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Inside the Market Research Industry

A Look at How the Market Research Industry Works

By

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The New Face of Market Research

Courtesy Ben Lancaster, Photographer. Copyright October 30, 2005 Stock.xchng.

A Little Bit of History

In the 1960s, market research for businesses became a more respectable industry, relying on systematic data collection and quantification. The benefit to businesses was immediately apparent as those enterprises that used market research data to make decisions had a definitive competitive edge. The 1970s saw corporations folding market research and competitive research into different business functions, such as the marketing or human resources departments. Marketing directors may or may not have been in place; regardless, market researchers reported to the executives of the functional business units.

Market researchers have been seen as a responsive subset of business units, responding to demands for market research reports, projects, or ad hoc "look up" and "figure out" requests. Strategically, the contributions of market researchers were viewed as low or not especially relevant to substantive business decisions. Well into the 1990s, the perception of corporate executives was that market research was not especially accurate, was narrowly conceived, and had low applicability, or actionability.

The Advertising Research Foundation (ARF) and the Cambridge Group conducted a study to gain ideas about how to change the perceptions of others about market research and to redefine market research in order to increase its relevance to C-Suite executives and the heads of business units. Based on the research findings, market research responded with an increased focus on actionable insight, return on investment, and risk-reduction for business decisions and market actions. According to Philip Kotler, rising costs in business operations put pressure on Boards of Directors and CEOs to increase accountability and justification for business decisions and for business unit expenditures. Doubtless, closer scrutiny by stockholders has had an influence, as well.

Constant adjustments in business unit budgets and corporate organizational structures have fairly continually eroded market research efforts. Large internal corporate market research departments are rare. When economic pressure is particularly great, corporations often decide to disband their internal research departments or reduce them to skeleton-crew levels. These decisions are frequently based on the belief that market research is market research, and it is a service that can be purchased by third-party vendors with little loss in quality. The perception that externally provided research can actually be superior has also emerged. Essentially, this is the same mentality that prompts corporate executives to seek external consultants to solve problems or make decisions. Such decisions are rarely supported by facts, but they do facilitate the ability to pass blame to an external organization if results are not as anticipated.

Business consultants provide a range of services to enterprises, one component of which is secondary research. Consultants may also influence the design of research, selection of third-party researcher providers or proprietary models, or the interpretation of data. Some business consultant groups also conduct both qualitative and quantitative research. Business consultants have many critics, perhaps the most vocal of whom are the middle managers who are charged with utilizing the research outcomes provided by business consultants and touted by executives who made the commitment to purchase external consultation. A study by Accenture indicates that 33% of the managers surveyed reported that getting the right data was a lengthy process, and 57% said that the data that is provided is discontinuous, making the compilation of information a tough aspect of their job. Missing data is a substantive problem that impacts decision making, with 59% of the managers surveyed reporting that the missing data "exists elsewhere in the company but just cannot be found." According to 16% of the managers, valuable research data tends not to be stored in collaborative workspaces. Further, 42% of the managers confess to using the wrong data to make decisions as often as once per week.

An enduring issue with third-party market researcher providers is that the end-product becomes commoditized. Syndicated research is a good example of how this issue presents difficulties for strong and dependable decision making. Syndicated research presents trend information and is, by its nature, formulaic. In the syndicated research industry, certain specific measures are tracked over time and periodically the data is released in reports to all those corporations that have paid a fee to participate. The fee can be very substantial and very little if any customization is permitted in the syndicated research-primarily because its value is tracking and comparing data trends, which would be corrupted if subscribers were allowed to alter the format. Typically, corporations that subscribe to the syndicated research have complete access to data that pertains directly to their own firms, but access to the specific data about other firms (competitors) is restricted.

Increasingly, market research is moving out of the corporate offices, out of the board rooms, and onto mobile platforms. Media buyers, media sellers, and advertisers are naturally leading this change as the digital platforms belong to them. Other sectors are following suit, particularly since consumers do not appear to be resistant to participating in marketing, advertising, and market research on their mobile digital devices.

Internal market research departments are found in companies that are focused on retail distribution and wholesale distribution. Internal market research departments are common in media companies, producers of industrial goods and services, and producers of consumer goods and services. These market research departments may be one-person operations or they may consist of many market researchers and market analysts with areas of specialty.

  • Full-Service Research Firm
  • Custom Researchers
  • Proprietary Methodology Researchers
  • Specialist Research Firm
  • Methodology Specialists
  • Other Specialists
  • Syndicated Data Providers

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