In the last post, we covered compliance concerns and data privacy and discussed what hedge funds expect in their data products. In this post, let’s assume your product is fully developed and ready to be sold. Just get your marketing team on it, right? Not exactly. Even if you’re a data company, marketing and selling data products to Wall Street is a unique process. Active managers make their wealth partly by keeping their circles closed. Therefore, despite having successfully productized your data assets, you may still not be able to penetrate the coterie that is Wall Street — your key demographic.
A large part of monetizing data is to get your foot in the door with the people who matter. Like all networking, one of the best ways to get considered is to have trusted relationships with people and organizations already connected with the hedge funds.
Alternative data is a new space for data providers and professional investors alike. As a result, hedge funds will often contract third-party data consultants and analysts to guide them through the data procurement process. Unlike enterprise sales, which typically follows a well-documented procurement process, there is much more variability when it comes to hedge funds. This is especially the case if you are selling them unique or little-known datasets.
If you are serious about monetizing data, strategic partnerships are key — not only with the hedge funds themselves but with data consultants and analysts that will vouch for the quality of your data. Even if your data is genuinely alpha-generating, your sales calls may fall on deaf ears if you approach hedge funds directly. Remember: You are an unknown commodity. A more effective approach is to enlist consultants that will broker deals on your behalf.
While the digital channels and social media you are already using will come into play as you market your data, one way to get on Wall Street’s radar is through traditional marketing. We find that our customers respond well to placements in top tier media outlets, including The Wall Street Journal, The Financial Times, The New York Times and The Economist. Whether print or digital, appearing in such publications will get you noticed and offer a dose of credibility to your brand.
The right events may also help. This audience attends conferences and seminars for new developments in the data world. Some of the bigger firms may even employ “data hunters” — people who go to industry-specific events around the world in search of new datasets. The trick is to pick the right ones: Avoid those that are focused on capital introduction or those that serve a dual purpose of education and accreditation. Neither of these tends to attract the right people.
Don’t underestimate the need for good collateral. While your customer base is sophisticated and data-savvy, there is no substitute for clear documentation that explains how to:
- Understand your data organization
- Access your data
- Write code using your data
- Surface predictive signals from your data
These documents, housed in an easily accessible document management system, will be required reading for your customers and will be necessary to jump-start any trial agreements you have in place. Nurturing your hedge funds customers is as important as nurturing any other audience to whom you might market — if not more so. They are busy professionals with competing interests. Even with a game-changing dataset before them, Wall Street clients will still have a hard time prioritizing the trial process.
Marketing dollars and diminishing returns
Alternative datasets derive value in part from their exclusivity. So if you mass-market your data — widely and indiscriminately — clients will likely assume that your data is no longer unique. In other words, at a certain point, your marketing dollars will actually work against you. This is what we call the paradox of exposure. Inundating your prospects with testimonials or demonstrations will negate the air of exclusivity you want to portray. You are better off cultivating long-term, privileged buyer relationships than doing anything that feels like mass marketing.
The sales process
Don’t expect a short sales cycle. Even if you are confident that your data is significantly predictive of some aspect of the economy. Investors have complex trading strategies. And they will want to understand how your data fits into their existing ecosystem. This does not happen overnight.
Lengthy trials are the norm here — you should plan for 90 days and be flexible if your prospect comes back to you multiple times with questions or concerns about your data. You will need to help your prospects climb a steep learning curve; remember that investors are seeing the type of data you have for the first time. A subject matter expert on your industry who understands your data and is able to shepherd a prospect through the trial will be crucial at this stage. A salesperson alone is not likely to be enough.
Finally, know your audience. Try to meet with them face to face — even in the digital age, physical visits are invaluable. While challenging, the more specifically you can match your data to your audience, the better. So remember to do your research before making the sales pitch. As with all sales pitches, the more familiar you are with your prospective clients, the more equipped you will be to actually sell them a product that they will need.
For the final post of the series, we will cover how much to charge for your data product (AKA the fun part).