We recently mentioned that budgets for AR have risen to 28% of PR spend. I’ve had an interesting question from a reader.
Do increased budgets mean anything? Effective analyst relations is really about building relationships not simply about budgets, or even mainly about budgets. Isn’t this even a point Lighthouse makes, that most AR effort is wasted. If AR managers are really focusing on the top ten, then high or low levels of resourcing don’t matter.
We think resources do matter. In fact, our surveys of analysts show a very strong correlation between their assessment of each company’s AR resourcing, and their confidence in recommending suppliers to shortlists. That’s a trend we see in all the industries we benchmark.
We think there are three reasons why we see this correlation.
- Budget is a strong indicator of political will and internal buy-in. Effective AR is candid: that means spokespeople need to be committed, and empowered, to speak openly.
- Building deep relationships with analysts takes effort. Few AR managers can build deep relationships with more than half a dozen senior analysts, especially in the US where analyst time is hotly contested for. Greater resources mean more staff, and that means more analysts can be communicated with. The telecommunications provider that is top-rated by analysts, for example, is the one with the most AR people over the last few years. The same is true with the networking equipment company that is most likely to be recommended by analysts.
- Most analyst relations effort is wasted, but less is wasted at firms with better organised AR. We quite often see firms with revenue under $100m that are wasting over 80% of their AR method; but we rarely see firms with revenue over $5bn that are wasting more than 40%. This is also, of course, because firms that resource their AR better are more likely to do it well; firms that cannot resource their AR will tend to push it out to their PR agency at minimum cost, and see it as a cost rather than a source of real benefit.
Of course, more can always be done with less. However, less is still less. The reality is that resourcing is one of the three crucial variables for effective AR. Saying that AR is about relationships and not budgets is a misleading truism. Correctly targeted budgets are the major source of good AR managers with the time, knowledge and resources needed to develop good relationships: Saying otherwise simply encourages AR budgets to be dismissed, deprioritised or even cut.