Qualtrics, which provides voice of the customer (VoC) and customer experience management software, announced its plans for an intended $14 billion IPO at the end of last year. This may be a “non-event” in the eyes of some because SAP, which acquired Qualtrics in 2018, announced Qualtric’s IPO intentions five months earlier. Qualtrics, meanwhile, has been operating as an independent entity under SAP’s wing since the $8 billion acquisition.
However, the $14 billion IPO aspiration is another investment that validates the VoC and CX market as more than a third-party application that plugs surveys into large customer experience management software suites. Medallia, the number 1 competitor for Qualtrics, is already public and worth close to $6B.
“Maybe it's the $14 billion non-event. Maybe that's the headline,” said Jim Davies, VoC analyst for Gartner. “I guess what it does is reinforce this is an actual software market. It's not just an add-on to something else. It's a viable entity in its own right. Years and years ago, it was just surveys … and it wasn't really a strategic initiative or strategic priority for the organization. Now I think this technology is viewed as something that is strategic.”
What CX Leaders Want
The CX software offered by Qualtrics features some of what digital customer experience leaders want in terms of investments. More than half of them told CMSWire in its State of Digital Customer Experience 2021 report they see analytics, insights and dashboarding as an investment priority.
Trailing behind are:
- Customer journey analysis & optimization: 37%
- Digital experience/Web CMS platforms: 36%
- Personas, targeting and/or personalization: 34%
- Social listening and engagement: 29%
- Marketing automation and orchestration: 27%
- Mobile apps or mobile touch points: 25%
- Skills and training: 24%
- Voice of the Customer programs: 24%
Qualtrics, with 3,370 employees as of September 2020, certainly has a big piece of the CX software market pie: more than 12,000 customers and 2019 revenue of $591.2 million. But it’s a big market with a total worth of $17.5 billion in six years, according to an estimate in late 2020 by Verified Market Research.
“I think that when it's deployed properly, that's when it really starts providing that business value,” Davies said of Qualtrics. “You're paying the millions of dollars to deploy it, but it could be making you millions of dollars in terms of the value it's providing so there is definitely merit from that perspective.”
Qualtrics had the highest percentage of deals over $1 million out of the vendors Gartner analyzed in its Magic Quadrant for Voice of the Customer published in November of 2020. Medallia, meanwhile, had the highest average revenue per customer. The number 1 reason for brands not investing in Qualtrics and Medallia according to Gartner’s research: cost.
Related Article: What Medallia's IPO Means for the CX Tech Industry
Different Tracks of CX Feedback
Of course, there are multiple money entry points into software that don't come in the six-figures. Price tag and company financials aside, though, this is a technology space like any other that’s made inroads and has its challenges.
Andy MacMillan, former CEO of Act-On Software and current CEO of Qualtrics partner UserTesting, said this is all about customer feedback and insights and taking it to the next level with actions. He breaks down these capabilities into a few buckets:
- Customer data collected from areas likes websites or mobile apps. “There’s a whole ecosystem of companies who will help you track clicks and see what people do,” MacMillan said. “We think of that as like a big data strategy for seeing what's happening in our platforms, and that's great.”
- Companies like Qualtrics that broadly get feedback from a large base of users and understand sentiment, feeling and where things are going with customers.
- Software that gets even deeper into more of an individual customer basis (like his own team's).
“I think what Qualtrics is doing a super interesting,” MacMillan said. “They’re thinking a lot about how to give people more insight out of the data that they're collecting to be more strategic about how they collect that data. I think they have a very smart roadmap.”
Why $14 Billion for Survey Software?
The providers will come screaming with calls of “We’re not just survey software!” for sure. Rightfully so. But surveys is still a part of this landscape, very much.
So why $14B? Because companies have realized they’re competing more than ever on experience to survive, MacMillan said. The so-called “experience economy.” We’ve all seen the statistics about customers walking away from bad experiences and businesses that compete solely on customer experience. (BTW, do good products matter anymore? Story for another day).
The potential $14 billion Qualtrics IPO is being driven by a couple of underlying factors that “make a lot of sense,” according to MacMillan. In short, there’s a need to understand customers you never see, or talk to — and you can't do that without some piece of software.
