ProVu - Mailing Process

Executive Summary

This process is designed for the investor relations teams in hedge funds, funds of hedge funds (FoHF) and their third party marketers who need to either:

In general hedge fund managers and FoHF invest a lot of time and effort creating professional monthly newsletters or datasheets.  Unfortunately, on average only 10-15% are opened.

Many companies believe that because their lists are small and targeted, their results are much better.  Perhaps it is, but the key point is that they don’t know what their readership rate is or, more importantly, who the readers are.

Not knowing means:

The process described in this paper shows how effective eMarketing, “Precision Marketing,” can:

The authors believe that maximum benefit is achieved if our process is implemented in full.  However, there is benefit to be obtained by taking selected elements and implementing these on a piecemeal basis.

Contents

1        Overview        

1.1        Objectives        

1.2        Impacting the Bottom Line        

1.2.1        First Amongst Equals        

1.2.2        Email Brand Value        

1.2.3        Maximizing Market Opportunity        

1.2.4        Focus Salespeople for Efficiency        

1.3        The 2 Key Factors of Emarketing Effectiveness        

1.3.1        List Quality        

1.3.2        Communication Quality        

1.3.3        Measuring results        

1.4        Structure of this Document        

2        Process        

2.1        Overview        

2.2        List Cleaning        

2.2.1        Why this is Important?        

2.2.2        Easy Aspects        

2.2.3        More Advanced        

2.3        Designing Effective Email        

2.3.1        Getting Email Opened        

2.3.2        Designing the Email Body        

2.3.3        Enhancing Investor/ Salesperson Rapport        

2.4        Testing Alternatives        

2.4.1        Principle of Measurement        

2.4.2        Programme of Alternatives        

2.4.3        Validity of Conclusions        

2.5        Emarketing Etiquette        

2.5.1        The Importance of Permission        

2.5.2        Implementation        

2.5.3        Double Opt-In        

2.5.4        Polite Emarketing Policy        

2.6        Managing Non-Respondents        

2.6.1        Reminder Why Important        

2.6.2        Learn Something from the Process        

2.7        Continuous Improvement        

2.8        Summary        

3        Implementation Plan        

3.1        Overview        

3.2        Activity Order        

3.3        Summary        

4        Using the Feedback        

4.1        Objectives        

4.2        Verifying Qualification of Existing Prospects        

4.3        Spot Potentially Interested “Outliers”        

4.4        Timing calls to Hard-to-Reach Contacts        

4.5        Structuring Follow-up        

4.6        Gaining an Insight Before Making the Phone Call        

5        Other Opportunities        

5.1        Overview        

5.2        Due Diligence Documentation        

5.3        Event Organisation        

5.4        Summary        

This paper aims to help the sales and investor relations functions within companies in the alternative investment market achieve one or more of the following objectives:

Most fund managers in the alternatives sector use a mix of the following in their sales and marketing activities:

From 1 to 3 these are increasingly direct, increasingly effective and increasingly expensive.  In the same way that face-to-face meetings can be more effective if qualification and preparation is done by telephone, professional emarketing can make that second stage more effective.

Effective emarketing can impact a management company’s interaction with its investors and prospective in the following ways:

The above, all covered in more detail below, have a direct effect on attracting and retaining investors, assets under management and therefore profitability.

As Charles Barnick, CEO of Coronation Fund Managers, said:

“Ultimately investors make decisions based on the way you interact with them.  The more professionally and efficiently this is done, the more likely they are to invest.  With all else being equal, investors will favour fund managers that distribute pertinent information effectively and whose salespeople follow up in the most professional manner.”

In an increasingly competitive environment, where many hedge funds and funds of funds struggle to differentiate themselves on the basis of performance alone, winning new investors will depend on other factors including every aspect of how the management company interacts with potential investors.

