Exchange Brands as Market Builders, by Robert Pattillo
In the regular round up of sector forecasts that industry magazines like to gather for the last issue of the year, Canada’s Marketing Magazine cornered a number of senior brand and advertising executives and asked them what the emphasis for brand marketing will be in 2009. An industry leader in Canada, Jack Bensimon of Bensimon Byrne characteristically led the pack of “experts” when he observed that “brands are increasingly sensitive to social, political and regulatory issues.” I doubt that there is anyone working in the Exchange Industry anywhere in the world today who wouldn’t agree with Mr. Bensimon.
And while this is really code for saying that, to be effective in this economic downturn, advertising generally is going to have to break through the tested, predictable approaches and try to confront some of the new complexities a worldwide recession has forced upon consumers; Jack Bensimon’s observation also applies to investors themselves and suggests that like everyone else who is trying to respond to recessionary pressure, exchange’s, many perhaps for the first time, have to more thoughtfully communicate their brands if disaffected market participants and new equity issuers are to be successfully won back to what is rapidly becoming a new world economy. Everyone will be looking for new assurances in which to place their trust.
With obvious exceptions serious competition in the exchange industry was slow in coming to most economies whether developed or emerging. Permitting, even encouraging monopolies in the exchange space made sense from the outset quite simply because it made regulatory control and oversight easier, regardless of market size. Governments and industry self-regulators alike appreciated the simplicity and the attendant guarantees of fairness and transparency that offered their own assurances to investors.
And even as regulation has eased in recent years, historically powerful exchange monopolies remain entirely dominant accept in the most aggressive free market economies where the unending search for a cheaper mousetrap continues to drive competition. The obvious strangle hold on available listings combines easily with very real monetary obstacles that face prospective new entrants, including increasingly expensive trading technology and easy access to the technical sophistication and knowledge which guarantee service quality. This is particularly evident with respect to trade volume capacity, data capture and transaction speed.
At the same time, there remains the irrepressible marketing challenge for any new upstart: available listings have already found a home and prove tough to budge to a new platform however compelling an alternative trading proposition might be. And if visibility rests among the primary priorities for a listed company, the bigger exchange invariably has at least an early advantage even if brand promotion has never been a communications imperative.
Transaction speed and cost are defining qualities for any exchange seeking to increase liquidity through new listings, largely because they remain central to the most powerful market models and these attributes clearly attract listings. But compared to the more robust free market economies where opportunity, cash and entrepreneurial instincts traditionally drive business building and the search for equity financing, new listings in many less industrialized areas of the world simply do not emerge as quickly as they do elsewhere. The opportunity for credible exchange competition simply hasn’t existed and big, unchallenged exchange brands were often left unattended as a result.
That’s mostly in the past. Competition is simply tougher in this sea of new trading alternatives, some of which bring with them an international reach. No question, the credit crisis and the ensuing recession will slow new equity financings and this will prove challenging for new entrants, but only at the outset. Cost pressures across the market will keep most trading alternatives a regular consideration as all participants look to reduce expenses. The presence of choice aside, if worldwide market volatility offers anything positive, it might only be a brief breathing space that established players could use to reposition themselves and their brands in a less gentle trading environment.
In Canada, for example, stock trading really began to look different in early fall of last year with the launch of alternative trading systems like Alpha Trading Systems, Chi-X and earlier, Pure Trading, all of which can compete aggressively on both price and speed. Some speculated that incumbent TMX Group might lose as much as 20-25% of existing volume. The immediate response from TMX, equity and derivative operators of the Montreal Stock Exchange, The Toronto Stock Exchange and the Venture Exchange, was to cut trading fees. But the Group’s management team quickly recognized this as a short term strategy, and is working hard to bring proven expertise to the business model. That means a new understanding of the brand and new ways of telling the brand story.
The new CEO, Tom Kloet, has an impressive background in derivatives trading which will prove an important start to changing the way market participants view TMX. Credible threats to both listings revenue and data sales need better marketing for a brand that’s in transition. And it suggests that overall earnings growth won’t be guaranteed with a business plan that might be dominated by Canadian equities. Recent media reports suggest that management understands that well, and is focused on change. Today the exchange is active in searching for listings in the United States while also developing sustained interest in opportunities that might exist in the UK, South Africa, Latin America, Israel and of course, China. Its strong resource orientation remains among its best selling features and a cornerstone of the brand’s promise.
