Maximize Your Return on Relationship (ROR) in 3 Key Steps
Written by: Jasmine Chen
Last week, we outlined why financial services brands should start thinking about influencers; seasoned journalists, industry leaders, finance bloggers, self-directed investors and satisfied customers. We’ve also recognised that influencers play a vital role in fuelling digital word-of-mouth networks.
Indeed, the latest paper by TopRank Marketing and Traackr reveals that an overwhelming 71% of participants regard influencer marketing as strategic or highly strategic.
However, despite the growing recognition of the importance of influencer strategies, it is still clearly underused and – for all but the most advanced marketers – has yet to progress beyond mere “tactical” utilisation.
So how best to tackle influencer strategies?
First of all, strong personal relationship-building is essential in order to nurture a long-term engagement that is mutually beneficial. This in turn means making sure that what you have to offer is of value in order to gain something of value. After all, influencers are by their nature very well-known and established within their specific industries, and what they have to say about your brand can have a profound impact on your business.
Executive Director at Schaefer Marketing Solutions, Mark Scaefer agrees: “The true power of influence marketing is coming from: network connections of the individual; long-term collaboration that results in authentic understanding and advocacy; quality, trusted content that is seen and shared by a relevant audience; and face-to-face and word of mouth advocacy”
We’re used to meeting the demands of maximising ROI in financial services marketing, but now it’s time to think about your Return on Relationship (ROR).
To complicate things, often there is no single “owner” of these relationships with target influencers; such relationships needs to be sought and maintained by all departments through all channels.
While it would be easy to be put off by the complexity of nurturing influencer relationships, there are three key steps that anyone can take to create and implement a successful influencer strategy.
1. Revisit your business objectives
Whether it’s increasing brand awareness or launching a new product, service or program, there needs to be a clear alignment between your commercial goals and what you want to achieve by engaging with influencers. Your desired business outcomes will also need to suit the needs and expectations of target influencers and – most importantly – your ideal customer.
As a first step, this requires doing a deep dive into the psyche of your ideal customer and identifying effective and ineffective touchpoints. What are their motivators, pains and triggers? Who or what are their sources of information? And what channels do they use?
Armed with this information, you'll immediately be in a better position to establish meaningful engagement between your business, target influencers and ideal customers.
Take another look at TopRank Marketing and Traackr's top ten goals of influencer marketing; revealing that most aims are (and should be) customer-centric, and focus on raising a brand’s profile to in order to extend their reach to new audiences.
2. Understanding your target influencers
Secondly, invest a considerable amount of time in researching your target influencers, including an in-depth study of their past work, published content and communications behaviour – before you reach out to them. Tools such as BuzzSumo are a great starting point for identifying the top few individuals with the greatest authority and reach in your specific industry. To increase the likelihood of forming any brand partnerships, it’s crucial to also understand why and how influencers have earned their communities - from your customers' point of view, what makes these influencers interesting? From here you can begin to consider what a mutually beneficial relationship might look like.
Bear in mind that your customers' influencers may not be who you'd expect. So rather than grouping potential influencers into broad categories such as bloggers, journalists or industry bodies, try taking a more holistic persona-driven approach. Influencers come in many shapes and forms, and it takes time to find one with the right audience and motivation.
3. Measure for engagement, impact and growth
As with everything we do, clear KPIs should be established at the outset, so you can measure for engagement, impact and growth.
This can be done by identifying the outcomes that matters most to your business, influencers and – most importantly – your customers. This could be as specific as tying influencer KPIs to each stage of the customer journey (i.e. awareness, sales, support and loyalty), or making sure these KPIs complement existing metrics (i.e. reach, acquisition, conversion and retention). And last but not least, your metrics should also measure influencer engagement, performance and fulfilment.
With these building blocks in place, you should be ready to nurture new contacts and ultimately build a strong lasting relationship – with a partner who is happy, satisfied and brings out the best in you and your brand.
Understanding ETF Liquidity and Trading
Written by: ProShares
ETFs offer attractive features—access to a broad range of asset classes, sectors and styles in a liquid, transparent and cost-effective vehicle. But before using that vehicle, it’s helpful to understand how it works, especially the sources of ETF liquidity and the mechanics of trading them. Understanding these points may help you improve execution when buying and selling ETFs.
The Primary Market—Creation/Redemption of ETF Shares
Most investors trade ETFs on stock exchanges in the secondary market. But the actual creation and redemption of ETF shares occur in the primary market, between the ETF and authorized participants (APs)1—the only parties who transact directly with the ETF. The APs’ ability to continuously create and redeem shares allows them to meet the supply and demand needs of investors, making them key liquidity providers in the secondary market.
Creation. This is how APs introduce new ETF shares to the secondary market.
