Key Messages: What They Are, Why They Matter and How to Develop Them
A year ago, the world woke up to the reality of COVID-19. As the virus made its presence known, public companies scrambled to assess the potential impact, and many issued carefully crafted messages indicating that they didn’t know how this would play out but they were focused on ‘being there’ for employees, customers, clients and communities during an ‘unprecedented’ time.
Those were talking points, heavy on sympathy and short on substance. Arguably, they were what stakeholders expected and needed to hear since the pandemic was (and is) severe and its duration was (and is) unknown.
Key messages, on the other hand, are something different. Unlike talking points, they transcend transitory sound bites to reveal something deeper and more profound about a company and its investor value proposition. When key messages are thoughtfully developed, authentic, and used frequently and consistently, they play an important role in an IR program. In this issue of IR focus, we explore the purpose of key messages, provide guidance on how to create them and discuss the leadership role that IROs should assume in developing the right ones.
The Purpose of Key Messages
It’s common to hear investment professionals use ‘elevator pitch’ to describe what they need to hear from a company to decide whether to explore an investment opportunity.
An elevator pitch, done well, is a collection of key messages crafted to address a central question: why should I invest? Without an accurate, unique and convincing pitch, gaining attention from brokers, retail or institutional investors not already invested in your stock is difficult given the broad choices available to them. Framing the company’s value proposition is one purpose of key messages.
Another is to alter inaccurate or dated perceptions of a company so as to encourage the investment community to rerate the stock or change its comparables in an effort to have its market price reflect fair value. Corporate executives are often heard to say that they do not get ‘credit’ for the value of their businesses. Sometimes this is because the starting point for investor outreach and communication – the key message platform – was nonexistent or did not articulate the evolution/change in the company’s value proposition. Companies that have made game-changing acquisitions or exited a low-growth market must refresh key messages to refocus investor attention.
The purpose of key messages is well understood by media relations professionals in the quest to get journalists to properly present a company’s story or its product/service. Key messages, repeated enough times, form convenient labels that journalists and investors put on companies. Once these labels are affixed, it takes a strong effort – and compelling key messages – to tear them off.
Key messages are fundamental to the delivery of an effective investor presentation. Without them, an audience leaves the room (or a Zoom/Teams call) with a lot of information but little perspective and even less conviction about the company and its direction.
One of the frustrating ironies today is that disclosure has led to a far greater volume of information dissemination in the name of financial transparency but has left investors overwhelmed and not necessarily better prepared to make good decisions. Key messages help to separate the wheat from the chaff.
According to one IRO: “Our IR plan embeds our key messages – we call them our key investor brand statements – in a message map to ensure we have alignment with our annual objectives and also to avoid dissonance when we communicate with different investor and stakeholder audiences. The message framework we use provides a jumping off point for all communication and gives us a way to think, in a logical way, about our disclosures so we can bring what’s important to our owners to the forefront.”
The word "dissonance" in that statement is important. In one respect, it means that if an IR objective is to build a following with growth-oriented investors and the message platform does not speak to growth, the misalignment will be costly when outreach begins. In another way, it means not delivering contradictory messages or inadvertently downplaying information that investors need to know in making an investment decision.
Key messages are not just sales aids; they also exist to frame bad news. When a company reports an earnings miss, key messages can be used to contextualize the results and establish a new set of investor expectations. The purpose of bad news key messages is to acknowledge a problem, demonstrate the company has done root-cause analysis and explain that it has a credible plan to improve.
On a related note, in order to combat short-termism, key messages should point shareholders away from dwelling on so-called quarterly capitalism and toward the ways in which a company can create value for the long term.
While he did not use the term ‘key messages’, Larry Fink, the Chairman and CEO of BlackRock, Inc., argued in his 2018 Annual Letter to CEOs that they “must be able to describe their strategy for long-term growth” and “strategic framework for long-term value creation” in order to “make engagement with shareholders as productive as possible…”. He went on to advise that a company should “explicitly affirm” that the strategy has been reviewed by its Board.
Companies often struggle to explain their strategies and, in the attempt, confuse objectives with strategies. Since BlackRock frequently engages not just with CEOs but corporate directors as well, it expects directors to be able to “describe the Board process for overseeing… strategy”. Well formulated and agreed upon key messages serve an important purpose at the highest levels of every company so it is no surprise that corporate directors are becoming much more engaged not only in strategy development but also in how those strategies are ‘key messaged’ to the investment world.
As a not-so-subtle warning to corporate CEOs, Fink’s letter also noted that “a central reason for the rise of activism – and wasteful proxy fights – is that companies have not been explicit enough about their long-term strategies.”
Key Message Development: Substance Before Form
Since key messages summarize a raft of information and have the power to change perceptions, they must be crafted wisely and with consideration of the company’s vision, strategy, financial/business realities and investor needs. Developing them is not easy.
Company executives, particularly those who do not issue earnings guidance, confront this challenge every quarter when trying to ‘key message’ their outlooks. In these cases, key messages must accurately synthesize information found in disclosure materials without misrepresenting or, to use a more colourful metaphor, shading them. MD&As have greatly expanded in size over the past 15 years but not necessarily in quality and insight; it might be wise to reimagine them using a key message approach for organizing first, second and third-level information.
