S&P Links CX to Equity and Credit Performance

Companies that use technology as a way of focusing on and adapting to their customers' needs have a clear advantage from the standpoint of investor appetite, said S&P Global Ratings and 451 Research, in a recent study.

The study evaluated the credit ratings, market capitalization, and earnings transcripts of nearly 10,000 global issuers to determine trends and identify digital customer experience leaders, learners, and digitally delayed companies. It found that of all companies using digital customer experience (CX) terms in their earnings transcripts, CX leaders and CX learners have higher equity returns than their industry peers.

In particular, the top 22 percent of digital CX leaders have 2.7 times higher average equity returns than their digitally delayed peers. The majority frequently and consistently use CX and service terms in earnings transcripts, in addition to digital transformation and machine learning terms.

Digital CX leaders also generally see lower observed default rates during times when macroeconomic shocks or periods of major market dislocation are absent. While the global portfolio as a whole narrowly beats CX leaders on the share of investment-grade credit ratings (51 percent versus 49 percent), when including the 'BB' category, S&P found three-quarters of CX leaders are rated 'BB' or higher, compared with 62 percent of their global peers.

"Since CX is a catalyst in many digital transformation projects, it is important to understand where businesses are making investments in new technologies to deliver differentiated and consistent CX," S&P said in a statement. "In technology terms, executing on business transformation demands new investments in more modern software and related technologies. This requires a well-planned approach to business and IT innovation and investing in new tactics to remain relevant in the eyes of customers."