Who will be the Ikea of market research?

I had the pleasure of participating in a lively discussion on the impact and future of “DIY” (do-it-yourself) research a few weeks ago at the recent ESOMAR Congress in Athens, Greece.  In a 90-minute “discussion space” session I shared a few thoughts about the future of the market research industry.  The other half of the program was presented by Lucy Davison of marketing consultancy Keen as Mustard and Richard Thornton of CINT.  They shared the results of some research on DIY research that they conducted among consumers of market research (i.e. “clients”).  Bottom line, many clients are favorable to DIY for a number of reasons.

For my part, I am more interested in DIY as a symptom of deep and fundamental change in the market research industry.  When I began my career in MR (on the client side at first), most research companies were vertically integrated, owning their own data collection capabilities and developing their own CATI software, for example.  This made sense when the ability to coordinate and integrate the diverse activities required for a typical research project was a competitive strength.  Perhaps you remember the days when a strategic segmentation study might have three or four phases, take six to nine months to complete, and cost $500,000 ( in 1980 dollars!).  But vertically integrated industries tend to “de-integrate” over time.  Firms may spin off or outsource some of their capabilities, creating value chain specialists who are proficient at one link in the chain.  The emergence of WATS call-centers and off-the-shelf CATI software were early steps on the march towards de-integration for the MR industry.

Technological change (especially in the form of disruptive innovation) also provides opportunity for new entrants.  Sure, some of the face-to-face interviewing companies made the transition to telephone, and many telephone interviewing companies successfully converted from paper and pencil questionnaires to CATI, but each of these shifts provided a point of entry for new players.

The large, integrated firms have managed to hang on to a substantial share of industry profits, but there are three looming threats.  The first is (so-called) “commoditization”–the downward pressure on pricing.  While some supplier side researchers complain that clients are unwilling to pay for quality, this downward pressure is the result of basic competitive dynamics:  there are many competing firms, few barriers to entry, many substitutes (e.g., transactional datamining) and not that much difference in value propositions or business models across MR firms.

The second threat is do-it-yourself research.  At the moment, DIY appeals to the least demanding and most price sensitive customers.  DIY removes the access and affordability barriers, thereby democratizing survey research.  As Lucy and Richard’s research showed, customers like the low cost, speed and convenience of DIY, and I expect many will move up the learning curve quickly.  I hope so–many of the DIY surveys I’ve seen from even big companies have been pretty ghastly. 

The last threat to the traditional MR business model comes from the sheer deluge of data generate by both commercial and non-commercial online activity.  How much could Google tell any marketer about customer preferences based just on search data, for example?

At the end of the session in Athens I offered this analogy.  Imagine that you need a bedstead.  You could go to a furniture store and choose from a selection of attractive, well-constructed and expensive bedsteads.  Or you could go to the local home improvement store, purchase some plywood and paint or stain and with a few tools (which could be borrowed or renterd) and some minimal ability, construct a perfectly serviceable platform bed–at much lower cost.  This represents the difference between the full service integrated research firms at the top of the latter and what we’ve historically thought of as do-it-yourself market research.  The gap between the two has been sustained until now by a skill barrier and limited access to better, easier to use tools.  This is the gap that Ikea filled in the home furnishing market by creating a new business model based on attractive, customer-assembled furnishings. 

Unfortunately for the incumbent research firms, this kind of business model innovation does not often come from the current players in a market.  The incumbents have too much personal investment in the current business model.  Let’s face it–most of us are in market research because we like the high-touch, intellectual problem solving that’s involved.  It’s what we’ve trained to do.  Designing something like appealing flatpack furniture that customers take home and assemble themselves just does not fit our self-image.

The smarter, easier to use tools are here.  Who will be the first to package them into a new way to deliver market research?

Copyright 2010 by David G. Bakken.  All rights reserved.

 

What’s New in Market Research: Report from the Advanced Research Techniques Forum (Part 1)

The 20th occurrence of the Advanced Research Techniques Forum, an annual conference sponsored by the American Marketing Association, took place in San Francisco a couple of weeks ago (June 6-9).  For those of you not familiar with A/R/T, this conference brings academic researchers together with market research practitioners in a format that produces (nearly) equal representation of contributions from each of these two groups.  Half of the twenty presentation slots are reserved for “practitioner” papers (where the lead author is not an academic researcher) and half are held for papers from academics.  One of these academic slots is assigned to the winner of the annual Paul Green award for the best article published in Journal of Marketing Research in the previous calendar year.  More papers than in the past are collaborations between academics and practitioners, and choice of one or the other as lead author can impact the chances of getting on the program given the limited number of slots.

The program is assembled by a committee comprised of academics and practitioners (disclaimer–I’ve been on the committee a few times and was program chair for 2008).  In a typical year, the call for papers might yield around 70 submissions.   In addition to the presented papers, “poster” presentations are considered, and the program includes optional tutorials (extra cost) before and after the main conference sessions.

The A/R/T papers, especially those presented by academic researchers, can be dragged down by the weight of too much algebra.  Over the years, the “advanced” has more often referred to “models” than to “research techniques” in general, and this year was no exception.  Still, there were a few presentations that are noteworthy.