“It's never been easier to build something at enterprise scale in any industry,” MacMillan said. “If I want to be a global retailer in my house I can. … So that means anybody can achieve global scale with really low marginal cost. So then you ask what are we all competing on? We're all competing on the experience.”
It can be a “terrifying realization” you compete entirely on customer experience with a group of people you don’t know, he added. So how do you start to get more signals? How do you get a more broad-based understanding and intuition around your customers? “And so I think that's why this whole market is just taking off because companies are realizing that gaining a customer is one download away and losing a customer is one download away,” MacMillan said. “And you don't see those customers anymore.”
Related Article: What Is Voice of the Customer and What Does it Mean for Customer Experience?
Desire To Prove Merit of CX Investment
What’s justifying the big investments from many of the more than 12,000 Qualtrics customers? And what do they want more of? They want CX analytics to be more prescriptive, for starters.
Further, one of the big buzzwords in this CX tech space is value-oriented. Companies need to be able to clearly demonstrate sizable investments in CX software, according to Gartner’s Davies.
“Using more analytics and being more prescriptive in those analytics is definitely a need, and that then links into the the bigger picture which is being value-oriented’,” Davies said. “That's the big buzzword in the market at the moment. So you're really saying, ‘If I'm going to spend a million dollars on Qualtrics, what do I get back for that?’ I know it makes sense to listen to the customers and understand them, but how can I justify to the CFO that the million dollars is worthwhile spending?'"
Do these prescriptive actions from CX software platforms lead to more efficient processes, better first-call resolution, better campaign click through rates, fewer product defects, etc. This effort represents “probably the biggest shift of thinking in the marketplace,” Davies said. “The vendors are all still finding their feet here because it's a bit of a new twist on the space. No vendor has really nailed it down. I mean it's still a bit of a learning curve for everybody because it becomes so big and so complex, and it's difficult to get right. I wouldn't say they're there yet. But it's the path they're on.”
Operationalizing: CX 'Holy Grail'
Companies also need able to operationalize their CX and VoC data across their enterprise to sometimes thousands of employees to inform customer experience strategy. And they’re demanding this from their CX providers.
Davies called the ability to operationalize CX and VoC the “holy grail.” “If you can operationalize VoC,” he added, “that's when you see the value. What we mean by that is getting the insight from all this data you're now collecting — all these direct, indirect, inferred feedback sources — but now distributing it to hundreds of thousands of employees, so they can use it in their day-to-day jobs."
Getting value and operationalizing from VoC speak to CMSWire research findings for the top challenges for CX professionals in digital customer experience: limited budget/resources (46%), siloed systems and/or fragmented customer data (37%), limited cross-department alignment/collaboration (34%), outdated/limited technology, operations or processes (29%) and lack of in-house expertise/skills (27%). And you’re going to need significant CX skills and competencies to make CX technology work, Davies noted.
Trying to get value and operationalizing any business process isn’t a new concept. But, as Davies noted, in VoC that’s always been in the hands of just a handful of people who generate glossy reports and speak about it amongst themselves.
“That's not operationalizing,” he said. “With operationalizing, you've got thousands of people who have a license to log in every day. … That's very different to what it was in the past where you still got the results and still got the dashboards and nice glossy reports, but it was just exposed to a handful of people within the company.”
Thinking About Experience in a Pandemic
The COVID-19 pandemic introduced a new wrinkle in the arena of customer experience management technology and brands ability to create experiences, according to Jason Grier, EVP and chief customer officer at Reputation.com.
Brands’ ability to clearly communicate and align with cleanliness and health procedures, like mask wearing, is critical, he noted. “Now — and for the foreseeable future — CX isn’t just about whether a brand responded to a review; CX is linked to personal safety,” Grier said.
Shaping and influencing the customer experience is a priority for brands now more than ever, he added, and the Qualtrics IPO is a testament to that. “Obviously, Qualtrics and Medallia are two anchors in the CX market, but it’s far from their ‘world,’” Grier said. “Rather, their success is simply further proof that great experience management is, and will continue to be, a competitive differentiator for brands.”