the industry in 2000 will tell you, but it does have a new context. In the last decade investors have suffered not one, but two catastrophic market events and their faith in markets and managers has taken a severe bashing. At the same time, the industry is facing a change of regime with RDR and control of the end investor has clearly shifted in the past decade from fund manager to intermediary (adviser or platform). Do not be surprised to see more fire directed at the industry on the matter of management charges in coming months and it’s worth taking a look at media attention regarding pension charges or indeed Banking CEOs and the clear casting of ‘villain’ if you are wondering just how bad attention could get. Now seems like a sound time for the industry, either as a collective body, or as individual firms, to think through and prepare a response in these terms. It may never happen of course, but if it does do you really want to be caught humming Dixie, particularly if that means investor confidence is further undermined?

Secondly, high correlation reduces the benefits of portfolio diversification and therefore increases volatility within the portfolio which means many investors are likely to be exposed to unintended risks and at a point where investors are incredibly risk sensitive. Think eating a toffee shortly before going to the dentist for that root canal work you needed. If investors aren’t aware of what’s happening and feel blindsided, again, the impact seems likely to be a further erosion of trust in the fund management sector, again bad news for the fund management sector. You can be ship shape, but in rough waters a number of small leaks can quickly become a soaking or worse still sink the ship.

You may think I am being overly pessimistic, and indeed perhaps I am. However, reflecting back on the July Peregrine Perspectives event, Shiv Taneja of Cerulli Associates quoted some sobering figures. A sharp drop in global AUM (assets under management) in 2008 was swiftly followed by sharp growth in 2009, but what was obscured from view is that the increase came predominantly from market growth and not new money coming in. Investors, as any good wealth manager will tell you, remain wary.

There may not be much that the industry can do to erase recent market memories, but what it could be doing is rebuilding trust in its services. There are many fires being fought here, European political pressures, home ground political pressures, regulatory changes, substantial socio-economic shifts, distribution evolution and of course delivering returns from the markets – but the importance of communicating the benefits of the service it offers to the people it’s offering that service to (in the right language, at the right time, on the right ground) should not be overlooked.

Perhaps you disagree with my assessment and feel that actually the industry does a brilliant job of communicating. I shall leave you then with two recent examples of just how the best of intentions can go horribly wrong; the recent response to criticism levied against the cautious managed sector by the IMA (see Matthew Vincent’s FT article on this ‘A conundrum to chew over: http://tinyurl.com/2vyhgvc) and the menagerie of funds that sit within the absolute return sector – be that the IMAs, Citywire’s or an advisers own classifications of that sector.

Challenges welcomed...