How (and How Often) to Conduct a Perception Study

“Honesty is the first chapter in the book of wisdom.”
— Thomas Jefferson

Just as honesty fuels wisdom on life’s great matters, candid thoughts from outsiders can prove invaluable for corporate executives seeking to learn how key market participants view their company. A perception study can play a vital role in gathering these opinions.

Typically conducted by an independent third party, a perception audit allows analysts and investors to anonymously give their views of a company’s products, pipeline, strategy, leadership, financial performance, and investor communications efforts.

While criticism can be hard to take, it also proves immensely instructive, especially when those surveyed offer insights that enable management teams to uncover issues/themes to address to improve your company’s image and investor relations efforts. It’s also helpful to hear what you’re doing right so you don’t mistakenly “fix” what’s working well.

Ideally, a company should perform a perception study annually to track progress in addressing issues identified in the initial, baseline survey. The results can help you develop new messaging, pinpoint areas that need improvement and shore up your overall IR strategy.

So how do you structure and perform a perception study? Your main tasks – working with an outside professional, such as an IR firm – involve crafting the questions to ask investors and analysts, identifying study participants and conducting the survey.

When working with clients on their studies, I focus on three key areas of inquiry: awareness, financial performance and valuation, and perception.

1. Awareness
   For the awareness portion of the study, you’ll want your survey firm to ask about investors’ knowledge of your corporate portfolio, which products they understand the most and the least, and which pipeline products seem particularly promising.It’s also instructive to ask investors whom they identify as your company’s peers, and to get their frank views on your company’s competitive positioning.
2. Financial Performance and Valuation
   It’s hard to overstate the importance of learning the market’s sense of your company’s financial performance and valuation. Several questions can help shed light on these views. Among these, you’ll likely want to ask analysts and investors:

   • Their opinion of your recent financial performance
   • Whether (and why or why not) they consider your financial guidance achievable
   • Their take on your company’s long-term growth profile
   • What capital allocation they prefer that you make, i.e. M&A, debt pay-down, organic growth efforts
   • Whether and why they consider the company under-valued, fairly valued or over-valued

3. Perception
   What do key market players see in your company and leadership? What do they think of your approach to the investment community? Posing the right questions will help you discern the market’s general perception of your company and management and flag any issues that survey respondents may have noticed.

   Ask investors for their thoughts on:

   • Your company’s strengths, weaknesses and vulnerabilities
   • The leadership team
   • Management transparency
   • Your investor relations efforts and any areas that may need more attention

   You also might seek investors’ advice for management.

After you’ve developed your questions, you’ll need to build a list of investment professionals to contact for the study. Ideally, your list will encompass a diverse group of respondents, including sell-side analysts covering your company and others who cover your industry but not your business; buy-side analysts who own your stock and others invested in your peer group but not your company; and managers of large and small investment funds, including current and prospective shareholders.

I recommend contacting 30 to 50 respondents, which should give you a broad sampling of large and small funds, healthcare specialists and generalists. I target 10 percent to 20 percent sell-side representation, with buy-siders comprising the rest of the group.

With questions and target participants in hand, your perception-study firm will be ready to conduct the survey and aggregate the responses. I conduct my surveys over the phone, typically asking about 15 questions, with most of them designed to elicit open-ended answers.

Annual follow-up studies would be similar to the initial audit, with similar or identical questions to track your firm’s progress in implementing feedback.

Using an independent third party is critical to obtaining forthcoming answers from respondents, who often need assurances that their comments will be presented to the company in anonymous, aggregated form. Candid responses drive the true value in perception studies.

While criticism can sting, keep in the mind that a perception study represents an effort to do your best for all stakeholders and solve any problems that investors may identify. A leadership team open to honest market assessments of the company can make significant strides.

Our healthcare team at Westwicke, An ICR Company, brings more than 300 years of combined Wall Street experience to help you navigate the investor community. If you have questions about conducting a perception study, please get in touch.