Brands serve the purpose of identifying and ensuring a consistent quality, this means that strongly branded products will be selected ahead of other competitive products.  In the context of emarketing an alternative investment product, there are two distinct brand areas: the quality of your emails and the quality of your product.

With regard to the first of these, i.e. the quality of the email itself, the competition is for the recipient’s attention and whether or not the email and its attachments read.  Branding here relates to the recipient’s recognition of you as a sender and the expectation of finding something of value in your email.

Branding of your product and management company is a more complex issue.  However, it is undoubtedly impacted by the quality of your communication and how often this is read.

By using the feedback from an emarketing process it is possible to identify contacts within your target accounts that may have left or changed roles as:

Ignore this feedback and you may not be communicating as effectively, if at all, with some of your target accounts.

The Pareto Principle put simply is that 80% of your investment comes from 20% of your investors.  Over 80% of your new investment will come from less than 20% of your prospects.  So theoretically, if you only spent your time with the best 20% you would be 4 times more effective (5x80%).  Even if this doesn’t work out in practice, it’s hard to argue that focus is a bad thing.

The challenge, of course, is identifying the 20%, or less, of prospects to concentrate on.  And that, together with working more effectively with these people, is what this paper is about.

In essence, there are only two factors that affect the effectiveness of a marketing activity:

List quality is the quality of the people you are sending the information to, i.e. are they people who are likely to invest?  To break that question down into emarketing fundamentals, we need to ask the following:

Communication quality is the impact that your emails have on the people who receive them. 

In the first instance your email will be competing for attention against the tens or hundreds of other emails that your investor or potential investor will have received and may be deleted before it is even opened.

Secondly, if the email is opened, your investor or prospect may not open the attached newsletter or datasheet.

Factors to measure, therefore are:

Of the above metrics, the first is the most difficult to measure as many invalid email addresses will not result in an error message (a “bounce”) being sent.

The most common way of measuring the number of emails that are opened in to use Microsoft’s Read Receipt mechanism.  However, this can be overridden by the recipient and the authors believe the technique serves mainly to irritate the recipient.  So is not recommended.  However, there are alternative ways of measuring the number of emails opened, which although not perfect they are certainly better that read receipts.

Measuring the number of attachments that are opened can be done with 100% accuracy and delivers perhaps the most useful information.

This document is designed to guide a marketing professional in the alternatives section through the implementation of an effective emarketing strategy.  Although the authors believe that this is best achieved by adopting the suggestions in this paper, there is benefit to be gained from selectively adopting those portions that can be integrated with an existing strategy..

Section 2 “Process” covers in detail the various elements of the Investor Communication Process covered.

Section 3 “Implementation Plan”

Section 4 “Using the Feedback”

Section 5, “Other Opportunities” looks at other ways in which tracked mailing can benefit a company in the Alternatives Sector including:

Appendices cover:

Most marketing organisations within the alternatives sector achieve an opening rate of 10-15% for their monthly newsletters or datasheets.  Put more bluntly 85-90% never reach a valid recipient or are deleted before they are opened.

As mentioned above approximately 30% of email addresses change per annum, which means that your list is constantly going out of date.

Obviously, incorrect email addresses should be removed from your mailing list, but ideally these should be replaced by a more appropriate contact or that contact’s new email details.

The impact of mailing incorrect addresses:

Some elements of email list cleaning can be achieved very easily or identified automatically using commercially available software products:

More advanced techniques for cleaning lists include:

Bounce management relates to the processing of automatic responses from a recipients email server.  These break down into two categories of notification:

Fortunately most commercial email systems, such as ProFundCom, take care of this on behalf of the sender.

Section 2.6, below deals with the management of non-respondents and recommends the cessation of mailing to people who demonstrate a history of persistent disinterest in your material.