 

Is crowdsourcing the future of innovation?

A featured article by Elizabeth Sullivan in the February 28 issue of Marketing Newsreports on a trend among some companies to incorporate crowdsourcing into their innovation processes.  The basic idea behind “crowdsourcing-led innovation” is that a large and diverse pool of people is both more efficient and effective at solving problems or generating ideas than any single individual or a small group.

Crowdsourcing has its origins in open source software platforms that allow communities of programmers to develop applications, but the idea took on new meaning with “Web 2.0” and the growth of user-generated Internet content. The concept got another big boost from the publication of The Wisdom of Crowds by James Surowieki.  Surowieki surveyed a lot of research to make his argument that sometimes crowds do a better job of solving problems than even the most gifted individuals.  And crowdsourcing seems to have found its way into brand positioning.  Microsoft has been airing a series of ads–most prominently during the Olympics–in which “ordinary” PC users claim credit for Windows 7 because of suggestions they made to Microsoft.

Because innovation is both important to most firms’ success and hard to do, it’s not surprising that any new approach that might improve the process would get a lot of attention.  Whether crowdsourcing will work for your business most likely will depend on the way you approach both crowdsourcing and innovation.

 

Are market research agencies the “back room” to the back room?

An insightful new report from Boston Consulting Group reveals that “most companies have not yet unlocked the value of consumer insight.”  The report is based on a quantitative survey of more than 800 executives from 40 global companies with at least $1.5 billion in sales.  The survey was supplemented with around 200 qualitative interviews, and the participants included line managers as well as members of the consumer insight function in these companies.

The authors found that companies fall into one of four stages of consumer insight capability:

• traditional market research function
• business contribution team
• strategic insight organization
• strategic foresight organization.

The companies falling into the last two stages are getting the biggest return on their investments in consumer insight.  However, according to this report, only about 10% of the surveyed companies are in one of these two stages of insight capability.  In Stage 1 companies, the insight function is more or less an “order taker” relegated to “back room” status, and the focus is on tactical research.  Things are a little better in Stage 2 companies in that  sometimes projects are more strategic, but the insight function is still project-focused.

If the consumer insight function is relegated to back room status in the majority of companies, does that make research agencies a back room to the back room?

 

And the winner of Superbowl XLIV is…Google

The winner of the advertising Superbowl that took place on Sunday, February 7, that is.  This is not just my opinion.  Comments captured from the digital ether by Alterian SM2 give the Sunday night victory to Google’s “Parisian Love” spot that ran at the end of the third quarter (mashable.com has a summary of the results).  Alterian SM2 looked at three measures for each of the 44 advertisers who aired commercials during the 2010 Superbowl:  total mentions, reach, and sentiment.  Google was the leader in mentions by a wide margin (almost 7,000 mentions, compared to 2,100 for the next highest ad–the Tim Tebow ad from Focus on the Family–and an average of  just over 500 mentions for all advertisers).  Google also came out ahead on Alterian’s Social Engagement Index (SEI), which weights the conversations by the popularity of the source.  The SEI for Google’s spot was 1,703 (versus an average of 100 for all ads).  Finally, Alterian weighted the SEI by sentiment to create a second index.   Google came in second on this measure, behind Doritos (SSEI of 673 and 941, respectively, against an average SSEI of 100).  It’s probably worth noting that Doritos ran three different ads during the telecast, against Google’s one spot, and these results do not separate out specific commercials.

Of course, not everyone who has expressed an opinion about the commercials aired during Superbowl XLIV put Google’s ad at the top.  The spot was not, for example, among the “top 10” Superbowl commercials listed at Fanhouse.  But in it’s way, Google’s ad may be the best example of what advertising is supposed to do.  Google’s dominant position in online search (and the revenues that search advertising generates) is under attack from Microsoft’s Bing, and Microsoft has been running ads showing how easy it is to use Bing to do things like find a dimly lit restaurant (apparently a plus for hungry vamps, if we take a recent ad literally).

 

D-I-Y Market Research: Worse than no research at all?

I just completed an online survey at the invitation of a company I’ve purchased from in the past.  It was obvious that the survey was an example of what the market research industry calls “D-I-Y” research.  If the quality of the questionnaire had not given this away, there was the “Powered by [name of enterprise feedback software vendor]” at the bottom of the screen.  I was asked to look at two different print ads for one of the products this company sells and answer a few questions that bore some slight resemblance to the questions you might find in an ad test conducted by one of the MR firms that specialize in that type of work.

One can only assume that the results of this survey are meant to drive a decision of which ad to run (there may be other candidates that I didn’t see).  If that’s true, then I think this may be a case where D-I-Y will turn out to be worse than no research at all.  The acid test for any market research is whether or not the decisions made on the basis of that research are “better” than the decision that would have been made without the research.

 

What’s ahead for market research in 2010?

Looking back over the last year in market research offers an opportunity to consider just which transformations, new ideas, industry trends, and emerging techniques might shape MR over the next few years.  Here’s a list of eight topics I’ve been following, with thoughts on the potential impact each might have on MR over the next two or three years.