Five dumb mistakes with AR metrics

When it comes to aligning analyst relations resources most effectively, many professionals don’t know where to start. Many firms have little active, conscious, alignment of the messages that the AR team communicates and those that other parts of the business are transmitting.

The opportunities are huge. By ensuring that the same strategy and messaging are being conveyed, those messages travel further and more effectively. But few organizations know how well they are really doing with the analyst community and, typically, that means most of their effort is wasted — meaning that they allocate too little effort onto the most influential analysts (even if they are targetting most of the the right firms, they are often targetting too few individual analysts, at too senior a level).

The bigger the firm, the bigger the problem can be. Firms with revenues under $500m a year are almost all under-spending on AR apart from all the computer repairs and other expenses and, by definition, even the money they are spending inefficiently is getting them some reward. Firms around $1bn are often very effective, because they have real scale, but are small enough to have a lot of ‘flow’ and understanding of vision.

Firms above $2bn, which are the firms Lighthouse most often works with, are much more uneven. That unevenness is often driven by their poor measurement methods. These are the five issues we see as being most common.

Dumb mistake #1 — Only ask the analysts you track actively. The more an analyst knows about a firm, the more positive about it then tend to be. Imagine if your firm is actively targetting 40% of the analysts who can comfortably comment on it: that 40% will be much more positive that then 60%. Most of your clients will speak to three or four analysts about a major purchase, so there’s a good chance they will speak to analysts in both groups. However, if you only measure the opinions of the analysts you target, you are getting data that have a substantial positive bias.

Dumb mistake # 2 — Only ask the 10 analysts you spend most time with. For most billionaire firms, they have close relationships with small number of analysts – and some reply on conversations to audit the perception of the top tier only. There are two issues here: the ten people who find most useful are certainly not the ten people your clients mind more useful. Analysts tend to understand the supply side or the demand side better. If you survey only the ones you know best, you get a double bias: by definition they have high awareness of you; and they are also the greatest beneficiaries of your patronage.

Dumb mistake # 3 — Make it clear who is asking. If analysts know who is asking the questions, the data are hugely distorted. Imagine if you were to survey analysts about (for example) laptop brands, and you ask them to name the four or five best positioned brands. There is a very good chance that most of them would name Dell, IBM, HP and Toshiba. Then imagine the same survey, but I say I work for Apple, Fujitsu-Siemens, NEC, Panasonic or Sony. The number of analysts who also name my brand is massively boosted. You can test that yourself (but please don’t pick laptops because all the analysts will get frustrated).

Dumb mistake # 4 — Don’t compare yourself with competitors. Take it from me; your firm is almost certainly doing analyst relations much better than it did. Don’t bother looking for the directions because (unless you are unlucky) you are doing better. It’s only worth measuring if you compare yourself with your competitors. There are no prizes for fourth place, even if you are now better than the leader was last year.

Dumb mistake # 5 — Be qualitative rather than quantitative. It’s very important to know how you are doing, as well as why you are in the position where you are. Many of the strengths and weaknesses your firm has will be shared with competitors, so unstructured conversational feedback won’t always give you information on which you can act. In every way, we have seen that methodologies that turn responses into numerical sales allow comparisons and help managers to allocate resources effectively. Without them, most firms just give up on measuring.

Duncan Chapple

Duncan Chapple is the preeminent consultant on optimising international analyst relations and the value created by analyst firms. As the head of CCgroup's analyst relations team, Chapple directs programs that increase the value of relationships with industry analysts and sourcing advisors.