Put bluntly, once a monthly email reaches a valid recipient, it is effective if:

The first challenge is having you email actually opened.  To do this it competes against the tens or hundreds of other emails that each recipient receives.  These decisions are made on the basis of:

The average email user makes read/ delete decisions, using the above criteria, in less than a second based on the header information:

These two fields, From text and Subject, are the only factors the sender can control, to determine if the email is opened or not.  It is our contention that these should combine to yield a familiar and information rich statement that piques the recipient’s appetite for more.

The From field does not and, the authors would argue, should not be merely somebody’s email address.

We advocate a 2-part subject line,.  First part is stable and recognisable, the second conveys headline information that will entice the recipient to open the email, for example:

Subject: Jan. 2007 Newsletter – Up 65% last 12 month

When combined with the “From” format advocated above this contains the maximum information in the most concise format.

In the Microsoft Outlook™ inbox emails are listed with the From in bold and subject below.  So one might see:

Research shows that the latter is up to twice as effective that the former.  This is due to both increased familiarity and increased information content.

The body of the email should provide the key information in the clearest and most accessible format.  Funds of funds and others merely gathering information should have their lives made as easy as possible.  However, the interested reader should be guided to and encouraged to open further information.

Using a consistent banner across the top of your email aids familiarity and is a useful tool for increasing brand recognition.  Technically it can also be used as a mechanism to identify if the email has been opened.

The downside of using banners is that they may initially be blocked by email systems which display an unattractive grey box with a cross in the corner until they are clicked on.  This issue is usually addressed once the recipient has either:

The authors believe that the benefits of graphical banners outweigh the disadvantages.  Excessive use of graphics, however, may have a negative impact on readership of attached documents.

For a single fund mailings, the mail should start with a one or two sentence reminder of the fund’s strategy and/ or objectives, followed by a table of results and a clear link to access the full datasheet/ newsletter.

Where an email covers performance of more than one fund, the initial text should explain the positioning of the management company as a whole and the distinction between the funds, followed by a table of results and a clear links to further information (see below). 

Although the usual way to provide additional information is through an attached newsletter.  The authors recommend that results and access to further information should be laid out in a manner similar to the following:

The above table has the advantage of:

There is a balance to be struck between providing too much information in the body of the email, in which case the reader has no incentive to read the datasheet, and too little, which might fail to whet their appetite for further information.

Since it is possible to detect when an attached document is opened, one would ideally like this to signify a level of interest from the contact being mailed.  Hence our recommendation, in section 2.3.2.3, that datasheets or newsletters be split by fund.  One might also include a link to an article profiling the principals of the management company or a trackable link to the website.

Whilst the body of the email must be concise, the footer can be as long as you like.  However, before the disclaimers and legal statements, it is worth highlighting your adherence to good emarketing etiquette (see section 2.5) and in particular:

Where you have more than one person involved with investor relations, the monthly email can be used to enhance the rapport between the investor and their usual contact at your company. 

This is achieved by:

The other aspect of rapport building, i.e. how the salesperson gains an understanding of the investor or prospect’s interests is covered in section 4.6 “Gaining an Insight Before Making the Phone Call.”

This section covers how one goes about improving the communication medium through the conduct of a series of experiments.

Being able to measure response rates make it possible to test two alternative email formats or the same email format sent at different times to see which produces the best result.

The key things to bear in mind when conducting such a test are:

The ProFundCom system will do the above randomisations automatically, as will some statistical packages.

Since one can only test the impact of one variable a month it is suggested that you work out a schedule of items to prove.  These variables might include:

With regard to the last of these there is anecdotal evidence that Friday afternoons are a bad time to send out newsletters or datasheets.  Knowing how bad would enable you to make a decision, if your datasheet was only finalised on a Friday afternoon, as to send it out anyway or delay to Monday or possibly Tuesday of the following week.

If you find that one email format or timing of email produced superior results to another, it is important to be able to determine how likely it is that this result may be due merely to chance.

This may seem like an unnecessary step, but one is exposed to the risk of being misled by chance events that might superficially imply the superiority of an actually poorer format.  Appendix B covers this in more detail.

