Following the Herd

By Darren Lassiter, Managing Partner and Head of Client Services at Arthur

Reflecting upon a busy first half of the year, it struck me—quite understandably considering the asset class is back—how much ‘Fixed Income’ advertising was out in the market. This fits with the typical short-term view of asset managers when it comes to advertising: they halt their efforts when asset classes or markets are out of favour with investors, only to reinvest when the markets or asset classes recover.

This approach is flawed for several key reasons:

• Increased Competition: When asset managers resume advertising in a recovering market, they face a significantly crowded and competitive environment. Every manager tries to re-enter the market simultaneously, making it harder for individual firms to differentiate themselves. This not only drives up advertising costs due to higher demand but also reduces the effectiveness of each campaign as messages get lost in the clutter.
• Missed Opportunity: By advertising during periods when markets or asset classes are less favoured, asset managers can capitalise on a less cluttered environment. Fewer firms are competing for attention, allowing for more prominent placement and potentially lower advertising costs. This consistent presence helps maintain and build brand awareness, ensuring that when the market recovers, the firm is already top of mind for investors.
• Building Brand Resilience: Consistent advertising, even during downturns, reinforces brand stability and resilience. It sends a strong signal to investors that the firm is reliable and confident, regardless of market conditions. This long-term view can build trust and loyalty among investors, who are more likely to stick with brands that demonstrate steadfastness through all market cycles.

However, marketing budgets are often the first to get cut in asset management firms. Therefore, it’s crucial to manage marketing budgets to maximise effectiveness. Reuse existing collateral rather than paying for new materials (ensure the messaging is still relevant). Don’t underestimate the message that simply investing in ads sends to customers. Your ability to advertise communicates that you are robust, financially secure, and have a quality product.

Cutting Back – Don’t Do It!

The temptation is to cut back, batten down the hatches, and wait out the storm. Don’t do it!

Several studies, including one from the Harvard Business Review, insist that cutting back on marketing and advertising during a recession is a very bad idea. Conversely, investing in marketing during tough times can be a very good idea.

Even when markets are experiencing volatility, it’s vital to calibrate your marketing to meet your customers’ needs, not just turn it off and stick your head in the sand. It can even be a good opportunity to build your brand because not everyone will have the same courage of their convictions. The advertising landscape might be quieter, rates cheaper, and you can get more reach for your budget. People may not be buying instantly, but that just feeds into potentially pent-up demand, and you want to be there when the floodgates open (remember our 95%-5% rule).

Top Thought #8

• Manage your marketing budget for maximum effectiveness.
• Repetition is your friend, so reuse existing collateral rather than paying for new (make sure the messaging makes sense).
• Memory triggers are powerful. Don’t underestimate the message that simply investing in ads sends to customers. Your ability to advertise communicates that you are robust, financially secure, and that you have a quality product.

*Source: Harvard Business Review