At the outset of current recession, the financial institutions, which were among the first to suffer during the credit crisis in July 2007, were commonly referred to as the canaries in the coal mine. If they were the canaries, then the solutions providers to the financial industry—those selling goods and services, like technology or consulting—can be thought of as the coal miners.
Toiling away in sometimes unsavory environments while hoping for a rich stream of business, these vital but often anonymous players have noticed a funny smell of late, only to turn around to see more than a few of their compatriots falling to the ground.
For example, according to a recent report by analyst group Celent, investment banking spend on IT will drop this year by a very substantial $6 billion over 2008. Bloomberg reported at the start of the year that Microsoft and Cisco alone could lose $4 billion in orders from the financial industry in 2009.
While the need for banks, brokers and hedge funds to communicate better with their customers is obvious this year, it is going to be equally important for those companies that rely on the financial services industry for their business to monitor and possibly modify their public relations and communications strategies.
For some of these firms, such as the consulting groups, the current recessionary environment could present an opportunity to drive specific messages or business offerings, particularly around helping financial companies reduce costs and outsource or manage bankruptcy or company restructuring.
Others, such as certain infrastructure or technology providers, may be so operationally embedded within financial institutions that they find themselves sheltered, at least from any short-term panic response to the downturn.
With multibillion dollar names like Lehman Brothers and Bear Stearns disappearing overnight, however, no one has been completely immune to the short-term shrinking of the financial services universe and all need to find new ways to become more valuable to this diminished customer base.
For many providers to the financial industry, particularly technology providers, there is simply too little time to dramatically change the nature of their offering.
First and foremost, companies that sell to the financial industry need to focus on the public relations—that is, on communicating their purpose with renewed clarity, articulating their value and convincing current clients of their indispensability.
With that in mind, here are four recommendations to this effect:
1. Get closer to your clients: Whether personally, through their sales teams or through improved communications initiatives, business heads in this environment need to get as close to their clients as possible.
In an effort to reduce costs, however, many firms are doing the reverse. Companies that shut down proprietary events, media engagement, direct marketing efforts and trade-show attendance will not only signal instability to the market, they will also lose invaluable communications channels to their customers.
2. Have a story: This is not the market to be without a clear story and a strong message, yet it is surprising just how many firms still have neither. In an environment marked by fear and uncertainty, clients look for stable partners whose worth is self-evident.
In many cases, the immediate buyer of the solution or service within the financial firm is also looking for a clear message to sell internally so that when they are asked by their superiors why the institution should keep a certain provider, they can clearly explain its value to the whole organization.
We can’t begin to equip our clients with these messages if we have not formulated them for ourselves. In addition, having this story articulated and validated by third parties such as the media and analyst communities is obviously an excellent way to enforce your message.
3. Focus on the value: Value is a relative concept, and your messages may need to change to reflect this. Two years ago a car dealer whose models were 10% more fuel efficient and 5% faster than his competitor’s may still have led his pitch with a message about speed. During last year’s gas price peak, however, there was no question which message would take priority.
This is the case with solutions for the financial industry. Some industry providers are lucky enough to have been talking about, among other things, risk and cost reduction for some time now, but others may need to re-prioritize. Listen to what your clients are telling you they need today and be prepared to redraft your value proposition to meet this short-term need.
For some firms, this effort will prove to be too difficult, but for those nimble and well equipped enough to redraft and successfully re-pitch this new value message, there is opportunity to be found even in the roughest of markets.
4. Reinvest in 2009 what you cut in 2008: Just as the financial services industry was the first to suffer, it is widely expected to lead the recovery. April 2009 was Wall Street’s best month in nine years, with the S&P 500 increasing more than 20% in less than two weeks for only the fifth time since 1929.
While banks and other institutions may not be ready to begin purchasing at the same rate as they did in 2007, the evidence suggests the worst of the cost-cutting is over and the return to normalcy has begun.
Those provider firms that don’t position themselves and their communications efforts ahead of this uptick risk losing significant competitive advantage once a recovery begins in earnest. PRN
CONTACT:
Dan Simon heads up Cognito Americas, a communications agency focused on the financial industry. Simon can be reached at [email protected].