Where results are too close to call, we recommend rerunning the test and combining the results so that the sample size is effectively doubled.

Polite marketing is only sending information to people who have explicitly given you permission to do so.  Permission to send information on one topic or fund does not grant carte blanch for all others.  It should also be possible to rescind this permission at any time.

The gold standard of politeness is to ask twice, (double opt-in, see section 2.5.3).  Although this initially seems like an unnecessary barrier to sending information is actually works quite smoothly and ensures that you collect proof of permission to mail.

We also recommend that people who persistently do not open the information you send them are periodically asked whether they still want to continue receiving it (see section 2.6 “Managing Non-Respondents”).  This we see as proactive politeness.

You meet somebody at a conference, party or elsewhere and they ask you to send information on your fund; that is the first opt-in.  Instead of just sending them the information, you send them an email asking them to confirm this request, i.e. double opt-in.  Importantly, if they do nothing you do not send them information.

If somebody is an important contact and they fail to respond to your request to double opt-in, you should call them or otherwise prompt them to respond.  However, do not mail them until they do, they may have good reasons why they do not want the information going to them or may suggest a more appropriate contact.

If you decide to adopt the principles of polite marketing, it is worth sharing this fact with your prospective investors.  This fact will:

The policy statement itself, ideally one page long, should contain the following sections:

For an example policy see Appendix A

It is a commonly held belief that there is no cost associated with mailing people who are not interested in your fund or who might not even exist.

However, over 30% of people change their primary email address per year.  In a business context this usually results from people changing employers or corporate restructuring.  Add to this those people for whom a change of responsibilities means they are no longer the relevant person to receive you datasheet or newsletter.

The cost therefore relates to the risk:

We advocate a process of monitoring those contacts who persistently fail to open newsletters or datasheets.  After a predetermined time period, 6 months say, of receiving information and not opening it, they should be removed from the list.

But before you do this:

As long as this exercise is carried out politely and professionally, you’ve got nothing to lose.

In section1.3 we defined the key factors of emarketing effectiveness as:

By proactively cleaning the list and implementing double opt-in for new contacts, your list will continuously improve with regard to the validity and relevance of contacts.

The quality of communicate will increase:

The average fund manager in the alternatives sector has 85-90% of its monthly newsletters or datasheets deleted before being opened or mailed to invalid addresses.

This implies that they are failing to connect with the majority of institutions or private investors that they are trying to influence.  In many circumstances the situation is unknown.

If you do not use any of the above techniques, it is highly likely that doing so will at least double your response rate within a 12 month period.  In addition to the improvement in your perceived professionalism, this will have a knock on effect with the focus of your salespeople, the quality of their telephone communication and the subsequent face-to-face meetings where you win new investment.

This section deals with how you do it in practice.  The adoption of all the ideas in this paper would constitute a big change in the way most funds operate and is too big to do all in one go.  So this section suggests a staged approach that if adopted in its entirety should double your response rate within 12 months.

By month it is suggested that you carry out the following activities:

The above section provides a process that proactively maintains the cleanliness of you database.  From month 8 onwards all contacts will either:

Therefore, the above process will ensure that contacts changing companies, roles or interests for any other reason will be identified by the system after 6 months, if not by the sales and marketing earlier.

The process also ensures that the response rate will exceed 20% which is approximately double the average for the Alternative Investments industry.

What do you want to know about your investors or prospects?

If one of your best prospects has not opened any information from you in the last 2 or 3 month, you have to ask: “are they really going to invest?”  The answer might be “yes” once you know why they haven’t read anything; but until you do, I would suggest that it’s not longer “in the bag”!

You will probably already be in regular contact with most of the contacts who regularly read your emails.  However, there may well be outliers whose interest levels exceed your expectation.

Keeping in touch with these people reduces the risk of missing opportunities.

