Alternative investment managers need to stop marketing to robots.
You should be thankful that allocators have not yet been fully converted to cyborgs. If that were the case, a massive algorithm that would sort through the madness and a very small group of managers would receive all the capital. And I think we would all agree that this would be a different group of allocators than those that receive the majority of capital today? Groupthink would be overruled by objectivity and it is doubtful that the majority of capital would funnel towards the largest managers.
The industry is so caught up in quantitative thinking and algorithms that it tends to overlook that human discretion is still accountable for the majority of allocation decisions. Sure, funds are lined up side by side and the numbers are compared, however, it still comes down to a human choosing one fund over another.
Marketing efforts should be directed to influencing that human. And if you think your numbers are going to stand up at the end of the day, you are dead wrong. More often than not the allocator has already made us his or her mind long before the funds are lined up and compared.
Allocators will never admit this, and there is obviously some objectivity to the process, however, I would gamble that an allocator has chosen who they are going to allocate too much earlier on in the process than we are made to believe otherwise. All the “diligence” has more to do with “why they can’t” than “who they should” if that makes sense.
The question therefore remains: how do you build positive brand equity in advance of a final beauty contest?
First and foremost, they have to know you exist, and emailing a deck doesn’t cut it. Efforts to connect have to be repetitive and you need to say interesting things. Remember, you aren’t marketing to robots. It is important to look to create engaging and interesting content. This is a great example:
Ok, you know that they know you exist. You can’t just keep asking for capital. There has to be a reason you can continually email them. Monthly performance stats aren’t enough. This doesn’t help you win the beauty contest. You have to make them believe that your firm is more relevant and forward thinking than others. How do you accomplish this, you continuously send them relevant and forward thinking information. And you may need to step away from the email button to achieve this.
Next, what happens when an allocator is interested enough to do a bit of online research. Do you look relevant and progressive, or do you look tired and old? Don’t have a website… mistake. Have an old website … mistake. Don’t have a video… mistake. All of these things help you win the beauty contest. Give me an example when someone buys something that looks old and worn out, when there is something new and shiny sitting beside it for the exact same price.
Does having connectivity to social networks help you look progressive or stuck in the past? Don’t look at us, what do you think?
The long of it, the allocation process is anything but objective. You can’t treat the marketing process like the investment process. Thankfully, it will still be some time before machines alone will determine who does and who does not receive an allocation. Humans are still pivotal to the process, and these same humans choose BMWs over Mercedes. You need to market to “this” human being and not the robot that you have making decisions on what to invest in.
By Kyle Dunn