Article from Börsen-Zeitung: Tailoring communications by surveying audience needs05/20/2006, 01:00 AM CEST
By Martin Ziegenbalg
Börsen-Zeitung1) , May 20, 2006
It is crucial for listed companies to find out how they are perceived by capital markets. Consequently, Investor Relations (IR) deals not only with hard financial figures but also with numerous "soft" factors: Is management strategy being communicated clearly? Is there a compelling link between the company's strategy and the success of its business? Does this link appear credible to capital markets? How do investors and analysts rate the professionalism of the company's IR activities? What are the preferred media and tools for communication? The wealth of questions reveals the need to conduct research in capital markets. There are two ways of obtaining such information: companies can either carry out their own surveys or take part in one of the perception studies conducted by various research institutes. The first method is extremely time-consuming. As a consequence, many companies carry out just one survey, thereby providing a snapshot of opinion but no insight into trends.
Perception studies by external providers generally focus on ranking several companies operating in the same sector; in most cases, they differentiate between sell-side and buy-side and break down their results by region. Studies of this nature can therefore deliver some key insights into the quality of a company's IR activities. However, simply knowing the ranking of their IR department is of only limited use for companies that wish to refine their financial communications strategy in order to meet the needs of their target audience. Another disadvantage of most perception studies is their relative lack of detail. A ten-minute questionnaire is the most that the financial community will accept, making it impossible to ask analysts in-depth questions about a company's strategy in particular market sectors.
Deutsche Post goes its own way
In its efforts to tailor its communications strategy to the demands of financial markets, Deutsche Post World Net has therefore gone a stage further and combined the two approaches. Deutsche Post World Net is one of the first big public companies in Germany to employ its own system of surveys - devised with the aid of a market research institute - to measure the impact and acceptance of IR activities at six-monthly intervals. Although this approach is similar to conventional perception studies in terms of structure and procedure, by concentrating on one company it is possible to ask much more detailed questions.
The first survey of some 200 analysts and investors who focus on Deutsche Post World Net took place in December 2004. The survey was then repeated at six-monthly intervals in the form of an online questionnaire; the next survey is scheduled for June 2006. The questionnaires are anonymous and take no more than ten minutes to complete, while the questions are designed to change as little as possible from one survey to the next. By repeating the same questions at regular intervals, Deutsche Post World Net can identify trends over time and draw conclusions about the relative success of specific IR activities.
Of course, the questionnaires are not written in stone and leave room to incorporate new developments. For instance, the most recent survey in December 2005 included questions about the acquisition of Exel and BHW and asked respondents to rate new elements of the Group's strategy. The next round is due to take place in June 2006 and will once again focus on the developments in corporate strategy.
Ten minutes of your time
The high response rate to the surveys clearly shows that, although their time is at a premium, analysts are still keen to support the efforts of the IR department to improve communications with the financial markets. Of the analysts contacted, one in four was prepared to devote ten minutes of his or her time to the survey. This is testament to the past efforts of the IR department that have prepared the ground and built trust between IR and its customers, in this case analysts. Furthermore, the response rate has remained largely constant over time, giving no indication of fatigue. The respondents clearly recognize that this market research is not about the IR department patting itself on the back; instead, they see that the company is indeed tailoring its communications strategy to the needs of capital markets.
Well-known to the audience
It is also significant that Deutsche Post World Net as a company is not new to most of the analysts. In December 2004, around 60% of those surveyed said that they had been dealing with the company for a period of between one and three years. This was backed up by the most recent survey, in which almost 60% of respondents stated that their involvement with Deutsche Post went back more than three years. Of course, this has given analysts the opportunity to build a strong relationship with the company and ensures that the details of the company's operation are well known to the capital markets. For the IR department, this means that it can rely on many aspects of corporate strategy being already familiar to analysts in its capital market communications.
Analysts in the UK and North America are also likely to be familiar with Deutsche Post World Net from many years of experience. In fact, the survey clearly shows that analysts on Wall Street and in the City of London are somewhat more demanding than their German counterparts. Buy-side analysts require more information than sell-side analysts, who tend to be happier with what they currently receive. However, all groups set great store by having personal contacts in the IR department. And despite the advent of new media such as online news tickers and RSS feeds, analysts like to be informed of important new developments by telephone so that they can ask background questions right away.
A direct line to the IR department supplements the personal contact that analysts seek with members of the Board of Management; analysts often prefer one-on-one meetings to large-scale analyst conferences. The financial community is particularly interested in anyone newly appointed to the Board of Management and this is reflected in Board members' schedules. In addition, analysts expect as a matter of course that the company's website will be kept up to date. Expensive print publications of fact books, on the other hand, are considered a less important source of information. These priorities are reflected in the way Deutsche Post World Net's IR department spends its budget.
Board of Management under the spotlight
One whole section of the questionnaire is devoted to questions about top management. Respondents are queried as to level of awareness of each of the Board members as well as the strategy pursued in their respective areas of responsibility. The study also investigates how clearly and credibly each Board member communicates his strategy. Responses in this section show a continuous improvement over time. It is apparent that the Board of Management is getting better at giving analysts exactly what they want, in terms of both the technique of their presentations and the degree of detail they contain.
Analysts want Board members to keep them informed about the implementation of strategy and not just the goal. Top management has responded to this by reporting on the execution of strategy, in some cases breaking this down to focus on short time periods and on operating units serving particular target markets. The fact that analysts are not satisfied with highly condensed data and blanket statements shows that they deal with the Group in a very serious and responsible manner. In fact, the findings of the Deutsche Post World Net perception study show that analysts are the most attentive listeners a company can hope to find.
All in all, the tailored surveys of investors and analysts conducted by the IR department of Deutsche Post World Net have evolved into a very good and practical tool for refining communications strategy in line with audience needs. Analysts and investors do not mind being asked what information they would like to receive, in fact they appreciate the two-way communication - provided that the Board of Management and Investor Relations respond promptly and adequately to their requests for improvement.
1) A German daily newspaper aimed at the financial markets.