How AR makes firms grow 280% faster

Our latest Analyst Attitude benchmarking study, for networking and telecommunications, shows how the key principles of analyst relations success are the same in networking as in other markets, but the results are amplified. Generally, there are lot of indicators that point in the same direction. Compared to their competitors, firms that are better at analyst relations tend to beat their competitors in four ways:

  1. They are much more candid with analysts than their competitors.
  2. They allocate more resources to analyst relations.
  3. They reach out to a wider community of analysts.
  4. They allocate more effort to AR outside their domestic market.

These things are harder than they sound.

  • Candour (excuse our UK spelling) is both real and perceived. Real candour means sharing information, and that is something that large firms struggle with, especially if they are listed in US stock exchanges. For example, many larger organisations struggle to give analysts information that is already in the public domain (such as pricing or strategy). Perceived candour is about the ability of the analyst to pull information out of the organisation, especially in verbal interactions.
  • Resources are primarily people, but these people either focus on generating information or on channeling it out. In the 1990s, few firms were using an effective mix of AR communcations techniques. Our friends Efrem and Norma turned that around through the 1990s with annual AR effectiveness studies that showed firms how to improve their channels and techniques. With a few exceptions (like Huawei and Nortel) most companies are using the right channels to communcate through. Now, the ‘bar’ is higher. Today, the weakness that most firms have is in generating and sharing rich information, especially on strategy and competitive positioning. When firms allocate more resources to AR, their instinct is to amplify the channels (e.g. more emails, more newsletter, more mailouts). Sadly that effort is wasteful: it would be better to produce better information.
  • Breadth of analyst outreach is also hard and, again, this is something that some US firms struggle with. They understand that 20% of the analyst firms have over 80% of the influence, but somehow come to act as if a relationship with five lead analysts covers off the whole of the industry. In fact, the top five individual analysts might have only 15% of the influence of the whole analyst community on a market segment. It’s right to start with them, but not to ignore the others. Our study shows that firms that have relationships with larger numbers of analysts have stronger relationships and, in particular, are more likely to be recommended – not only in total but also on the level of the individual analyst.
  • Briefing outside the domestic market can also present challenges, for reasons we explain in Industry analysts are all in the US, aren’t they? Many US firms focus most of their AR effort on relationships with US analysts working for US firms. They believe that, because technology is a global market, technology advising is a global market. However, markets and consumer preferences differ nationally. That is why the analyst firms are globally distributed and why many firms, such as IDC, have most of their analysts outside the US. The US firms are not as dominant outside the English-speaking countries and, even with them, the US analyst is not the only one to advise clients.

These core dimensions of analyst relations success are not the only elements that matter: for example, ‘selling’ AR internally is key. However, so few firms are really getting the basics right that it is no surprise that analysts are really rewarding those that do. The firms that are best at analyst relations are growing almost 280% faster than those who are in the bottom 50%. But for the laggards, that is not enough of a business case to focus on sharing more information: when they put it more effort, it just means they tell the PR team to upgrade the media releases from black and white to colour printers for their monthly mail-out to analysts.

If you work for a major networking, telecommuncations or services brand, the chances are that we are tracking your firm in our benchmarking studies. If you want to know how your firm is doing against its competitors, and how to overtake them, start by ordering the FAQ from our website or by giving us a call.

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