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Influence Direct and Indirect

5 Questions: The Value of Direct vs Indirect Influence

Influence Direct and Indirect

Almost every action, choice or decision we make is the result of “influence” in some particular way. Even our personal preferences are shaped by influence, perhaps through the actions of others (“hey, you should really try this out”) or perhaps through our own past experiences (“I don’t care what you say, I’ve tried the bagels at that deli and they just don’t cut it for me”). Peer-pressure, marketing, advertising or even a desire to try something different based on past experiences are all forms of influence that shape our lives.

DIRECT vs INDIRECT INFLUENCE

Nowhere is the impact and value of influence more evident than in the world of business, as businesses are continuously trying to influence their target audience (customers) and partners to their benefit. When it comes to business, there are two different ways that a business or an organization can reach or influence¬†its target audience – direct and indirect. Direct influence is when a business specifically targets or touches their target audience – it is a direct “us to you” type of interaction and gives the business the most control over their message (it’s a one-step connection).

The difference between direct vs indirect influence is like the campfire game – what you tell one person may not be what they tell the next…

Indirect influence, on the other hand, is a bit more of a challenge as it involves a third-party (and intermediary influencer of sorts) that the business needs to influence in the hopes that the third-party will in turn influence their target audience.

UNDERSTANDING WHO INFLUENCES, AND HOW

If we take a look at the different organizations within a typical corporation, we can see how they influence the organization’s customer base.

Direct Influence Groups

  • Sales directly touches the customer through personal 1:1 interaction. This is the front line, where the influence of a sales strategy & pitch (or even an individual sales rep) can be the most directly measured.
  • Marketing touches the customer base en masse (although sub-segmentation usually occurs to a great extent). Their goal is to directly convey a corporate or product image, create demand and literally influence a customer to think about their product or service. Measuring the success, or influence, of a marketing campaign is possible, but not quite as easily as the direct 1:1 interaction of a sales rep.
  • Business Development touches organizational partners. When it comes to building partnerships and team-oriented strategies, business development is the functional equivalent of sales – it is almost always a 1:1 pitch and its effect can be immediately measured.
  • Customer Service touches existing customers. When the customer has a problem, customer service can not only help resolve issues and answer questions, but can, on a 1:1 basis, help influence how a customer uses a product/service, how they perceive the company in general and, potentially, influence future sales.

Indirect Influence Groups

  • Analyst Relations (AR) involves the process of interacting with, and influencing, industry analysts, who in turn have the ability to influence their clients and followers (your target audience). Measurement of this influence can be difficult.
  • Public Relations (PR) targets the press and media (print, online, bloggers, etc.) with the goal of influencing these groups and individuals to share information with, and thus influence,¬†their readers (your target audience). The influence of PR campaigns is often measured by the number of “mentions” a firm has, or by a post-campaign outreach to measure public (potential customer) awareness, or (if the PR campaign is designed to improve the value of a tarnished brand) consumer sentiment.
  • Investor Relations (IR) has a similar role to AR, in this case dealing with financial analysts and investment firms with the hopes of shaping a positive image and value proposition about your firm, which they hopefully will share with their clients, resulting in a healthy stock price. Measurement of IR value often (and somewhat unfairly) is measured by stock price or analyst recommendations alone, and not by increases in consumer sentiment or sales (while the financial analysts and investment firms may not directly interact with your target audience, it is hard not to connect the dots between a poor/falling stock price and the reluctance of consumers to purchase your product – nobody today wants to buy from a business that is viewed as financially at risk).

The Wild-Cards

  • The C-Suite, who has the ability to make or break a deal, to influence their entire customer base or investor community with a single sentence (think of the power and influence that Steve Jobs has by merely showing up at an event!).
  • The Customer – perhaps the most influential group of all, even if they are outside the core corporate structure (a perspective, by the way, that I think is slightly off-base: the customer should *always* be considered part of the complete business organization). Their ability to drive your business should be both welcomed and never underestimated.

ALL ANIMALS ARE EQUAL…

As George Orwell said, “All animals are equal but some animals are more equal than others.” Perhaps the same can be said for influence as well. You could put forth a very interesting argument that certain forms of corporate influence are more important than others, perhaps even more effective than others, and certainly more cost-effective (in terms of bringing new customers to the table, and retaining them over the long term, converting them from customers to clients).

All influencers are equal but some influencers are more equal than others…

So let me pose a few questions – knowing full well that the answers will vary between industries, markets and economic business cycles…

  1. Are all business groups equal when it comes to the value of their influence?
  2. Are certain types of corporate influence more effective in *gaining* new customers?
  3. Are certain types of corporate influence more effective in *retaining* existing customers?
  4. With a limited budget, where would you focus your resources in building a strong corporate influence strategy?
  5. Is it possible for all of the different business groups to effectively work together to form a culture of “fluid corporate influence” that operates as a continuous feedback loop, or are there just too many barriers and silos for this to take place (Bonus points if you can give me an example of a firm that does this today!)?

