by Richard Hollins

Pie charts are everywhere. If you’ve ever had to present numbers, you’ve used them. They’re easy to create, look (superficially) smart and fill lots of empty space in your presentation or paper. I’ve used a ton of them, right up to the point that I found out they suck.

This revelation came courtesy of Randall Bolten’s Painting with Numbers. Bolten, an experienced Silicon Valley CFO, lists what he calls the deadly sins of presenting numbers. This is number ten:

Deadly sin #10

Using a pie chart – period

Harsh? I thought so. Then I realised he was right.

Problem 1: pie charts are bad at communicating the basics

You should only ever use a chart if it helps your audience to understand your message. By themselves, pie charts don’t do that.

The chart below shows the favourite social networks of a large sample of UK adults. The precise numbers don’t matter (I made them up) but they make my point:

Some things are obvious from this: among my imaginary sample, Facebook is most popular and Pinterest the least. After this, things get hazy. Is LinkedIn more popular than Google+? How much more popular is Twitter than the next two? Remember that you’re showing a chart because you want your audience to form an opinion. They can’t do that from this chart.

Now let’s tackle the obvious objection: there aren’t any data labels. So let’s add some.

Now it’s clear how each of the networks ranks. But it’s also clear that the labels themselves provide the only useful information. You’d be better off just sticking them in a table.

If you want a visual aid, then a bar chart does the job perfectly.

In a pie chart, it’s hard to accurately compare the segment sizes because they’re at angles to each other. In our bar chart, it couldn’t be clearer how each network ranks. It’s even easy to read off the percentages, without having data labels cluttering things up.

Problem 2: pie charts are worse at showing trends

Your audience might not be satisfied with knowing the current position. If you’re asking them to decide how to allocate their marketing budgets, for example, they’ll want to see trends. Pie charts are even worse at showing these than they are at explaining a single set of data.

First, pie charts use up far too much space, so it’s hard to get several side by side and still make them legible. Three sets of data is pretty much your limit.

Then we’re back to the fact that only the data labels allow you to make comparisons with any accuracy. But they’re even harder to use than with a single chart because your eye has to jump from chart to chart to chart. Hopeless.

For this kind of thing, a line chart is a good bet:

The trends in this chart could hardly be easier to spot.

Problem 3: pie charts are terrible at showing trends in absolute numbers

Pie charts are bad at showing trends in percentages but when we’re comparing trends in absolute numbers, they’re useless.

To illustrate this, we’re going to switch to some different data, showing a simple cost breakdown for a growing company.

Here, it’s really hard to spot the trends. The wage bill is up by 30% and yet it’s a smaller proportion of the pie. Material costs have almost doubled but that’s only apparent by looking at the labels. These charts are terrible.

There are several better alternatives. My preference is a stacked bar chart. This clearly shows how total costs have moved and the gridlines make it easy to estimate the size of any part of the bars. The series lines emphasise the trends.

Bolten was right

Don’t fall for pie charts’ superficial charms. They’re never the best way to present data. There are so many better options, all of which are just as easy to produce and much more effective at making your point. Choose wisely.

Find out more

Learn more about my financial copywriting services. Or contact me to discuss your needs.

Posted by Richard Hollins

It’s an inescapable fact that financial copywriting involves numbers, so I was intrigued to come across Painting with Numbers by Randall Bolten. As the subtitle says, it’s a practical guide to ‘presenting financials and other numbers so people will understand you’.

Although the book focuses on internal communication, there’s plenty for financial copywriters and investor relations professionals to chew on. My thoughts below relate to corporate reporting but the lessons apply more broadly.

Have you thought through the numbers you’re presenting?

Pick a number

Deciding which numbers to disclose is a challenge for many companies. Once you get beyond the regulatory requirements, there’s an almost endless list of metrics you can provide, which might (or might not) help your audience understand you.

This is where Bolten’s Law* of Discretionary Disclosure comes in:

If you present a number, your audience will ask about it.

(*Experienced financial communicators already know this, but we’ll let him claim the name.)

Bolten’s point is that if you include irrelevant numbers, there’s a good chance someone in your audience will get hung up on them. That’s a great way of derailing the conversation and damaging your credibility.

So why would companies do this? In my experience, it comes down to two things:

1. Habit. Companies put out the same information, quarter after quarter, year after year, even though their management, strategies, products, markets and customers all change. There’s merit in consistency but there’s also merit in challenging what you disclose and making sure it’s still relevant. If the answer to ‘why are we disclosing this number?’ is ‘because we always have’, then it’s time to stop.
2. Wanting something to say. This happens when companies have just started doing something (typically a new strategy) and feel the need to show progress, even when there isn’t any. (Sample thought: We don’t want to admit that sales of our new products are tiny, so let’s tell them how many patents we filed instead.) It also arises when the necessary data are incomplete or unreliable, which is surprisingly common. (Sample thought: We’ve no idea what our global CO₂ emissions are but we do know what they are in the UK, so they’ll have to make do with that.)

In both cases, companies end up cluttering their narratives with information that doesn’t help anyone form a view about how they’re doing. Even so, you can bet that someone, somewhere, will seize on these scraps on information and incorporate them into a crucial line of their financial model of your company.

You don’t say?

A third possibility is that companies give out irrelevant information because they want to divert attention from what they’re not saying. There’s a good chance they won’t get away with it, though, because of Corollary #1 to Bolten’s Law:

If you don’t present a number that the audience was expecting, they will ask you why it’s not there.

The onus here is on companies to understand their audience, so they know what those expectations are likely to be. There may well be a good reason for not disclosing a particular number, but you’d better have a convincing answer for when those questions come in.

If the number’s not there and you included it in previous disclosures, then you’re on even dodgier ground. This is because of Corollary #2 to Bolten’s Law:

If you don’t present a number that the audience was expecting because it was in previous reports, not only will they ask you why it’s not there, they will also question the motives behind the omission.

As I said in this earlier post on writing annual reports, there’s a natural tendency to want to say less when the message is bad. This is usually a mistake. Trust in management is fundamentally important to investors. As a rule, it’s better to be honest about what’s going wrong and to set out a clear explanation of how you’re going to fix it. Clamming up and hoping no one will notice is a risky strategy.

That’s because of Corollary #3 to Bolten’s Law:

The likelihood that your audience will express their concern about your motives for not presenting information is inversely proportional to the harshness of the conclusion they are in the process of forming.

In other words, if people think you’re being economical with the truth, you might only find out when the analysts publish their reports and investors sell their shares. By then, it’s too late for you to explain, even if your motives were pure.

What are the lessons here?

1. You need to continually think about the numbers you’re putting into the public domain and whether they serve a useful purpose for your audience.
2. If you decide to change your disclosures or to drop some disclosures altogether, have a well-prepared (and valid) answer for why you’re doing so.
3. Don’t drop valuable disclosures just because their message is unfavourable. Explain what’s happened and say how you’ll fix it. Then fix it.
4. If you want to change your disclosures, it’s easier to do it when times are good. Your audience is less likely to think you have something to hide.

Find out more

Learn more about my financial copywriting and annual report copywriting services. Or contact me to discuss your needs.

Posted by Richard Hollins

The Department for Business, Innovation and Skills has published the latest instalment in its narrative reporting proposals. This is a set of draft regulations which will amend the Companies Act and come into force for financial years ending after 1 October 2013. This means that the 2013 December year ends will be among the first who have to implement them.

The Future of Narrative Reporting – what’s new?

BIS’s original proposal to split annual reports into two – a strategic report and an online annual directors’ statement – has been abandoned. The strategic report will be a requirement but annual reports will remain one document, as now.

There will be a legal requirement for quoted companies to include a discussion of:

(a) strategy (amazingly this isn’t currently a Companies Act requirement)

(b) the business model (which is already a requirement under the Corporate Governance Code), and

(c) human rights issues and gender diversity.

Other than that, the changes are limited to a number of technical modifications to the directors’ report, none of which is very interesting.

Who does it affect?

The regulations apply to “quoted companies (those incorporated in the UK and listed on certain UK, EU or US markets)” (source: BIS).

What does this mean in practice?

First, all the overseas incorporated companies that are listed in London seem to be off the hook. However, they would be well advised to meet these standards if they want to attract investors.

Second, a quoted company is defined as one that is included on the Official List. This excludes AIM listed companies, who are among those who could most do with raising their game when it comes to reporting.

What’s the impact?

For most big companies, the changes are negligible as they’re already reporting on these things.

The impact for smaller companies might be more marked. In particular, it will force those who currently deliver little more than a nicely typeset version of their prelims to do more.

What’s next?

In the short term, the government is running a consultation (until mid November) on the draft regulations.

Then in the new year, the FRC will run a consultation on the style of guidance companies want for implementing the strategic review. This could throw up some new suggestions and provide a benchmark for best practice, in the same way that guidance on OFRs has in the past. In particular, it would be surprising if the guidance doesn’t clarify what is meant by a business model and how it should be disclosed – an area too many companies are struggling with.

Finally, the government intends to introduce its new requirements for reporting directors’ pay at the same time as the narrative reporting changes become law (i.e. October 2013). For many companies, this will be a much more substantial change to reporting practice.

Find out more

Read more of my posts on annual report copywriting

Posted by Richard Hollins

One of the great things about being a copywriter is learning from your clients. The following was shared with me by Cindy Barnes at Futurecurve. It explains the process buyers go through when they’re deciding what to buy and – crucially from a copywriting perspective – what influences them at each stage.

This information can help copywriters guide clients through the materials they need to convince their customers. It’s also helpful for copywriters, when considering how to persuade potential clients to use our services.

What buying decisions are we talking about?

This model doesn’t apply to all buying decisions. One of the big trends in recent years is that selling has polarised into two types – transactional and consultative.

Transactional selling

With transactional selling, customers already know what they want. All they need to do is decide who to buy from, which will come down to price, speed of delivery, convenience and similar factors. Most retailing is built on transactional selling.

Consultative selling

Consultative selling is appropriate when the decision to buy is more complex. Buyers have a need but they might not know how to fulfil it. They might not even be certain that the right product or service exists. The seller therefore acts as a consultant, explaining the buyer’s options and, in the process, setting out the case that the customer should buy from them. This is the process described below.

How buyers buy

Assessing needs

At the start of the process, buyers are trying to figure out what’s available and whether it will solve their problem. The company’s job is to educate them, so customers feel sufficiently informed to move to the next stage.

The company’s website is the obvious place to do this, giving plenty of space to guide customers through the options and the chance to mix copy with video, graphics and pictures.

White papers are another excellent way to inform customers and to demonstrate expertise, without being overtly ‘salesy’. They allow you to address current issues or to go into more depth for the buyer who is hungry for detail.

Blog posts can work in the same way: I know that posts I’ve written on how to get the most from a copywriter have helped me to win business. Good case studies are also invaluable for showing how your products or services work in practice.

Ultimately, the volume and type of information you provide will depend on how much education your customers need. Know your customer, as always, is the basic rule.

Evaluating options

This is the differentiation phase – why customers should choose you instead of the alternatives.

The alternatives include both direct competitors and other uses to which customers can put their money. It’s obvious that your sales training course will compete with other training courses but your customer could instead choose to invest in new salespeople, new software or a complete overhaul of its website and marketing collateral. Why is your product the right choice?

This is where benefits-led copy comes into its own. There’s a vast amount of good advice about how to do this, which I’m not going to repeat here. What’s important, though, is to realise that the benefits you believe your product offers may not be the same as the benefits your customers perceive.

This is the second key thing I learned from Cindy. Customers’ perceptions of value have three elements – rational, emotional and social/political. These elements determine how people choose what to buy, even in B2B markets.

Most companies only focus on the rational element, answering the buyer’s obvious questions, such as:

• Does the product work?
• Will it save me time?
• Will it cut my costs?
• Will it make me money?

