Redesigning Investor Targeting for Higher ROI · Redesigning Investor Targeting for Higher ROI Matt Kamisher-Koch DIRFdagen 2014 18 September 2014 CEB Investor Relations Leadership

Redesigning Investor Targeting for Higher ROI

Matt Kamisher-KochDIRFdagen 201418 September 2014

CEB Investor Relations Leadership Council

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Membership Program Overview

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KEY TAKEAWAYs

insight

■ Targeting Efforts Are low ROi: IROs are doubling down on efforts to woo new investors to combat rising investor churn. Unfortunately, most IR teams are unsatisfied with the outcome of all their targeting outreach and interactions. Eighty-three percent of IROs tell us they earn low or moderate returns on their targeting efforts. Furthermore, 70% of IROs end up regretting a high proportion of meetings that they and their CEO or CFO attend.

■ Two levers drive ROi: Leading companies increase the ROI on targeting efforts by 32% by reducing the opportunity cost of targeting and maximizing communication value of each interaction.

What the Best Companies do

■ use Corporate growth Plans to Establish Your Targeting strategy: Don’t build next year’s targeting plan based on the current calendar and projected management availability. Targeting plans that lack a connection to your changing growth profile are unfocused and wasteful. By aligning targeting with corporate strategy you can ensure it’s not merely a volume-driven exercise, but supports specific shareholder mix objectives.

■ Be limited in Your Targeting, and Travel less: Your capacity to cultivate meaningful relationships with prospective investors is finite. Focus targeting efforts by segmenting your investors into manageable and actionable groups, and develop a plan to balance in-person and technology-supported outreach to each prospective investor.

■ focus on the Communication Value of Each interaction, Not Broad Awareness Building: Returns on targeting efforts suffer most when IROs treat one-on-one and group interactions as repeatable, broadcast-focused events. Leading IROs re-architect the agenda and capture qualitative intelligence to generate higher communication value for themselves and their counterparts on the buy side.

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0%

40%

80% 78% 77%

57%

MEETiNg fATiguE, MEETiNg REgRET

Relatively Low Value of Targeting MeetingsPercentage of Meetings with Prospective Investors in the Past 12 Months

low returns on targeting efforts stem from iROs’ high meeting regret and poor outcomes.

■ In addition to the poor meeting outcomes listed at right, the majority of IROs have told us that, in hindsight, they should have:

– Cancelled 10–30% of meetings, and

– Pulled the CEO/CFO out of 10–30% of the meetings.

Percentage of Meetings That Did Not

Lead to Conversion

Percentage of Meetings That Did Not Help to Close

the Valuation Gap

Percentage of Meetings That Did Not Result in Value Added Dialogue

n = 52 global IROs.Source: CEB 2012 Investor Targeting Benchmarking.

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Catalog # IRR0019214SYN

Title

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ThE fRusTRATiON YOu fEEl

Escalating Volatility and Turnover Versus Targeting Activity and IR ResourcesIllustrative

Most iROs have reacted to market and information challenges by escalating targeting efforts.

iROs have doubled down on Targeting in Response

■ Conference schedules have expanded by 52% since 2008.

■ Number of visits with existing and prospective investors is up 121% since 2008.

Market Volume and Volatility ■ Stock market transaction

volume has multiplied quickly since 2004.

■ Turnover of top 10 shareholders is up to 20–40% per year.

iR Resources have shrunk or Remained flat

■ Average IR budgets have fallen since the financial crisis.

■ Average IR team size has fallen by 1.5 FTEs since 2008.2008 Present

Time

Source: CEB analysis.

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Conversion Rate

Communication Value Cost of

Time

Cost of TravelCost of

Third Party support

Opportunity Cost

Return on investment

?

?

?

?

WhY MOsT COMPANiEs sEE MiNiMAl RETuRNs

Targeting ROI ModelIllustrative

There are two factors in the targeting ROi equation you must focus on in order to improve returns: reducing opportunity cost and maximizing communication value of each interaction.

■ Most IR teams are focused entirely on the conversion rate, and underestimate the impact that communication value and opportunity costs can have on the overall quality of targeting efforts.

Meeting conversion rates vary dramatically from a low of 3% to a high of 60%. The average conversion rate among member companies today is 22%.

Cost Driver

Return Driver

Source: CEB 2012 Investor Targeting Benchmarking.

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Communication Value definition

Percentage of meetingswith prospective investors thatcould be characterized as value-added dialogue (i.e., leading to outcomes such as improved messaging, business intelligence, feedback, and better risk management).