All of this speaks to brand management generally and the immediately recognizable promise of performance that any exchange offers listed companies, traders and investors alike. Even without the extraordinary events of the last four months, attention to brand was going to become a priority, even for the most successful exchanges. The market collapse world wide has simply brought the issue to the table more rapidly. There is no avoiding it. No putting it aside. Exchanges must act like every other business where success means not just getting a customer but keeping that customer in whatever way makes sense. When you are talking listed companies, more than reduced trading fees need to be in the gift basket.
Rising competition will not diminish in the face of immediate market turmoil. Geographic limitations, whether created by regulation or technology, are disappearing forever and everyone is seeking to reduce costs while improving profit across every possible revenue stream. For their part, listed companies are searching for more and for better visibility in a desire to get their individual stories out and heard above the din of trading floor chaos and a flood of press releases.
Any one of these issues demands constant attention from senior corporate marketers but it is the combination of them that presents the most compelling argument to move brand to the forefront of the business building effort. Brands make promises that only success and hard work will keep. But at a time like this when confidence has never been lower, when trust has never been so reserved, great brands stand out as symbols of order, transparency and, particularly in the exchange industry, of good governance.
Well developed exchange brands are easily recognized. Some are regarded as beacons of national pride; others as centers of excellence in the setting of market standards; and still others as symbols of industrial progress and emerging strength in a developing world. What they all share in common are the listed companies that have met the tests and come to market to become part of something larger: to become part of a particular reflection of commerce and industry as seen if only in a select corner of the world.
And in this respect it is the listed companies that become the treasure of the brand. They must be encouraged and supported, promoted and defended as full members of the exchange. It is their job to be clear in their own voice but it is the exchange’s job to share in that voice as part of a larger chorus that speaks to opportunity and success. As a communications tool it really isn’t a great deal different from the relationship between the individual member exchange and the World Federation of Exchanges.
Members share principles and standards that together hold them up and in many ways apart from the exchange industry around the world. As cynicism and mistrust continue to colour perceptions of the investment community, members of the WFE should seize the opportunity that exists in the relationship they have with the Federation. Practice principles, standards, shared data and industry news all bind the membership together in an important image of market integrity that is rooted in common goals of excellence that membership alone makes unique. For brand managers the association is a valuable tool with which to frame international tests of quality and practice that can be demonstrated in an easy reference to a member exchange somewhere else in the world.
It is not unusual for a listed company on the Toronto Stock Exchange to note in advertising that it is listed on the Toronto Stock Exchange. It is a source of pride for many CEOs who have worked hard to bring their company to this point of public offering. It is also a fair demonstration of business legitimacy. And that should be encouraged if the exchange really is to be held up as a national standard of excellence and something that stands apart from the emerging competition. It is a statement that at once asks for recognition of the accomplishment and for interest in a company that has met tests the exchange itself has established.
Only the effective management of brand through a complex set of communications initiatives will continue to allow established exchanges to dominate the market. The difference between today and 10 years ago is simply the thoughtfulness and hard work that aggressive communications requires. Even five years ago many exchange CEOs saw these efforts as being unnecessary and too expensive. That’s changing as exchange CEOs join ranks with the CEOs of the best of listed companies to get the story out; to tell investors that the fundamentals are strong, the integrity and commitment stronger and the opportunities real in a world where “social, political and regulatory issues” have emerged to influence investment behaviour.
About Robert Pattillo
Robert Pattillo is a corporate communications, brand and issues management professional. He is widely recognized to be among Canada's senior brand and category marketing specialists.
Throughout the last 25 years Mr. Pattillo has either led or been a member of the teams assembled to reposition or re-brand more than nine of Canada's leading corporations, including Ernst & Young, the Canadian Broadcasting Corporation, Sun Life Financial Services, the TSX Group and DundeeWealth Inc.
Through most of the 1980s he was head of public and corporate affairs function for The Bank of Nova Scotia. He subsequently occupied similar positions at all of the companies named above as well as the Goldfarb Corporation and later, Alliance Communications Corporation, then Canada's largest independent producer and distributor of filmed entertainment.
Early in his career Mr. Pattillo was a presenter/journalist for Canada's CBC Radio, hosting the regional daily news and current affairs broadcast, Information Morning, from CBZ in Fredericton, New Brunswick. He was an associate producer (program research) in CBC television news in Halifax before moving to radio. Earlier still, he taught briefly at the high school level.