So there you have it. Five simple questions about influence. I’m curious to know how YOU view the value and role of influence in your organization, and how you think it might change as your business changes and evolves over time (hint: the value of influence varies in both time and place).

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Outsourcing Analyst Relations: A viable option?

Last week I participated in an interesting discussion regarding influence and the role of analyst relations (AR) – specifically around the issue of how AR staff could increase their influence through a variety of different mechanisms or channels. But one key point that kept creeping into the conversation was one of limited resources: “we simply don’t have the staff to aggressively pursue everything that we would like to accomplish” (a point echoed by many in smaller or fast-growing firms).

After a bit of digging, two basic issues kept making their way into the discussion: a lack of full-time resources and a lack of “R”-level funding (which is often split between Analyst Relations, Investor Relations, Public Relations and Marketing).

That said, there seemed to be a general consensus that yes, there are “parts” of the AR function, regardless of the size of the firm, that could be outsourced based on the size/type of organization, the goals that need to be accomplished and the availability of “outside” resources (or more importantly, funding) – all with the understanding that there must be an accountable person in-house to properly manage and drive the effort.

OUTSOURCING

Here are three basic examples where outsourcing of AR activities might make sense:

  • The Introduction: Sometimes finding the right analyst, or getting in front of the right analyst, can be a challenge. This can be difficult in situations where a firm is moving into a new market sector (product and/or geographic) and may not be familiar with the most appropriate information analysts to reach (think of a US firm trying to move into ASIA/PAC as an example). Using an outside resource (an agency, advisor or perhaps even another industry analyst) to help find the right “connected” or “influencial” person can be extremely effective.
  • The Event: Outsourcing clearly makes sense whenever the word “event” is involved. In fact, the bigger or more important the event, the more outsourcing becomes a viable option (especially for a staff-constrained AR team). Much of the event coordination and publicity can (and should be) handled by hired guns (working under your direction, of course) and free up an AR pros time for more 1:1 analyst “relationship building” activities. This is also a great opportunity to involve PR and Marketing (see below).
  • The Startup: For firms that are just entering into the market, the ability to recruit – and pay for – a quality AR team may simply be beyond their means (CAPEX vs OPEX in a manner of speaking). In this situation, outsourcing the entire AR function to an outside “professional” team, under the control of a “C”-level or Senior “R”-level person my be the most cost-effective approach (especially if the level of work activity will fluctuate considerably over the first year or two).

Now let’s take a look at “insourcing” as a means to leverage in-house budgets and expertise to your advantage.

INSOURCING

As I mentioned above, AR typically competes with IR, PR and Marketing for budget allocation. Interestingly, all of these functions tend to be a bit cyclical in nature and feed off of each other: it is not uncommon to find periods where one group is more “active” than another (that is not to say that any of these groups have “time off” or have any idle time on their hands). But depending upon the situation, the best outsourced resource for AR may actually be an insourced resource in the form of IR, PR and Marketing. This type of in-house insourcing, or collaboration, is something that most organizations could, and should, benefit from if properly executed (different roles, but working to help each other out by lending their own expertise).

This is not to say that every time AR needs a helping hand that they should look to an internal corporate ‘R” function for support, but rather that part of any company’s “R” strategy should include a dose of cross-function support. This not only helps with resource and budgetary issues, but can also be part of a much larger integrated marketing campaign (IMC) that can best get solid, reliable results when IR, AR, PR and Marketing are all working in sync with each other (notice I’ve left out sales – that is a separate function for a different discussion). Remember that while all of the “R” functions have very different responsibilities and areas of expertise, coordination of effort is critical to the success of any firm.

THE PARTING THOUGHT

There are clearly times when outsourcing AR/Influence-related tasks can make sense – certainly the number of established PR, Marketing and Investor Relations agencies show that this model can work extremely well if executed properly. There are also times when, do to the nature or sensitivity of the work, outsourcing may not be a viable option. But if you are a small firm, or branching out into new market sectors, outsourcing certain AR “outreach” functions can definitely work (from both an access/influence and a financial perspective). And if you are a larger, more established firm, a combination of outsourcing and cross-function insourcing should definitely be part of your overall strategy.

One important item to keep in mind in both of these scenarios is “expertise”. Before you outsource anything related to corporate “influence”, make sure that you are selecting the right person (or team) for the job. Going with the lowest-cost option is almost always the wrong approach, while overpaying for “bloated reputation” can often be a waste of time, money and opportunity.

If you are in a position (or think that you might be at some point in the future) where in-house insourcing is a viable option, make sure that there is an established cross-training program and a solid team focus in place as part of the corporate culture before you start to rely on other groups for support. And remember, if you ask for support from one of your other in-house “R” functions, don’t be surprised if you are asked to return the favor – that’s what teamwork is all about.