Providing the Right Information at the Right Time
As a content marketer, you sometimes need to cast a wide net. When writing copy for your company’s website, for example, you’ll be working under the assumption that almost anyone could be a potential customer. And you’ll write your web copy based on that assumption.
At the same time, you realize that not every product is right for every customer, especially when you’re selling financial products. With some campaigns, you know you’ll need to target the right customer with the right information at the right time. And that’s where contextual marketing comes in.
Contextual marketing 2.0
In a nutshell, contextual marketing is a form of personalized marketing that allows you to target specific (current or potential) customers based on how they behave and what they search for online. You know what this looks like. You Google “best boots for Canadian winters” and search through the results. A few minutes later, you log onto Facebook and the ads all seem to be for winter boots.
With the ever-increasing move toward mobile, contextual marketing can go one step further to target the right customer with right information at the right time AND in the right place. You search for winter boots on your mobile, and you start receiving ads for the best deals on boots at stores within a couple of kilometres of where you are at that moment. You might even get a coupon to put toward your purchase, texted right to your phone.
With the ever-increasing move toward mobile, contextual marketing can go one step further to target the right customer with right information at the right time AND in the right place.
Targeted ads are a good example of contextual marketing, but they may not fit with what many content marketers do. So, what does this type of marketing look like within the context of a broader content marketing campaign?
Let’s look at the example of sports retailer Finish Line. The company created a direct-email campaign to announce a big sale at its stores. The announcement included a countdown clock that told customers how much longer the sale would last based on when they opened the email. Every time a customer opened the email, the countdown clock would update itself, making customers aware of the time-sensitive nature of the sale and creating a sense of urgency.
Finish Line also used its customers’ location data and stock information from each store to enhance the sale announcement. In addition to a countdown clock, customers could see a map to the nearest Finish Line location and up-to-date inventory of everything available at that particular store.
The company even took into account what would happen if the email was opened after the sale ended by providing an alternate message of great deals still available at their stores.
Contextual marketing for finance
Some financial services firms are already using contextual marketing with great success. One large retail bank, for example, tracks when a customer uses his or her credit card to make a purchase. The bank then sends the customer information on how to save money on similar purchases next time. One large retail bank, for example, tracks when a customer uses his or her credit card to make a purchase. The bank then sends the customer information on how to save money on similar purchases next time.
By using location data, the bank could also choose to guide customers to the best deals on complementary products. For example, if the customer just bought a new printer, they could be guided toward the best deals on paper or ink refills. The tie-in here is that the bank is giving customers information that will help them successfully manage their credit card debt.
A note of caution: Contextual marketing could feel invasive to some customers. There are plenty of people who use the word “creepy” to describe those Facebook ads that seem to know exactly where they’ve been, when and with whom.
The examples we’ve given here, with Finish Line and the large retail bank, weren’t overly invasive and were well received by customers. But if you plan to use what could be seen as very private personal data to create tailored content, consider allowing customers to opt-in to your marketing program first. And avoid using sensitive information that has become public but that a customer may not want you to have, such as news of a recent divorce.
Yes, it can be a challenge to create tailored information that doesn’t cross a line, but for those who get it right, the payoff is often significant.
Global Equity Investors Should Be Prepared for a Market Pullback
Written by: Paul Quinsee, Global Head of Equities, J.P. Morgan Asset Management
Themes and implications from the Global Equities Investors Quarterly
- We expect the trend of increasing global corporate profits that began in mid-2016 to persist throughout 2018, with economic growth stronger, interest rates still low and capital discipline evident in most industries. Our analysts’ forecasts of double-digit earnings for 2017 and 2018 look to be on course.
- Fundamentally, this remains a good environment for equity investing, but our optimism is tempered. Higher equity valuations—and the absence of a significant market correction for quite some time—make us more cautious now.
- We still see more upside in emerging markets, Europe and Japan than in the U.S. After strong gains from growth stocks, we identify incremental opportunity in value stocks again. Across global markets, many financials still look promising, and the surprising extent of capacity reductions in many basic industrial businesses is intriguing to our investors.
- Among the potential risks we are monitoring: the unwinding of quantitative easing (QE) and its impact on capital markets; the traps of investor complacency and excessive risk-taking.
For more than a year now, a stronger, broader global growth environment has driven an acceleration in corporate profits around the world. As we approach the end of 2017, our estimates for a continued synchronized earnings recovery sustain what we would describe as our tempered optimism. We think this recovery will continue for a good while yet and are not expecting a recession (even for the now late-cycle U.S. economy) over the next couple of years. Our analysts’ forecasts of double-digit earnings for 2017 and 2018 look to be very much on course, having been supported by a wide range of positive second-quarter corporate results. As bottom-up stock pickers, we are finding ample opportunities, especially in Europe, Japan and emerging markets.
But our optimism is restrained. Higher equity valuations—and the absence of a significant market correction for quite some time—make us more cautious now. Our investors now expect average, not outsize, gains over the next 18 to 24 months. The eventual unwinding of global central bank balance sheet expansion, slated to begin with the Federal Reserve (Fed) in October, will surely present challenges. And after a strong run for global equity markets, we must guard against the trap of investor complacency and excessive risk taking.
In the following pages of our quarterly Global Equity Views, we present our investment outlook, discuss market trends and spotlight opportunities and potential risks.
