November 7, 2022
There are more than 130 million retail investors who hold $17 trillion in assets. Individual investors make up about 10% of daily trading value of the largest 3,000 stocks in the U.S., according to Morgan Stanley.
These retail shareholders who move about $38 billion in assets each day tend to focus on a few industries – consumer discretionary, communications and technology. The fact that these individual investors gravitate toward the consumer discretionary industry is telling since it includes goods and services that people spend money on when they have some extra income. Spending in the industry includes travel, going out to eat, fashion and jewelry.
In short, individual investors tend to invest in what they like. And it is important to note: Investors are consumers too. So when they find a product or service they like, they are much more likely to invest in it as well.
Likewise, share ownership can affect purchase behavior and brand loyalty with 80% of individual investors agreeing that being a shareholder in a retailer, consumer product company or brand would make them more likely to be a customer of that company or buy their products. Those aged 35-64 are significantly more likely than those aged 18-34 to say this (87% vs. 73%), females were slightly more likely to be customers (82%) versus males (78%), and the likelihood was relatively consistent across racial lines with similar proportions of White (85%), Black (79%) and Hispanic (78%) investors all indicating their customer loyalty would be higher for the companies they own.
The survey also found that 82% of individual investors would be likely to buy shares of stock of a company if they are a brand, product or retailer they love.Those with an annual household income of at least $50,000 are significantly more likely to say this than those with an annual household income of less than $50,000 (86% vs.69%) and support peaks among females aged 45-54 who are most likely (94%) to buy stock in the brands they love.
Loyalty matters to both decisions on stock purchases by retail investors and their discretionary spending. When customers are part of paid loyalty programs such as those offered by Amazon (Tii:AMZN) Prime and Costco (Tii:COST), they are 60% more likely to spend money with those brands. Even free rewards programs like those from Starbucks (Tii:SBUX) and Delta Airlines (Tii:DAL) prompt consumers to be 30% more likely to increase their spending with those companies.
So it makes sense that publicly traded companies offering shareholder rewards see the same type of loyalty. According to research, companies that give stockholder perks can expect a bump in their share price when the perk is announced and shareholders who hold that company’s stock for a longer period. Researchers found that perks increase firm value by increasing share liquidity, decreasing the equity cost of capital and boosting signaling to investors.
None of this should come as a surprise to anyone who watches individual investors. That’s because every investor uses his or her knowledge as a starting point. Simply put, they invest in what they know. So if they love Coca-Cola (Tii:KO) for example, they are more likely to invest in Coke than they are Pepsi (Tii:PEP); if they use an Apple (Tii:AAPL) computer and iPhone, chances are they will invest more in Apple than they would Dell Technologies (Tii:DELL), for example.
There is a reason $600 billion a year is spent globally in media placements. These companies want to connect to consumers. They also want to build knowledge about their brands since consumers spend on what they know – especially so when they invest.
That’s why TiiCKER is so passionate about rewarding retail investors: We know it will lead to stronger relationships between individual shareholders and the companies they love. So take a moment to sign up for a free TiiCKER account today. And if you are a publicly traded company, reach out to TiiCKER. We can help you set up a shareholder reward program or help amplify one you already have in place. Drop us a note at email@example.com.
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