Newly Public Customer Feedback Firm Medallia Must Overcome Survey Fatigue

Medallia, a company that tracks customer feedback and employee sentiment, raised $326 million in its debut as a public company on Friday. New shares in Medallia soared, giving the San Francisco-based company a $6.3 billion valuation after its first day of trading.

The enterprise software company has roughly 550 clients, including Marriott, Hilton, and five other of the largest hotel groups in the U.S., plus brands such as Airbnb and Delta.

But the path to success for Medallia, which has no profits, will be overcoming the fatigue by customers from the deluge of surveys that they are asked to answer at seemingly every turn.

Medallia is one of several customer surveying and employee feedback companies to catch attention recently. Software giant SAP last November acquired its rival Qualtrics, based in Provo, Utah, for $8 billion. Qualtrics customers include four of the five largest global airlines and companies such as American Express.

Survey Monkey, another vendor, raised $180 million last September in its stock market debut.

These and other vendors typically got their start by collecting surveys after trips. But they now try to help hotels, airlines, and other companies check in on customer experience while those customers are actually on their journeys, such as while they’re checking in at a hotel. (They also sell services to non-travel sectors.)

Skeptical Sentiment

Medallia claimed in its financial filings for its initial public offering that so-called experience management technology has a potential market of about $68 billion worldwide.

But to hit that number, Medallia would need corporations to retool their tech stacks to put customer and employee feedback centrally into their systems. Digital transformations like that are tough. Speaking of “digital transformations” in general, a McKinsey report found that fewer than 30 percent succeed on average.

Another way of looking at the $68 billion experience management estimate is that much has still to be done. We’re now many years into the “experience management” tech era, but the vast majority of travel companies still don’t use these vendors beyond basic post-trip surveying.

TrustYou, a traveler feedback tech company based in Germany, has moved from relying on clients like Accor Hotels and Google to looking for growth in new segments, such as with tourism boards and destination management organizations looking to better understand why visitors do or don’t come to their location, said Michael Menzel, senior vice president of strategic partnerships. TrustYou collects reviews on behalf of 700,000 properties and is owned by Recruit, which also owns Japanese online travel agency giant Jalan.

Many of the voice-of-the-customer companies must integrate with larger suites of customer relationship management software run by other companies.

So Medallia and its less-capitalized competitors may become acquisition targets for companies such as Adobe, Microsoft, Oracle, and Salesforce, which are each building customer-based enterprise software suites, perhaps in conjunction with a customer relationship management service, such as Cendyn in the hotel segment, or a customer data platform, such as Amperity or Blueshift.

TripAdvisor might theoretically also be interested in acquiring technology to help its travel partners analyze and respond to customer reviews more effectively, though the online travel giant hasn’t yet built much in such digital services.

Acquisitions Necessary

Medallia isn’t profitable. It posted an $82.2 million loss on revenue of $313.6 million for the year ending Jan. 31, 2019. That was a narrower loss compared with the prior year when it lost 70.4 million on revenue of $261.2 million.

A big challenge Medallia may face in getting to profitability may be coping with “survey fatigue,” where many consumers stop answering queries because too many companies have asked them their opinions. The company believes new tech and approaches can circumvent that issue.

“Voice is a huge thing for us,” CEO Leslie Stretch said. “We will just speak our feedback.”

Medallia also aims to interpret customer sentiment indirectly through other signals, such as a customer’s tone of voice when talking to a call center or choice of words when communicating with a hotel front desk via instant message.

“We plan to make technical tuck-in acquisitions that will help us enhance our platform, like in voice and predictive analytics,” Stretch said.

Already Medallia reported in its financial filings that in May it acquired Strikedeck, a customer success software service, for $11 million in cash. In June it acquired Cooladata, a company that claims to predict customer sentiment trends, for $7.6 million.

Some other tech vendors competing with somewhat overlapping services include GuestRevu, TrustYou, Shiji-owned ReviewPro, Revinate, TrustPilot, UserTesting, and Local Measure.

Hotels Invest

Medallia has the biggest market share among hotel groups in the U.S. for customer sentiment software, with brands like Hilton, Marriott, and Best Western participating.

Some hotel companies use it to improve their online reputation as a means of boosting bookings.

A case in point: Best Western plugged social reviews from its hotel website and other sites like TripAdvisor into Medallia’s systems. The hotel group said the move led to increases in hotel engagement with social reviews, resulting in a 7.5 percent increase in average social media scores.

Wyndham Hotels & Resorts, as another example, removed about 80,000 rooms in the U.S. after finding they didn’t meet the company’s brand standards according to customer feedback pulled and analyzed by Medallia.

Four Seasons used Medallia to create dashboard reports for general managers and regional managers to see how their properties are scoring in guest satisfaction compared across the company. It was part of an effort at focusing on customer feedback that led to a seven-point gain in the brand’s net promoter score, a widely used measure of customer sentiment.