Economic growth and corporate earnings
The breadth of global growth has encouraged once-skeptical investors who worried that the growth was too U.S.-centric. We now see synchronized growth and rising growth expectations across both developed and emerging markets. Purchasing Managers’ Index (PMI) readings show continued healthy levels, and in emerging markets the pace of GDP growth and the breadth of industrial production growth are increasing. Some have taken to comparing this to the old cliché of a “Goldilocks” environment. It can’t last forever, of course, but we think the not too hot, not too cold environment should prevail through 2018.
Earnings are driving markets higher (EXHIBIT 1), and we are forecasting double-digit EPS growth globally in 2017 and 2018. In the U.S., a combination of steady revenue growth, improved margins and heavy share buybacks has boosted earnings growth for several years, and we expect this to continue. However, higher debt levels will eventually constrain buybacks. In Europe, corporate profits are growing for the first time in six years, although we do acknowledge further euro strength as a potential headwind. Strong operating leverage for Japanese corporations should help propel earnings gains this year and next. In emerging markets, we project high double-digit profit growth in 2017.
So far this year, equity markets have been led by growth stocks, especially a small group of Internet companies with the market monikers BAT (Baidu, Alibaba and Tencent) and FANG (Facebook, Amazon, Netflix and Google). Some investors see a bubble forming here, drawing parallels with the extreme prices of many technology stocks in 1999. But on balance we are less concerned, given that these companies boast massive user bases, impressive growth rates and in many cases strong profitability as well. The recent rally has made them less attractive, but their valuations do not seem unreasonably high just yet. Potential regulation is the biggest risk.
Earnings growth has driven this year’s rally
EXHIBIT 1: COMPOSITION OF TOTAL RETURNS THROUGH SEPTEMBER 30, 2017
Source: FactSet, MSCI, J.P. Morgan Asset Management. Returns shown are for MSCI gross return indices except for U.S., which represents the S&P 500 index return. Past performance is not necessarily a reliable indicator for current and future performance. Data as of September 30, 2017.
From a regional perspective, we still see more upside potential in emerging markets and developed markets ex-U.S. In emerging markets, earnings are growing and valuations are still reasonable—we have only seen half the multiple expansion that we see in a typical emerging market up cycle. In international markets, our investors continue to acknowledge new themes; for example, activism in Europe is a new reality, and the number of European companies subject to activist campaigns has tripled over the past five years (while the number of U.S.-targeted companies has dropped). It is evident that there is plenty of opportunity for European companies to improve profitability and allocate capital in more shareholder-friendly ways. Greater capital discipline is also evident in Japan, where stocks look more reasonably priced than we have seen for many years.
From a style perspective, growth has outperformed value this year. Our investors see more opportunity in value stocks, but a major style rotation from growth to value seems unlikely in the near term. Within value and across global markets, many financials still look promising. Not only do they stand to benefit from higher interest rates, but their valuations are still relatively attractive, and many management teams are beginning to return more capital to shareholders. Some of our value investors are also finding opportunities in deeply out-of-favor retailers, believing that the fear of Amazon is perhaps overdone in some cases. And across investment styles, we are finding opportunities in relatively wide spreads between sectors (for example, “bond proxies” vs. cyclicals) vs. relatively narrow spreads within sectors.
Surprises are always interesting, and the surprising extent of capacity reductions in many basic industrial businesses is intriguing to our investors. A large number of the capacity cuts have occurred in China, where the government has incentivized politicians to close down capacity in their region (often for environmental reasons), a trend that began with coal and continued with steel and aluminum. Capital deployment trends are also positive for many industrial companies, although the U.S. energy sector remains an exception.
Reduced monetary stimulus
The slowdown in the expansion of central bank balance sheets—which ballooned from $4 trillion pre-financial crisis to $17 trillion today—presents a clear challenge to investors. The slowdown, already underway, is set to enter a new phase with the Fed’s first post-QE reduction in its balance sheet.
How might the unwinding of quantitative easing impact capital markets? It is the subject of intense debate. Some forecasters expect a very gradual rise in interest rates, while others fear a more abrupt dislocation as the tide of liquidity begins to retreat. We take some comfort from the still relatively attractive valuations of stocks vs. bonds.
Over the near term, our investors worry about complacency, especially after such a strong run in equity markets. In this context, some point to the CBOE Volatility Index (VIX) nearing 30-year lows. However, we note that many of the usual warning signs of a looming market downturn are not yet visible. Retail investors still seem cautious, and IPO activity continues to be moderate. Most important, valuations
It’s been a great year for equity markets around the world. We see enough opportunity to keep investors engaged, but our optimism is tempered by higher valuations and the potential for increased risk appetite to eventually lead to excessive risk-taking. We advise investors to stay diversified and look for opportunities in value stocks and international markets. However, some higher equity valuations, especially in the U.S. and in some bond equivalent sectors, do warrant close attention, with an eye toward the possibility of a short-term correction. Equity investors should be prepared for a market pullback but not yet positioned for the more substantial downside that usually comes with recessions.
Source: J.P. Morgan Asset Management. Views are as of September 30, 2017.
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Opinions, estimates, forecasts, projections and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. There can be no guarantee they will be met
Important information: The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance.
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