The point is that key messages must be the outcome of intensive analysis and collaborative deliberation by the IR team, finance, the CEO and perhaps marketing and public relations/affairs executives.
Big-picture core messages (as distinct from situational messages required to frame bad news events) are often forward-looking but they are not based on so-called marketing bumpf. They are not the same as consumer brand messages: they are purely investor-oriented in design. Padding the investor message track with sales fluff guarantees that it will be ineffective or, worse, damage a company’s credibility with investors.
To be authentic, every key message must be rooted in reality and supported by fact-based evidence. Simply saying that your company is the best (fill in the blank) enterprise on the planet, without being able to prove it, will be instantly dismissed.
What the Audience Needs to Hear
Key messages should leverage insight and feedback from investors gathered during day-to-day interactions or from perception studies so that during the drafting process, the content is relevant to the audience and has impact. In today’s environment, every company would be well advised to think through core messaging with an ESG mindset and to do so with input from corporate directors.
To reinforce that point, Fink’s 2018 Letter to CEOs said: “The Board is essential to helping a company articulate and pursue its purpose, as well as respond to the questions that are increasingly important to its investors, its consumers, and the communities in which it operates. In the current environment, these stakeholders are demanding that companies exercise leadership on a broader range of issues. And they are right to: a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process.”
As those in a company closest to investors and with the clearest understanding of what drives valuation on Bay Street/Wall Street and beyond, IROs should be leaders in the development of core messages.
Ideally, key messages should differentiate your company from others in your industry. Platitudes found in thoughts like ‘we are well positioned for the future’ have no place in a key message library. They are easily dismissed and do nothing to advance investor understanding. Similarly, how many companies say they are ‘a leader’? One investor interviewed for this article said he often “laughs” when he hears a CEO use this as a message, “when the company is clearly not even in the top five for market share in its industry.”
CIRI’s Guide to Developing an Investor Relations Program notes that key messages build on the 'core strengths' of a company.
One source of inspiration is the corporate purpose statement, which tells the world why the company exists. For example, a major U.S. airline says its purpose is to “Connect people to what's important in their lives through friendly, reliable, and low-cost air travel.” A key message to this airline’s investors might align with that purpose statement by describing how its business model efficiently/profitably delivers ‘low-cost air travel’ and how its purpose can drive profit in future – or can even be sustained in this pandemic era.
Indeed, a company’s business model is absolutely something to ponder when developing key messages. Statements of corporate values can also inform messages.
Focus on Threes
Accepted wisdom is that people can only remember three or at most four key messages. This is true for the executives who deliver messages as well as those who receive them. Researchers say that offering too many messages at a time leads to cognitive backlog.
It is inherently difficult to arrive at just three messages. Advice from those who have agonized over message development is to set aside ample time to investigate, ponder and test messages for fit, relevance and staying power.
The Focus Group Approach
A starting point is to organize a focus group of senior executives from different areas of the company to brainstorm, debate and create. Board members may also wish to participate, and this should be encouraged.
IROs should play a leadership role in organizing, setting the agenda and leading these sessions. In advance, let participants know that they will be asked a series of questions and the answers will inform key messages. CIRI’s Guide to Developing an Investor Relations Program offers a detailed list of questions that can be used to ‘crystallize strategic messages.’ IR focus added to this by asking IROs to contribute their favourites. These included:
- What distinguishes us as a company, as an investment, today?
- What will our company look like in five years?
- What is our competitive edge and why do we win?
- What’s the first thing investors think about when they think about our company?
- What’s the first thing investors should think about?
- What do investors not know about our company that they need to know?
The intent of these questions is to capture initial ideas that can be subsequently turned into key messages. After the focus group, consolidate and circulate your notes to the participants. Then hold another meeting to narrow the focus. Based on these discussions, the IRO should put pen to paper and create a series of key messages. Experts in the field say it’s common to create six or seven messages rather than just three. Once these messages are crafted, test them with the focus group, refine the language used to ensure it is accurate, clear, and succinct and choose between primary and secondary messages.
To be effective, each key message should only be a few words long. It’s a tough assignment but as noted above, important to every company.
The final development step is to add bulletproof points to each key message. If you can’t prove a message with facts, eliminate it, as investors will expect to find evidence of authenticity in every declarative statement made. After settling on key messages, socializing them with your Board before introducing them publicly is advised.
Once you are in the market with your key messages, you need to continue to monitor their effectiveness and be willing to update the content as necessary.
Key Message Examples
Key messages are defined by those who deliver them, not by the recipient, but it is possible and enlightening to look for examples in the materials of other companies. CIRI’s Guide to Developing an Investor Relations Program lists almost 20 examples. Here are a few others to ponder for quality and originality :
- Our operating model is Complete, Global, Diversified and At Scale
- Leading the world in social capitalism
- Innovation defines our future
- We are an essential destination for your food and pharmacy needs
Message Map
Once established, key messages must find their way into all investor communications materials. This is the job of the message map. It ensures that all company documents – news releases, investor decks, websites, and social media – leverage the agreed upon messaging but in a way that is customized to each format.
Creating the right key messages and messaging map takes time away from investor outreach. But it is time extraordinarily well spent.
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