The ProFundCom system can notify you in real time when a contact opens your newsletter.  When they do this, it is more than likely that they are sitting at their computer in their office, without any pressing issues to attend to, and ready to take your telephone call.

With all else being equal, calls to people who have read you latest newsletter or datasheet are more likely to be productive than calls to those that have not.

If you have 500 contacts on you database and 50 have read your recent newsletter, you have a manageable list, based on some objective data that means you are less likely to miss outlier opportunities.

Knowing what documents a contact has chosen to over those that they have ignored, gives you some insight into their priorities and potential interest areas.  It also gives you some idea of what they might already know, you know in advance how the conversation might go and can be mentally prepared.

Knowing who and when people have opened documentation you have sent them can be useful in a number of different situations beyond the monthly newsletter mailing.  For example:

By tracking who has opened the detailed fund documentation that is sent to a prospect during their due diligence prior to them investing, you have an absolute record for compliance purposes, of both having sent this, and it having been received and opened.

If you are organising a series of “meet the manager” meetings, firstly you can you the techniques outlined in this document to help you identify the most interested potential investors. Secondly by tracking who opens the details of these events vs those that do or do not request a meeting can sometimes provide an insight into why people are not interested.

By using a central system to send and track document on an ad hoc as well as for the formal mailings, enriches the database of contact interests and increases the benefits that tracking the regular mailing alone can provide.

Appendix A – Example Polite Emarketing Policy

Polite Emarketing Policy

March 2007

As part of ProFundCom’s marketing and business development activities it periodically sends emails to prospective customers informing them of developments that have occurred with its Investor Communications Process, product or business.

The company endeavours to only send information to people who are interested in receiving it.  This usually consists of people its employees have met or spoken with by telephone and explicitly obtained permission to mail.

Double Opt-In

Before somebody is added to a ProFundCom mailing list they are sent an email asking them to confirm that they are interested in receiving this information and that they give the company the permission to send it to them.  Only when a reply to this email is received will that person be added to the mailing list.  If they do nothing they will not be mailed.

Unsubscribe

Even though somebody may have given ProFundCom permission to send them email, the company recognises that that person may change their mind and revoke this permission at any time.  The unsubscribe link on the email enables them to remove themselves from one or more mailing lists and/ or suggest an alternative contact.

Removing Non-Respondents

Because ProFundCom tracks who opens attachments or follows the links in its emails, it is able to identify who is interested in the material it sends.  If somebody fails to open any attachment or follow any link for a sustained period of time they are sent an email suggesting that, unless they ask otherwise, they will be removed from the mailing list.  If they do nothing, they are unsubscribed.

Although ProFundCom has some people on its mailing list that have not explicitly given their permission to be mailed through the double opt-in process, the company’s programme of removing non-respondents means that it is gradually getting to a position where all recipients have demonstrated their interest by consistently opening the material sent.

Confidentiality

ProFundCom will not sell or share its mailing lists with any third party.

Appendix B – Testing the Significance of a Result

If we assume for a moment that each person we sent our e-mail to has a 10% chance of responding and we send an email to 700 such people.  Then we often say that we “expect” to get 70 responses (10% x 700).  However, the likelihood of getting exactly 70 responses is actually quite low, about 1 in 20, and the probability of each number of responses is shown by the graph below:

Therefore, if we are testing new mail formats and get results of 66 and 74 from a mail to 700 each, it can be credibly argued that the difference is explained by be natural variation.  However, if a third format yields a result of 84 (2%), we can calculate that this result or higher would only be seen through random chance 5% of the time (see table below).  So we can be 95% sure that this third format produces better results than the 10% we are used to.

To get a sense for how sample size and differences in the observed frequency affect certainty of results see the table below.

To see how these are calculated see overleaf.

Calculation of Likelihood of Responses

Definitions/ Assumptions:

Then the probability P(r) of seeing r responses is given by the following formula:

Therefore, the probability PG(r) of r or greater responses being seen is given by the following: