Increased AR effort increases analysts’ expectations

Many of our clients successfully use our Analyst Attitude Surveys to compare their performance against their competitors and, in doing so, make the case for better resources.

Of course, it’s a race: everyone is advancing their analyst relations, so the question is not whether you put more effort into your AR, but whether you can increase more than your competitors.

However, increasing supply of information also increases analysts’ expectations. That means that the increased supply of information for analysts actually increases their demand for information. The chart above shows a common pattern. I have swapped the scores and the vendor names, so there’s no need to embarrassed.

These charts show the difference between how many analysts say they want more information and how many say they want less information from each of these vendors. We weight ‘outliers’, very high or low scores, but most scores stay between 0 and 1. Unsurprisingly, most analysts want more. What is surprising, however, is that the pink line, for 2005, is so far above the blue line, for 2004. Of course any change is amplified: if there’s 5 on one side and 5 on the other, and then one switches, the gap is 2 (because 6 minus 4 is 2) even though only one person moved.

This produces a real challenge for measuring analyst relations: which of these firms is the best performer and which is the worst? Is is the firm from whom analysts want the biggest increase; or is it the firm that is best meeting analysts’ needs? Is it the firm that’s created the biggest increase, or is the best that firm which has continued to keep on top of rising expectations? With the 20 year experience of my colleague Efrem Mallach in AR measurement, and with a pile of historical data, Lighthouse is able to tell clients which of these outcomes is most strongly correlated with business success. Without that context, the data are much less valuable.

However, one trend is clear: analysts want more information: the increasing effort put into analyst relations is not reducing analysts’ demand for better information.

Of course, a lot of analyst relations effort is wasted. Many firms fail to identify influential analysts and focus on them. However, these data also suggest that firms that lead at analyst relations are also widening the gap between them and their competitors. By offering a high level of analyst relations service, that your competitors cannot replicate, you can delight analysts and give them increasing expectations of you competitors.

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