The following guest post is courtesy of Diane Harrison who is principal and owner of Panegyric Marketing, a strategic marketing communications firm founded in 2002 specializing in alternative assets.
The Rule of 150, first posited in the 1990s by British anthropologist Robin Dunbar, refers to the maximum number of people with whom any person can build meaningful relationships. While there appears to be a spirited debate over the actual figure (100? 150? 250?), the general assumption that humans maintain closer relationships within small groupings seems to have some historical merit. In military leadership dating back as far as the Roman centurions, history has borne out that, once the number of 150 is exceeded, it’s nearly impossible for individuals to form strong enough interpersonal bonds to work well together.
The lessons learned from military leaders past and present is an interesting one to compare with some classic marketing tactics in assessing whether or not marketing relationships can benefit from the Rule of 150 as well. A few of these key marketing practices are examined here.
ALTERNATIVES REQUIRE EXTRA ATTENTION
Due to their diverse and often esoteric nature, marketing alternative products to investors is a lengthy and detail-oriented process. Before actual sales efforts can begin, marketers of these alternative assets must engage prospects through education about the suitability and attractiveness of these strategies and their relevance to portfolio allocation. Once this groundwork is established, then the more selective process of determining appropriate strategies can begin. This means that potential investors must be willing to work with alternative marketers to form a dynamic and interactive relationship as they move through the educational and informative stages of this process.
THINK SMALLER TO GET BIGGER
How can alternatives marketers use the Rule of 150 to its maximum advantage? Here are four suggestions where applying the Rule of 150 may serve in forming stronger relationships with prospects.
→ ADD VALUE UP FRONT: The initial outreach to prospects should focus on providing a learning experience and educational value, which can form a solid base from which to build a marketing effort. This educational process can take weeks or months, but should not have a sales component attached to it. Rather, if marketers can pinpoint several key objectives or issues individual prospects have and assist in providing to them customized information and assistance, the likelihood of extending the discussion through additional meetings grows.
To accomplish this level of detail means marketers must focus on a small, high-value subset of the overall target market. This doesn’t imply that the total universe of potential prospects should be winnowed down to 150. Rather, it speaks to establishing meaningful hierarchal efforts in getting conversions going with the hottest current prospects and pursuing the direction this outreach takes with these top prospects first.
→ FORGE RELATIONSHIPS THAT SERVE BOTH PARTIES: If at all possible, the primary contact with prospects and investors should be an inside person. When marketing efforts are outsourced there is little control over the selling activity and customer relationships. As time goes by, the relationship between the prospect and the marketer does not serve the fund manager as much as it becomes the communal property of the two parties involved. This creates a relationship which is more portable versus committed to the product and the manager’s business. It also establishes an environment in which it becomes difficult to reduce dependence on selling partners, who end up controlling the key client relationships.
→ TAILORED OUTREACH BETTER THAN WIDER COVERAGE: Having 150 or fewer hot prospects means that ideally, there can be closer tabs kept on identifying specific issues and follow ups that are more meaningful to the prospects, and a frequency schedule for contacts that is tailored according to their desire. The monthly or semi-monthly carpet-bombing approach of most marketing efforts generally doesn’t serve investors well, as they get buried under factsheets, calls, and emails in the first 5 days of each month. Typically, most of these messages and mailings get deleted from overburdened mailboxes without even being opened, so serve little to no purpose in furthering the relationships.
→ TRIAGE PROSPECTS CONTINUALLY: When sorting prospects into groups of 150, regularly assessing the status of each prospect becomes an easier task. Because the number of hot prospects gets reduced to 150, striating the overall number of prospects is a useful practice so that tier one (the hot) gets the most attention, while tiers two, three and so on are maintained but don’t usurp the time and focus the hot prospects receive from marketers. On a regular basis, new prospects will join various tiers, and existing prospects may be moved from one tier to another, based on specific circumstances. For instance, if a key individual changes jobs, the new firm the individual moves to may be jumped from tier three to tier one, as the interpersonal relationship is an established one and the likelihood of strengthening the tier three firm relationship warrants moving it higher on the prospect list.
KEEPING YOUR EYE ON THE PRIZE
Few would argue that establishing strong interpersonal relationships with prospects and investors is critical to long-term success in fund management. If one accepts the Rule of 150’s assertion that the maximum number of people with whom any person can build meaningful relationships is approximately 150, targeting a marketing approach to smaller groups makes good business sense.
With investors demanding better service and greater transparency in all aspects of their wealth management, alternatives managers who structure their marketing approach in ways that maximize the customization and relationship management that these individuals desire are positioning themselves for faster growth. This focus can be critical as it may determine how effectively marketers convert prospects to investors.