2015 Asia Research Stakeholder Survey – Fall in Optimism

In June 2015, Asia Research undertook its fourth annual industry stakeholder survey. Conducted online among both client- and agency-side market research professionals across Asia, 226 researchers gave their views on the health outlook of the MR industry in 2015.

Tracking the results since 2011, there has been a progressive fall in optimism in the market research (MR) industry in Asia, although overall, stakeholders still maintain a positive view of the industry. Most notable is how MDs and Directors within agencies are less optimistic about the future of the industry as in-sourcing, pressure on budgets, and general economic uncertainty are taking their toll. Most pessimistic are researchers working within one of the Big 4 global firms (Nielsen, Ipsos, TNS, and Millward Brown), but other international research firms remain more bullish.

Those working client-side are more optimistic than agencies, perhaps because of the increasing choices they have for obtaining consumer insight as supply and demand ratios become more favourable to buyers of research.

Despite this, 21% of agencies state that they are undertaking more research (by value) than a year ago (47% report an
increase in value compared to 26% reporting a decline).

The main source of MR business is from major multinational corporations (MNCs) – 85% of agencies obtain their business from MNCs, and 68% state this is their main source of business. The second most common source of MR is large local corporations (65% of agencies deriving business here), followed by mid-sized corporations at 38%. These figures are very similar to a year ago and show there are no major shifts in terms of who buys research.

But there has been a modest increase in agencies obtaining business from the public sector. This year, 26% of agencies are undertaking research with Government institutions, compared to 15% in 2014. In Singapore, the shift is more dramatic, rising from 20% in 2014 to 46% this year. Trade between research agencies (subcontracting) is still quite common (36%), and 20% of research agencies also derive business from management consultants and advertising agencies.

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The main opportunities for the industry are leveraging of technology (64% stating a “top 3 opportunity”), adding more value through greater insight and consulting (50%), developing new MR methodologies (43%), social media listening (31%), and growing consumerism in emerging markets (26%).

Opportunities will also exist for increased client spending in specific markets across Asia. The clients surveyed state that their top three markets for investment in research (outside of their home markets) will be China (23%), Indonesia (17%), Thailand (17%), Vietnam (17%), the Philippines (15%), and Malaysia (13%). It should be noted that most clients in the survey are located in SE Asia, so it is not surprising that SE Asian markets tend to get higher mentions, but clearly China still remains an important market for clients in SE Asia despite the recent turmoil on the China stock market and resultant uncertainties.

The main threats to the research business are more pressure on pricing (55%), in-sourcing of research (46%), MNCs scaling back on research (31%), poor-quality fieldwork (33%), lower respondent cooperation rates (29%), and general economic uncertainty (31%).

Another challenge facing agencies is the poor conversion rate of inquiries to projects. An average of three out of ten requests for proposals from clients are for projects that never get commissioned with any agency. This is mainly because the client fails to obtain funding for the project, or the decisions to undertake the project take so long that priorities within the client organisation change. Such indecisiveness does cause time wastage, and agencies need to chase even more inquiries in order to find those that actually do convert to real business.

Comparing client and agency perceptions

During the survey, clients were asked how they put agencies into the consideration set for projects and how they make the final selection. This was asked specifically in the context of ad-hoc research, which represents some of the most contested research business among the various agencies. In order to compare opinion against perception, agencies were also asked how they think clients make their selection of agencies in the final decision on projects.

In terms of being “in the consideration set” for a project, vendors are most likely to be asked to quote based on their track record of completing similar projects (85%), their reputation in the specific field of research (e.g. NPD or pricing) (80%), and their track record of good client servicing (67%). People within the agency also matter, with the project lead within the agency being important to 52% of clients and their team members at 36%.

At the final selection, price ranks in the top three of clients’ decisions (64%), but not necessarily the most important aspect. Other factors swinging the final decision are the agency’s track record on similar projects (58%), having an innovative approach, and the overall quality of the proposal in terms of presentation. The importance of the team lead in final decisions actually ranks lower, with more importance placed on the team members, possibly because clients know they will have far more contact with these team members during the project itself.

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Agencies generally have a good understanding of how clients make final decisions on proposals. Agencies recognise that price needs to be competitive (76% state this is in the top three considerations) and also recognise the importance of the agency’s track record on similar projects in winning the proposal, as well as the overall quality of the proposal submitted. However, they over-estimate the importance of the personal relationships with clients in winning the business but underestimate the importance of taking a more innovative approach.

Change ahead

Most stakeholders agree that the industry is changing – 38% feel that in five years’ time there will be “very different types of research supplier in the market”, and among these, 7% state that “the kinds of research departments and suppliers we see today will no longer be around”.

Additionally, 39% state that the departments and suppliers we see today will still be here, but that there will be “major changes in the products and services used by research organisations”.

In some markets (e.g. Singapore), there could be some structural changes as MNCs decentralise their research to the local markets, and a significant number of clients state that they now prefer to deal with agencies directly in market rather than with a regional co-ordinator. This in itself will put pressure on the Big 4 firms in “hub markets”, who have been accustomed to acting as co-ordinators of regional projects and “feeding” their local offices.

Singapore agencies will also find themselves having to do more public sector work to make up for the falls in the private sector by virtue of budget cuts or decentralisation of budgets to local markets. Public sector business can also be considered more “assured” (i.e. that the project will almost certainly go ahead even if the open tender process remains very cutthroat).

With 30% of proposals ending up in the bin (mainly due to lack of budget), it would be good for the industry if clients could actually secure their budgets before requesting full proposals from their agencies. In this way, greater efficiencies could be achieved for the whole industry, allowing us to spend more time on doing research rather than on “thinking about doing research”.

First published in the Q3, 2015 edition of the Asia Research Magazine