How do you get investors to respond to communication?

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One of the big challenges of every marketing executive is working out how to get investors or super fund members to respond to communications directed to them.

Mailing all investors in a fund is time consuming in production terms, hugely expensive to execute, and often achieves abysmal response rates. It’s not just poor return on marketing investment – it can be a disaster if you need investors to respond to a unitholder vote.

For retailers, the issue has been compounded by reliance on advisers to manage communication, and the art of speaking to the investor has sometimes been lost.

Recent research by the UK’s Financial Conduct Authority (FCA) provides some useful and practical pointers to lifting response rates significantly.

The research stemmed from a recent case where a UK firm was writing to 200,000 customers to inform them of potential mis-selling, and that they may be eligible for compensation. The FCA worked with the firm to conduct a randomized controlled trial where different approaches could be tested.

The standard, or control approach was a standard letter and envelope designed by the firm, which received a response rate of ~1.5% – pretty similar to a typical direct marketing exercise. The FCA developed 7 variations:

– Envelope with “act quickly” message added to it.
– Regulator logo included on letterhead.
– Two clear and direct bullet points at top of letter.
– Simplification via reducing text by 40%.
– Emphasis on speed by stating that the process would take only 5 minutes.
– Use CEO signature instead of customer service team.
– Send reminder 3-6 weeks after the initial letter.

The 200,000 customers were split into the 128 possible combinations and then standardized in terms of age, gender, amount of compensation etc.

So what works in terms of lifting response rates?

– As today’s chart indicates, by far the most effective was the use of clear and direct (salient) bullet points at the top of the letter. This alone increased response rates by nearly 4% (ie from 1.5% -5.5% ), which is huge.

– Other mechanisms which doubled response rates were simplification via less text and a speedy process.

What doesn’t work?

The use of special envelopes and the regulator’s logo had virtually no effect.

Using the CEO to sign the letter actually reduced response rates (disturbing).

Coming up with the perfect letter is not as simple as applying the three mechanisms which work, and then keeping the CEO well away. There are interactions between the mechanisms, and in particular, combining the bullet points with text simplification subtracted from using bullet points alone. The “best” approach combined:

Clear and direct bullet points.

Speedy process.

Reminder letter 3 weeks later.

This approach lifted the response rate from 1.5% to nearly 12%, which is an uplift any marketer would kill for.

The research also looked at gender effects, which is especially important for some Australian not-for-profit funds with large female memberships. The responses of women were similar to men on most factors, but women reacted even more positively to the clear and direct bullet points, less positively to reminder letters, and even more negatively to letters signed by the CEO.

The research is not a complete match with the situation of Australian super funds or fund managers – the UK firm involved was writing to ex-clients, and the compensation at stake was generally small ($30 on average). But there are many similarities.

Investors are generally busy people with limited time and interest to review communications and process information contained in them. Relatively small changes can result in big improvements in response rates, even when the starting point is good. In the battle to achieve marketing return on investment, those are important findings.

You can find the research paper here: http://www.fca.org.uk/static/documents/occasional-papers/occasional-paper-2.pdf.

Posted In: Trialogue