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fROM iNsighT TO ACTiONleaders successfully reduce opportunity costs and increase communication value through differentiated practice in three areas. i. REduCE OPPORTuNiTY COsTs ii. iNCREAsE COMMuNiCATiON VAluE

RO

i dri

vers

Pro

gre

ssiv

e iR

O A

ctio

n st

eps

design Targeting strategy and goals

■ Ensure alignment between the targeting plan and corporate strategy

■ Pressure test assumptions about level of travel required to hit goals

■ Set targeting objectives

■ Know when to take your management team on or off the road

focus the Targeting list

■ Segment your current and prospective investor universe and narrow the targeting list to the few prospects that matter

■ Revisit multi-year conversion assumptions for each target and cull the list often

■ Develop an efficient channel strategy to stop relying exclusively on face-to-face meetings

Maximize the Value of dialogue

■ Use one-on-ones to challenge prospective investors and diagnose sources of confusion about your stock

■ Capture qualitative information from interactions and close the learning loop with follow up and requests for feedback

Increase ROI by 19%

Increase ROI by 19.4%

Increase ROI by 14.6%


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disCussiON ROAdMAP

1design Targeting strategy and goals

2focus the Targeting list

3Maximize the Value of dialogue

Targeting Strategy Development Investor Segmentation Protocols Anatomy of a Valuable One-On-One

Targeting Performance Measures Targeting List Filters Qualitative Information Capture

Targeting On–Off Tripwires Targeting Channel Mix

1

1 Pseudonym.

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ThE PROBlEM WiTh ONE-ON-ONEs

Standard Approach to Capturing Information from Interactions with Prospective Investors

lack of discipline in capturing information from targeting trips often limits iR teams’ ability to incorporate learnings into future targeting planning, message development, and scheduling efforts.

finalize Road show itinerary

Prep Materials and Management

Add info to iR Activity log

■ Finalize trip schedule using internal analysis and sell-side assistance.

■ Finalize standard investor presentation for road show.

■ Prepare CEO and CFO with talking points on general strategy.

■ Document trip details: institutions, contacts, issues, and Q&A.

There is little in-house data to vet names against list of prior conference attendees in that region.

There is insufficient tailoring of deck and/or message for each investor based on past conversations; same deck as the one used two quarters ago.

Data captured in CRM is financial and transactional in nature; it provides no clarity into attitudes, concerns, or risks at the individual investor and/or segment level.

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ThE TARgETiNg lEARNiNg lOOP

UPS’s Approach: Continuous Learning Loop

finalize Road show itinerary

■ Finalize the meeting list using internal intelligence to screen for prioritization and assess vendor data accuracy.

Materials/Management Preparation

■ Prepare for the meeting using in-house intelligence to inform the agenda and key discussion areas aligning to the investment style and preferences.

Qualitative feedback Capture

■ Capture qualitative information using the standard template to analyze soft signals and impressions.

■ Follow up with each buy-side contact and request direct feedback.

Add impressions to Targeting intelligence database

■ Log qualitative information into CRM system.

■ Use this information to inform future itineraries, preparation, and in-meeting discussion focus.

Rather than taking a linear, transaction-focused approach to feedback, create a learning loop where qualitative signals from target investors are incorporated into future efforts.

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Source: UPS; CEB analysis.

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CAPTuRE fEEdBACK TO sTRENgThEN MEssAgiNg

IRO’s Notes From a Meeting Target Investor YIllustrative

use one-on-ones to find out what’s really on investors’ minds; identify emerging issues that could impact valuation, and adjust messaging for future meetings.

■ The meeting takeaway notes are also used to inform and accelerate preparation of the next quarterly earnings release.

dO identify the major changes in investors’ macroeconomic and microeconomic assumptions by asking what is driving them; pressure-test assumptions on long-term product and regional growth bets; ask indirectly about the health of key customers.

Investor Y, Paul Jones30 January

General Feedback ■ Customers in the US are nervous about the fiscal cliff and other regulatory overhang. This could delay growth in the US and Europe too.

■ Accelerated trade-downs from premium services affecting competitors’ profitability forecasts

■ Concerns about ability to flex capacity quickly as conditions in emerging markets cool and other key markets reenter recession

■ Disruptive forces in our marketplace that we are potentially underestimating are x, y, z

Questions for Management1. What is the magnitude of risks faced in domestic markets?

2. Are we in danger of a prolonged growth stall in this environment? What is the outlook on speed to recovery?

3. Size short- and long-term risks to international strategy (e.g., negative revenue translation, sovereign debt, emerging markets cooling off)?

4. Are we at an inflection point in customer demand in any lines of business?

5. Which trends are cyclical versus structural (e.g., customers permanently moving supply chains from Asia closer to home)?

Action items

■ We need to reinforce messages on the long-term resilience of our operating structure to handle both sharp shocks and delayed recovery in various regions, regardless of when conditions improve.

■ We need to identify and dispel myths and rumors about magnitude and permanency of changes in customers’ needs.

■ Let’s invite Paul and his team to the next facilities tour and share additional public documents on cost-structure issues.

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QuAliTATiVE dATA CAPTuRE

UPS External IR Meeting Notes Template

Collect feedback and qualitative impressions of each meeting to make adjustments to messaging, focusing, and targeting calendar as new intelligence is gathered.

■ UPS’s IR team has tailored data fields within their Thomson investor management tool (CRM) to keep an electronic record of all qualitative information captured in meetings, integrated it with financial profiles, and drawn out learnings on targeting trends.

dO implement a simple, standardized template to collect qualitative feedback and impressions on the investor’s overall sentiment and use the intelligence to shape future interactions.

