Previously, we discussed the importance of Corporation Persona and IRO / IR Program Persona.
The goal is to align these two personas in order to optimize the investor relations (IR) function.
What does a company or IRO do when the company or IRO does not know what or who they are?
Commission a perception study.
What Is A Perception Study?
A perception study represents a process whereby the investor relations team, and, typically, a third-party work together to canvas several key constituencies in order to gain feedback on messaging and strategy, which is then presented to management, and the data used to further optimize the IR program.
A perception study allows you to canvas your key constituents in order to better understand messaging impact, and what others think of you. Working with a third-party provider elicits greater candor around feedback from the investment community.
The IRO / IR team works with a third party to develop key questions about investor messaging and company strategy. The survey canvases several constituents over the course of a few weeks. Then the third party compiles and presents the findings to the IRO and then management.
When I worked on the sell-side, I did not give perception studies much of a thought. I definitely participated in one for athenahealth ($ATHN) and one Everyday Health ($EVDY).
In the case of athenahealth, the study was used to assess the effectiveness of their 2015 Investor Summit. In the case of Everyday Health, the study was used to better understand their story from an investor perspective. The former case represents a typical perception study. In hindsight, the latter case represented a tell of sorts in that doing a “random” perception study signals to the investment community that the company either recognizes its messaging may be suboptimal, or worse something bad could be coming down the tracks.
As an IRO, my initial perception was why would I ever want to pay for a perception study? I mean I am a walking perception study of my stock. So here are some reasons why you do a perception study.
Why You Do A Perception Study
Insurance: A perception study will scientifically prove your value as an IRO. Study results will allow the IRO to quantitatively illustrate the impact of the IRO’s efforts and effectiveness of the IR program. The study will prove your worth to management, and allows you an opportunity to solicit feedback on your performance.
Credibility: Any ex-sell-side analyst will likely represent a walking perception study regarding his or her stock, so what? Management may not believe the feedback based on your internal perception study. Additionally, your internal perception study might be wrong, as you may be misinterpreting data points. Commissioning a perception study will provide the scientific proof of your internal perception study. Remember, the more data driven the management team, the greater the need to regularly commission a perception study.
Improvement: In the best-case scenario, the perception study will tell you that all is well with your efforts. Most likely, the study will yield some areas for improvement. For example, a perception study will likely tell you to focus on X, despite management’s laser-like focus on Y. Additionally, the study will provide feedback on the effectiveness of management and message delivery. The key is to use the results as constructive feedback and then correct and adjust.
Consistency: A perception study can provide a 360-degree view of your company and program. The most comprehensive perception studies consist of canvasing the buy-side, sell-side, board of directors, and C-suite. The survey will uncover any inconsistencies between the way these groups think about the company and message. Sometimes a perception study will uncover a situation where management and the board think of the company differently. In the worst-case, the perception study will uncover a discrepancy between management and the Board, but also that the members of the C-Suite each see the company differently.
Optimization: Typically, preparing for an analyst day represents the most natural driver for commissioning a perception study. The process will canvas the investment community to better understand the key topics that need to be addressed at the analyst day. Post analyst day, the study then provides feedback on how well the analyst day addressed these key topics, etc.
Costs and Vendors
These studies vary widely in costs ranging from free to over six figures. Vendors range from doing it internally (not recommended) to both large and small third-party investor relations vendors.
A perception study is one key areas an IR program should allocate its financial resources.
Thinking about the process, it would be near impossible for an IR team to conduct the survey in house. Furthermore, the primary problem of doing this on your own is that you will likely get little candor due to fear of retaliation, or grudges.
While there are many who can provide a perception study, the three providers I am most familiar with are NASDAQ, Rivel Research Group, and Corbin Advisors.
The difference between vendors seems to revolve around the analytics and presentation of results.
A NASDAQ perception study represents the low end of the cost range. Pricing will depend upon your ability to bundle other services / products, and how wide a canvas you with to cast. If you want to canvas the board, costs will typically be higher.
Rivel Research Group has a significant background in perception studies represents the middle of the cost range. Price seems to depend upon depth of questions and constituents canvased.
Corbin Advisors represents high end of the cost range.
Thinking About Costs
There are a few variables to consider when thinking about how much money to allocate to a perception study, including: IRO background, management’s focus on data, and IRO credibility.
IRO Background: An IRO with a strong capital markets background likely can get by at the lower end of the perception cost range. In this scenario, the perception study is most likely to confirm what he or she already knows. The risk is that the study uncovers something the IRO may be totally missing. Remember, the greater the tunnel vision (focus on your own company) of the IRO and management, greater is the amount that should be spent on perception.
Data-Driven Nature of Management: Secondly, one must consider the data sensitivity of management. Does the management team need significant scientific evidence to make a decision? Think Robert McNamara during the Vietnam War. Does management make decisions with imperfect data and less than the whole picture? The more data-driven the management team, the greater the spend on a perception study.
IRO Credibility: The greater the credibility of the IRO to management the less money needs to be allocated to a perception study. If you have low credibility with management, you need to ensure that the perception study helps you to establish credibility with management.
While perception studies represent a significant allocation of financial resources, a perception study will truly help you find your persona and optimize your interaction with investors.
