I can say fascinating. What’s wrong with that? Everything these days is hyperbolic.
Maybe you disagree – but there’s a lot of clues in this document about the future of CX, market research & analytics.
For the geeks, the full S1 filing is here.
Or you can just read this. It’s more entertaining.
Quick background on Medallia
Medallia was the early leader in what we now call Customer Experience Management.
Founded in 2000, the company runs CX programmes for over 500 customers – mostly big, enterprise users.
Their kit sucks in data from call centres, digital platforms, feedback surveys, online reviews, social media and other sources – then extracts KPIs to measure the customer experience.
It sends targeted actions (‘fix this problem for that customer’) to frontline staff; and members of the C-Suite can track performance at a strategic level.
It’s about measuring what’s working and fixing what’s broken.
The company makes about $250m in revenue, but the last few years have been eye-wateringly loss-making.
Last year, a new CEO came in from CallidusCloud (you remember – SAP’s ‘other’ CX acquisition before Qualtrics … the one nobody talks about, like the embarrassing older brother).
The tide of red ink has been stemmed, and the business has been spruced up for its IPO.
Funding to date: $325m, $70m of which was just 4 months ago.
Here are the 10 things that stood out for me in the S1. Not in any logical order, and more for what they say about our broader industry than about Medallia specifically.
1. Software doesn’t kill services
Far from it. It creates demand for new, different services.
Look at all the in-house marketing and insight teams who have bought software tools – and then find they still need external help to run them.
Medallia’s revenue split is roughly 70% subscription / 30% professional services (page 78 in the S1).
Subscription is mostly software – although it probably includes some contracted services (account management, tech support, customer success etc) that are critical for the software.
Professional services comprise “managed services, implementation and other services. Our managed services offering provides enterprises with value creation experts to help them develop deeper analysis and obtain additional benefits from our platform … we believe our professional services serve an important role in accelerating enterprises’ realisation of the benefits of our platform.”
Translation: services are essential for getting value from software.
And it’s not just in-house services that platforms like Medallia drive. They create scope for third party providers to sell services – see Medallia’s implementation and consulting partner network (page 125).
So if you’re one of the ‘market research agencies and consultancies’ that get disparaged further down (see #5) – don’t be glum.
Software won’t eat your business if you figure out quickly enough how to build new services around it.
If you want more on this, check out this article on how research tech platforms, agencies and clients need to play nicely together.
2. CX alone is not enough
It’s funny.
CX is a cool, new, fast growing category with (apparently) masses of headroom.
But most big CX players are at pains to point out that their market opportunity is so much bigger than CX.
Medallia is no exception. It’s got 4X (not the dodgy Australian lager): Customer, Business, Employee and Product Experience (page 100).
3. ROI is fiendishly difficult to calculate
Insight and analytics teams worry they don’t have a clear ROI model that can prove their value to the business.
But you’d think, with all the data, it would be easier to prove a return on investments in CX management.
All that feedback (“5 billion experiences analysed annually”), all those closed-loops, all those outcome metrics.
Apparently not.
Medallia commissioned Forrester Consulting to speak to some customers and estimate the payback.
They reckon customers see an average $36m impact (new income generated + cost avoided) over 3 years.
Well, that’s what came out of 6 customer interviews (page 103).
So if you’re fretting about data points for your own CX or insight ROI model – maybe relax a little. Apparently you don’t need very many.
4. The joy of specs
Speculation, that is.
I love speculative stats. Particularly those with spuriously accurate numbers that come from official institutions. They sound so credible.
PR people, lazy journalists and IPO prospectuses love them too.
Here’s a great one:
“Actively disengaged employees cost the United States $483 billion to $605 billion each year in lost productivity.”
Wow. That must be a huge market opportunity for Employee Experience platform vendors (page 105).
It’s amazing there’s any productivity left in advanced economies – between the disengaged employees, the Hay Fever, the hangovers and the sick days called in to binge watch Netflix.
5. Research agencies are lame at CX
Ouch.
Under ‘alternative approaches’, research agencies and consultancies get trashed:
“Market research and consulting firms. These approaches are not scalable, lack comprehensiveness, are conducted at a point in time and cannot capture data or provide insights in live time. They also do not allow enterprises to easily take action across the organization on the most critical experience issues.” (Page 107)
To be fair, this is pretty true. If you’re an agency reliant on survey-based CSAT programmes, you might want to think about a new offer.
There’s good money in professional services on CX platforms.
6. CX is as big as the global research and analytics market
Medallia estimates its total addressable market at $68bn.
There are some big assumptions in this number.
It’s arrived at by counting up all the large enterprises in the world and calculating their theoretical total spend – if they were to spend as much as Medallia’s biggest customers today (page 107).
It’s one way to guesstimate, I suppose.
For comparison, ESOMAR reckons the global research & analytics market is worth $76bn.
7. CX platforms are helping to democratise data and insight
More than half of Medallia’s enterprise customers have over 1,000 employees using the platform (p115).
That’s actually pretty cool: it’s a huge value driver, evidence of platform stickiness – and proof that you really can get insight-to-action tools used right across the organisation.
It bodes well for research and analytics teams.
They will increasingly need to push their data out – customer profiling, segmentation, brand tracking results, social monitoring – rather than publish reports or presentations.
Right now, it’s like,“yeah I know I’ve got a dashboard but can you just email me the deck?”
As platforms like Medallia get embedded, hopefully things will get better.
8. What the hell is PX?
Well if you were reading closely earlier, it’s Product Experience: product feedback management, innovation and concept testing, product journey analytics, product feedback analytics (page 115).
This is intriguing because it steps on so many other people’s turf. Product feedback management (tools like Uservoice), feedback analytics tools (like Usabilla and Mopinion) and journey analytics (like Pointillist and Clickfox) are all categories in their own right on this site.
Innovation & concept testing is the bread and butter of hundreds of market research agencies and research automation platforms.
So is a CX platform credible for all this?
For sure. All those integrations, all those users, access to all that customer data: it can be easily be tweaked to generate product insights.
This is much more than a hedge for CX; it’s about the real upside you get from incumbency with such a pervasive insight platform.
9. The Medallia feedback fridge
Please save us from this one (page 118).
Embedded feedback captured through IoT devices. Yes, that means smart fridges and who knows what else.
Surely there’s a limit to all this. Smiley push buttons at airport security. Touchscreen ratings in toilets. We’re all going to get feedbacked-out at some point. Maybe that’s the real limiter on the CX growth opportunity.
That and rogue agents.
The toilet cleaners in Singapore Changi airport press the green face repeatedly throughout their shift. Sorry to grass you up guys. I’m sure you’re not alone. I’d do the same thing in your shoes.
So I won’t be welcoming the Medallia API on my new talking Samsung washing machine.
Enough already.
10. Miaow
The casual dismissal of competitors in these filings is always entertaining.
In this one, Qualtrics gets dissed as a “survey tool” (page 123).
Yeah, the same Qualtrics that convinced SAP to cough up $8bn.
Fair enough.
Good luck getting a 20x valuation in your IPO, guys.
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