Key data Recorded from Each Meeting

■ Industry-wide and UPS-specific topics of interest

■ Familiarity with latest company events and sector news

■ Sentiment (bullish or bearish on UPS)

■ Impressions of how engaged the PM was overall (e.g., were they interested in UPS specifically, were they very knowledgeable about the company, were they very excited about UPS’ prospects, etc.)

■ Intent to purchase or sell shares or only to glean competitive intelligence about UPS or industry (i.e., no real interest in establishing a long-term investment)

■ Key messages that are of low or no interest to the investor

date: Brokerage firm/Event:

uPs iR fEEdBACKlocation: Sentiment Target Meeting Typefirm Name/Attendees: Tier Global 99 Sell-Side Buy-Side PM Analyst Bull Bear Hot Mod Not 1-on-1xx Group

Tele/VideoconferenceMgmt DiscussionBreakfastLunchDinnerinstructions (Add to..)E-mail ListHoliday cardFacility TourRoad Show HostFollow-up LetterOtheruPsers PresentSVP IRO CEOVP IR CFOIR Manager Pres. OperationsPres. Int’l. COOSales, Marketing and Strategy

CIO

OVERViEW: _____ don't forget To Ask... database inputdETAilEd sEgMENT REViEW: _____ Include Investor Style, Discussion Summary, Number of PMs Present, Length

Of Meeting, Intent To Purchase/SellRECENT CAll REViEW: _____Meeting Topicsdomestic supply Chain

and freightfinancial

Pricing Pricing Economy CompetitionTrends Trends Guidance -- Pricinginternational Forwarding Modeling -- FDX TrendsPricing Logistics Margins DividendsTrends LTL Use of Cash Share RepurchaselaborNotes

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AssEss iNVEsTORs’ REAdiNEss

Target Investor Readiness DistributionPercentages Are Illustrative

The iRO aggregates his impressions of target investors’ understanding of uPs to determine the right messages and channels for future interactions.

“Well Aligned” “improving” “unaware” “Challenged” “Misguided”

35% 40% 5% 10% 10%

“Well Aligned” “improving” “unaware” “Challenged” “Misguided”st

atus

Act

ion

item

s

Investor’s understanding of UPS is very high; there is a high alignment between our stock and their portfolio interests.

Continue at current course and speed.

Investor’s understanding of UPS is gradually improving; we are beginning to have more productive dialogue about long-term alignment.

Cultivate relationship further.

Investors have not seriously considered UPS as an investment in the past and we have not had a chance to engage them.

Engage through introductory phone calls.

Investors are interested in furthering dialogue with UPS but have significant concerns about key parts of the investment value proposition that we must first address.

Bring relevant quantitative and qualitative information to their attention to change their mind.

Investors are misinformed about the magnitude of performance risks or the impact of certain global economic trends on UPS’s long-term results.

Challenge their misinformed assumptions and set up additional time on the road.

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iNCORPORATiNg fEEdBACK TO suCCEEd

Targeting ROI Performance

Percentage of Targeting Meetings Leading to Value-Added Dialogue

uPs’ disciplined approach to capturing qualitative feedback from each interaction leads to higher ROi and more valuable dialogue with investors.

Bottom Quartile Performers

Bottom Quartile Performers

Top Quartile Performers

Top Quartile Performers

UPS

UPS

n = 52 global IROs.Source: UPS; Investor Targeting Benchmarking, CEB Investor Relations Roundtable (2012).

n = 52 global IROs.Source: UPS; Investor Targeting Benchmarking, CEB Investor Relations Roundtable (2012).

0%

25%

50%

18%

50% 50%

0%

50%

100%

21%

75%

90%

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ThANK YOu

Proven Best Practices Peer Benchmarks Executive Networking ■ State Street’s Message Absorption Index

■ Johnson & Johnson’s Key Message Matrix

■ Budgeting, spending, and staffing benchmarks for IR departments

■ Online peer discussion groups

■ On-request advice, feedback, and perspectives from other leading executives

Research and insights decision and diagnostic Tools live and Online learning Events ■ Evaluation of new issues and challenges facing finance leaders

■ Analysis of successful business tactics employed by leading companies

■ IR Website Diagnostic

■ Customized Investor Prioritization Model

■ Message Absorption Diagnostic

■ Capabilities of a World-Class Investor Relations Function

■ Senior IR executive meetings

■ Ongoing webinars

■ Online learning

Advisory support ■ Personalized counsel for the head of the function for pending decisions, new tactics, internal presentations, and other needs

■ Earnings and analyst day analysis and feedback

For more information, please contact Matt Kamisher-Koch at [email protected].

To download the presentation please go to: http://ceburl.com/DIRF2014.

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How We Can Help—Program Features:

mailto:Mkamisherkoch%40executiveboard.com?subject=

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Documents

Redesigning Investor Targeting for Higher ROI · Redesigning Investor Targeting for Higher ROI Matt Kamisher-Koch DIRFdagen 2014 18 September 2014 CEB Investor Relations Leadership