- In-kind—The AP creates ETF shares in large increments—known as creation units—by acquiring the securities that make up the benchmark the fund tracks in their appropriate weightings and amounts to reach creation unit size (blocks ranging from 25,000 to 100,000 fund shares). The AP then delivers those securities to the ETF in exchange for ETF shares.
- Cash—Alternatively, APs can create ETF shares by exchanging the appropriate amount of cash for ETF shares, for what’s known as a cash create. Often, ETF shares are created using a combination of securities and cash.
- The AP then offers the ETF shares for sale in the secondary market, where they are traded between buyers and sellers on an exchange.
Redemption. This follows the same process in reverse.
- The AP redeems ETF shares in large increments—known as redemption units—by acquiring them in the secondary market and transferring them to the ETF in exchange for the underlying securities or cash (or both) in the appropriate weightings and amounts.
The Secondary Market—Costs and Mechanics of Trading ETF Shares
Costs of Trading. In the secondary market, firms that specialize in buying and selling ETF shares—APs or market makers2 (liquidity providers)—trade them to provide market liquidity and make a profit. This profit margin is embedded in the bid/ask spread, which reflects the implicit costs of trading ETFs.
Bid/ask spread is the difference between the bid—the highest price at which a buyer is willing to buy shares—and the ask—the lowest price at which a seller is willing to sell ETF shares. Three key factors impact the bid/ask spread:
- Creation/redemption fees charged by the ETF provider to the AP.
- Spread of the underlying securities—The bid/ask spread and liquidity of the securities that make up the ETF affect the liquidity and the bid/ask spread of the ETF itself. When there are many bids and offers on a security, it is easy to buy and sell, thus the bid/ask spread tends to be tight. When securities are less liquid, the spread is wider, making the cost to acquire them higher. The higher the cost of acquiring the underlying securities, the wider the ETF bid/ask spread.
- Risk or hedging costs—Holding ETFs entails certain risks, which need to be hedged. Liquidity providers use a variety of financial instruments, including futures, options and other ETFs, to hedge this risk. The more instruments they have to choose from, the lower their hedging costs and the lower the bid/ask spread. The higher the risk, the wider the spread.
ETF bid/ask spread = Creation/redemption fees + spread of underlying securities + risk
Executing Large Orders—Tapping Into Deeper Pools of Liquidity
There are two common ways to execute larger trades directly with liquidity providers, both allowing investors to access deeper pools of liquidity than those offered in the quoted secondary market alone:
- Risk trade—A liquidity provider will quote a price for an ETF at a given size. If that price is accepted, the trade is executed and the liquidity provider assumes the market risk of providing the liquidity at execution.
- Create/redeem—For orders that are large enough, it may make sense to work with an AP to create or redeem shares. This type of transaction is usually executed at either the closing market price of the ETF or at the NAV of the ETF plus fees or commissions.
Mechanics of Trading. To fully consider an ETF’s total costs, it is important to understand the dynamics of trading. In general, two types of orders are commonly used to trade ETF shares:
- Limit order—Buy or sell ETF shares at a specified price. One way investors decide at what price to enter a limit order is to look at the IOPV3 as a guidepost. Limit orders may help investors get the best price, but there’s a risk the order will not be filled.
- Market order—Buy or sell immediately at the prevailing price available at the time. With market orders, execution may be faster, but the investor has limited control over the execution price.
While a large number of transactions are executed using limit or market orders, investors often find their order is larger than the quoted market. There may be “hidden” liquidity within the quote that can be accessed in the market using limit or market orders. However, in some cases, it may make sense to execute trades directly through a liquidity provider. How and when to place an ETF order can depend on many factors, including price sensitivity, level of urgency and overall goals for the portfolio. Determining what factors matter most can help determine the best execution strategy.
Questions? Our capital markets experts can help. Learn more about our ETFs here.
1 An AP is a U.S. registered, self-clearing broker/dealer who signs an agreement with an ETF provider or distributor to become an authorized participant of a fund.
2 A market maker is a broker/dealer that buys and sells securities (or ETFs) from its own inventory to facilitate trading in those securities. Most APs are market makers, but not all market makers are APs.
3 IOPV is the Indicative Optimized Portfolio Value—the intraday net asset value of the basket of underlying securities
Investing involves risk, including the possible loss of principal. ProShares are non-diversified and each entails certain risks, which may include risk associated with the use of derivatives (swap agreements, futures contracts and similar instruments), imperfect benchmark correlation, leverage and market price variance, all of which can increase volatility and decrease performance. Please see their summary and full prospectuses for a more complete description of risks. Carefully consider the investment objectives, risks, charges and expenses before investing. This and other information can be found in the prospectus; read carefully before investing; obtain at ProShares.com. There is no guarantee any ProShares ETF will achieve its investment objective.
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