G.S. Schwartz & Co. Case Studies

As the storm of a volatile market blew the bull out of town recently, publicly held direct marketing companies looked to the Direct Marketing Association to help them communicate with investors.

The DMA's Investor Relations Program is perhaps more useful to public DM companies now now than it has been in boon times, says Chet Dalzell, director of public relations for the DMA. "The ways in which the DMA provides value to a companies' own investors relations efforts in this type of market is exactly the goal of this program, no matter if the market is up or down. In a bull market, every day is good news. But the need to differentiate yourself from others and communicate shareholder value is vital at all times."

Differentiating direct marketing from other industries is the point. When setting up the program a year-and-a-half ago, the problem was simple — and potentially devastating. "On Wall Street, the analysts assigned to cover direct marketing industries were drawn from other industries, such as retail, or in our case, office supplies, so they had no real understanding of direct marketing and why it's a special area of analysis," notes Rick Black, chairman of the DMA's Investor Relations Program and senior vice president, Boise Cascade Office Products, Schaumurg, IL, and president, Reliable Corp.

The 50 or so DMA-member companies that were already public or wanted to be, realized that this inaccurate perception would keep them from growing or gaining the financing to launch as public entities. A core group of these members formed a committee, collected the funds to implement the program, hired G.S. Schwartz & Co. — an investor relations/public relations firm — and began to get the word out.

The program's focus is companies almost wholly dependent on direct marketing — including consumer, business-to-business and suppliers to the DM industry.

The committee stages conferences in major cities across the U.S. to which analysts from a variety of brokerage houses are invited. A half-dozen conferences have been held to date. Typically, the analysts hear an overview of the direct marketing industry. Then, a handful of of DM CEOs present their companies' stories. Investors may or may not have already been tracking these companies. The idea is to expose myths about the industry as much as it is to glean interest in individual DMers.

The conferences and other efforts are turning Wall Street's head — as well as changing its mind— about about direct marketing. No longer will the industry be thought of as merely a subsection of other industries, asserts Black. He's confident that analysts and the financial media are catching on to other key DM-business features: that databases are the backbone of the industry, the importance of postage and paper prices, and that DM "is an industry unto itself, even though companies sell different things," Black points out.

"It's worked out extremely well," Black says. "In the first year, we've had analysts pick up coverage of companies that had no analyst coverage in the past. And, we've had analysts pick up other companies because of their involvement with direct marketing. We are getting universally positive feedback both on their reception on Wall Street and in the press."

Individual companies have their own measures of success. Dalzell admits, but notes, "We've gotten excellent feedback from folks. If your stock is a star performer, like Abacus' [a cooperative consumer database company], you get a lot of attention in the stock market. But others might be like New England Business Service [Groton, MA], which has recently gone through turnaround and wants the analyst community to understand these changes. The program helps them communicate that in a cost-effective manner, which they could not do on their own."

Tony WHite, CEO and president of Abacus Corp., a Westminster, CO, which presented at a conference simultaneously to going public, says that although it's difficult to correlate the program's effectiveness to stock prices, presenting at the conferences "has been very useful in expanding our exposure to Wall Street, above and beyond the companies that have been following our stock. Because of its clout, the DMA has been able to get very good companies to these sessions. No matter how good your own IR program is, there's always new blood out there."

In addition to the conferences, DMA president and CEO H. Robert Weintzen stumps for the program in a road show, meeting with local press and investment firms in cities nationwide. The committee has amassed a 1,000-name database of fund managers and others who've expressed an interest in the program, and sends them notices about conferences and a newsletter, "Direct to the Street," every other month. A fact book that drops four times a year features quarterly reports of participating companies and an overview and trend information about the industry.

The DMA is speaking to a number of major investment houses about holding a day-long industry conference in 1999, in cooperation with one of them. Also in the offing is the construction of a Web site linked to the DMA's (www.the-dma.org) which will offer links to participating DM companies, as well as a report targeted to investors by economic forecaster, The WEFA Group.

Meanwhile, says Black, "We expect an increase in membership, and a lot of companies that want to go public to benefit from our efforts."