Commodification of Market Research being Reversed
A few years ago Synovate created a new role within its global management team, a position entitled “Executive Director — Consumer Insights”. What was particularly interesting for many wasn’t the creation of that position, but who filled it. The executive hired had previously spent 17 years within the marketing practice of McKinsey & Company, the global business consultancy.
Some may believe that this is not so newsworthy, as market researchers are business advisors themselves, and are as valuable to managers as are the likes of McKinsey, Boston Consulting or Deloittes. But unfortunately, readers who agree with this sentiment remain in the minority.
In actuality, the margins commanded by business consultants are well in excess of those commanded by market researchers. This no doubt reflects these consultants’ own abilities to leverage their value as much as market researchers’ tendency to only see as far ahead as the next project – because generally speaking, market researchers have a poor record at capitalising on their strengths. Great researchers live and breathe the problems their clients face, and usually thoroughly enjoy what they do – and do it well. But such researchers are not always great businesspeople. Where researchers focus on finding solutions and insights to their clients’ specific challenges, business consultants focus on business management per se – so it’s only logical that they can easily extend their business management skills to their own companies.
Some readers may question whether market researchers should in fact model themselves on business consultancies. After all, for many managers the term “business consultant” is a term of abuse! Plus there are many clients and research briefs that simply do not require the kind of intimate business relationship demanded of those using consultants. But both doubters and believers alike need to understand that market researchers do not need to slavishly follow the consultancy approach, but that they have the luxury to pick and choose the elements that are best suited to them and their clients.
However, one of the most important areas of improvement that most market research companies should focus on is decommodifying their work. The advent of online research, particularly the do it yourself online questionnaires and mail systems that are now available, has been a two-edged sword. On one hand it has enabled many small companies or non-profit organisations to conduct basic customer surveys that would have been hitherto too expensive for them.
But on the other hand it has revealed that many research clients had only been using market research companies because of the supply chain that they owned (e.g. interviewing teams and data processors). By eliminating the need for such resources, DIY online customer surveys have revealed market research’s Achilles heel, and many market research companies have lost work as a result. To illustrate the poor level of business-savvy that many market researchers are guilty of, one only needs to see just how fast non-research companies were to get into the online space. For every bona fide research company acting to add value and shore its defences against commodification over the last decade, there have been dozens of IT companies flocking into the area. MessageMedia, the Wired Internet Group and The Survey Company are just a smattering of New Zealand businesses now offering survey services. None of them are members of the Market Research Society, and none are subject to the same quality standards that such membership demands. But they continue to be used, and often by some large well-known businesses who have clearly got the budget to do such work ‘properly’.
But doubters may ask, is research really that hard? Surely the success of these DIY surveys proves their good value, and underlines the poor value to be gained when specialist research companies inevitably charge more for what might appear on the surface to be the same thing? To such doubters I present the following examples of how what might seem simple enough can be far from the case.
Consider something as simple as asking people how important a variety of deliverables are to them, for example, various product or service features, brand attributes or KPIs. Here is where the uninformed may simply ask respondents to rate the importance of these variables. For the International Journal of Market Research (2006, Vol 6), Chrzan and Golovashkina reviewed six different ways of measuring respondents’ self-stated degrees of importance. The measures which simply required respondents to rate “how important” factors were to them were found to be least predictive. Whatever is gained by such ‘cheap and cheerful’ measures will inevitably be lost through misguided actions based on such poor research.
Another sample is from the classic area of customer satisfaction. Already well known to be quite a poor predictor of re-purchase, measures such as satisfaction, likelihood to recommend, or even the popular Net Promoter Score continue to be used as the basis of key business decisions when they have little robust proof behind them. Add to this the fact that the way people answer satisfaction questions at all can differ considerably by age, culture, gender and category experience and its clear that something as seemingly simple as customer satisfaction is all but simple. And why should it be simple, when one considers the massive complexity of the human mind?
But this over-simplification of research is exactly where researchers have floundered, and when businesspeople continue to move their research activities to inferior DIY options, researchers largely have themselves to blame. Synovate’s appointment of a McKinsey executive within only a couple of years of the company’s establishment shouldn’t have been the eye-opener it was. The fact that it was deemed unusual in itself says much of how the industry has to improve.