This ignores the fact that buyers also have an emotional response (‘How will buying this product make me feel?’) and a social/political response (‘How will it make me look to other people?’). Buyers may not even be aware that they are having these responses but they are an inevitable part of the way we make purchasing decisions.

Don’t believe it? Ask Phil and Kirstie

Anyone who doubts this only needs to watch Location, Location, Location. Buying a house is almost always our most important financial commitment and a decision where rationality really should rule. On this programme, almost any of the houses would satisfy the buyers’ rational criteria – they’re in the right town, with the right number of bedrooms, the right amount of off-street parking and so on. The buyers, however, are driven to a huge extent by how the houses make them feel and how they imagine their friends and family would perceive them if they lived there. It’s exactly the same – although less overt – for other purchases, even in a corporate setting.

It therefore stands to reason that copywriting that taps into these emotional and social responses will have added power. There is another trap to avoid, though, which is assuming that everyone thinks, feels and acts like you. The only way to know your customers’ responses is to ask them.

Resolving concerns

Now your buyer is almost convinced to buy from you. Humans are naturally risk averse, however, and our brains are wired so that the pain we feel from a loss is much greater than our pleasure from a similar-sized gain. Companies therefore need to overcome their customers’ fears and take as much risk as possible out of the buying decision.

Obvious ways to do this include case studies and testimonials. Buyers naturally feel more confident if they can see that previous customers were happy with what they got. My own experience shows this: the projects and testimonials pages are among the most visited on my website.

This phase can be time consuming, especially for public sector customers, which are typically more risk averse, and large organisation where numerous people need to sign off. Customers may also need to construct a business case or estimate their return on investment. Anything that shortens the process is welcome.

Negotiating

The final stage is about making sure the deal stacks up, from both a price and contractual perspective. Having clearly articulated the value you offer and taken as much risk as possible out of the buying decision, your customers should already be convinced that your product or service is worth what you’re asking for it.

The lessons for copywriters

There are two clear lessons for copywriters:

1. By understanding how buyers buy, we can help clients cover all the bases, whether they need white papers to educate their clients or a new set of case studies to reduce the risk of buying from them.
2. Everything here applies equally to how we sell our own services. Simple things like gathering client testimonials or writing case studies about successful projects can be powerful persuaders.

Read more

Check out more of my business copywriting tips:

Tautology – so good you said it twice

If you want to inspire, you need a great story

Good copywriting needs empathy

Posted by Richard Hollins

Tautology – saying the same thing twice or more – is one of the standout features of business writing. There are three main reasons that it’s so prevalent: it’s often used for emphasis, it’s easier than rewriting or finding a better word, and it’s a sure sign that the writer hasn’t thought hard about what they’re saying.

Here’s a classic example of using tautology for emphasis, from a major utility company:

“One of our key priorities is to be number one for customer service.”

Somehow for this writer, priority just didn’t sound important enough.

Similarly (and coincidentally from another utility company), we have this:

“Delivering the highest levels of service is a primary focus.”

Focus does sound limp here but it’s easier to use a tautology than to find a better word or rewrite the sentence.

Here’s one from the world of local government:

“Employees and Members of the Council are encouraged to establish and maintain positive, helpful and friendly relationships with all of our customers.”

Presumably whoever wrote this could imagine relationships that were positive but unhelpful or negative but friendly.

The next one you’ll see all over the place. This time it’s a major accountancy firm that’s to blame:

“A turbulent summer of sovereign debt crises in the US and Europe, sharp equity market falls and signs of slowing growth around the world, are affecting the future prospects for the world and UK economies.”

At least they were clear that it’s future prospects they’re talking about, otherwise how would we have known?

Here are two more you’ll see all the time, both from FTSE 100 companies. There’s something about corporate responsibility that encourages this sort of thing:

“Our size and scale give us a big responsibility.”

“It’s also about supporting and helping the communities where we work, and being a good neighbour.”

Finally, a stinker from one of our largest law firms. This one must have been dreamt up by committee:

“They include meeting obligations to publish data on our people demographics.”

Enough said.

Find out more

Three grammar ‘rules’ you should ignore

Read more of my copywriting tips

Read more of my grammar tips