Why PR pros must understand the difference between a product and a business

As companies like Peloton, Zoom and Netflix take heavy losses on the stock market and online, here’s how brand storytelling must center business basics—and avoid the perils of hype.

knowing-product-vs-business

It’s common to hear from PR industry experts about the importance of becoming a business expert.

Business acumen, strategic thinking and the ability to speak to the language of the C-suite are essential advantages for PR pros looking to ascend the corporate ladder. Yet, it’s perhaps never been more difficult to suss out some of those business fundamentals.

The stock market has been impossible to predict lately, with many foreseeing a calamitous future amid the Federal Reserve promising rising interest rates and questions about rampant inflation.

The New York Times wrote:

As the wild stock market swings that started the week demonstrated, no one knows where the market is going, not hour by hour or day by day. What’s more, no one on Wall Street has been able to predict reliably where the market will be next month or next year, though plenty of people are constantly trying to do so.

Really, we’re all in the dark, and when stocks are shaky, that’s not a pleasant place to be. Yet there are compelling reasons to stay in the market.

We at PR Daily have been covering the wild ride of companies like Peloton—and how their seeming PR crises have little impact on customers’ opinion of the brand.

So, what is happening at Peloton—and what does it have to do with PR?

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Product vs. business

Part of the issue is understanding the difference between a good product and a good business, something that gets hammered out in a recent episode of the “Plain English” podcast.

Host Derek Thompson talks with guest Morgan Housel, author of “the Psychology of Money,” about what is creating problems for Peloton—despite having such a groundbreaking year of sales. Housel’s point: Just because everyone loves your product doesn’t mean you are operating at a profit.

In the podcast, Housel offers several businesses that have wildly successful products yet lack sound business fundamentals: Netflix, Zoom and Peloton all get a mention. Netflix might have subscribers all over the world—but it just raised prices as it continues to burn huge amounts of cash to create content that can be quickly consumed in a weekend.

It’s a great product—but not a great business, according to Housel.

For PR pros, it’s a reminder that being able to navigate the profit and loss statement is a crucial skill that enhances your ability to tell a great story about the brand. And to Housel and Thompson, it could be more important than ever to communicate the numbers behind your business.

The end of zero-interest rates

There’s nothing unusual about market dips—they happen like clockwork as confidence in the various instruments on offer waxes and wanes. What is unusual is how much money has been made available to businesses and the wider economy over the last decade or so.

Since the 2008 crash, a period of crucially low interest rates for banks to borrow money has kept overall interest rates at basement levels—leading to hot markets, record corporate profits and, recently, a troubling amount of inflation.

Now the Federal Reserve, which sets interest rates, is promising to end the era of easy money—rattling the stock market and changing how everyone will think about a business.

 The story of a company

For PR pros and corporate communicators of the last decade, being able to tell a good story about your company has been more important than communicating about the hard financials. That’s how brands with poor profits have been able to achieve massive valuations from Wall Street analysts.

Having a healthy profit mattered less than being able to claim you were the future of blood work testing or the future of the taxi industry. And when you can borrow heaps of money for low levels of interest, cash flow is less important. As the Federal Reserve unwinds a decade of low interest rates, that will all change.

PR pros must be able to understand the core financials of their business—and understand how to communicate them to a wide range of audiences in the months ahead. And that will require astute business acumen to accompany those hard-won communications skills.

 

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