Indonesia: Exploring the Opportunity

In the last 5 years the market research industry in Indonesia has experienced significant growth. New, home grown agencies have been established in the region whilst multinational research companies continue to flock Singapore where the competition and market have intensified.

For existing players and the new local players Indonesia offers a fantastic opportunity with everyone eager capitalize on Indonesia’s expanding economy.

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By 2015 the CAGR for GDP growth in Indonesia is expected to increase by 15%, this would result in the GDP of Indonesia to reaching 1.58 trillion. The market research industry in Indonesia ranks 28th in the world when compared to 16th in the world for GDP. The market research CAGR is 18%. With the higher CAGR in the market research industry it would be another 5-10 years before GDP rank and market research industry rank are at parity.

Back in 2008, there were approx 25 market research companies operating across Indonesia. These companies varied from large-scale multinational to small-scale local research agencies. Among this number, around 12 were multinational research companies.

Today, there are approx 40 existing market research companies in Indonesia, comprising large-scale, small-scale, local and multinational companies. The increase in this number shows that market research industry in Indonesia is recognized as both promising and competitive, in line with the growth of other industries. In the next five years, the number of market research agencies in Indonesia will  expand to meet the escalating demand.

This growth of market research industry can be attributed at a  national level to increasing awareness of the benefits of  conducting surveys on  products or brands prior to launch.

Many agencies have also been engaged in conducting political surveys. This has also created a very promising market for national political survey agencies. Furthermore, Indonesia’s presidential election next year will increase the demand for surveys on public perception of both the parties and the candidates.

The development of market research industry and market share in Indonesia is also accompanied by the introduction of new research methods to the market.

Market research agencies now use technologies such as eye tracking, brain mapping and face recognition as part of innovation in research method. As a result, if previously the research findings could be provided in 6 weeks, now the research findings as well as the recommendation can be provided within several days.

In Indonesia, Kadence has introduced K-WEB (Kadence Window into Eyes and Brain), a research solution which tests consumer’s perceptions and feelings towards advertising creative in realtime. To date, K-WEB research method has been applied to several ads and many clients have started using this method. The advantage of using this method is not only cost-effective but also time-efficient. That is what today’s market needs: understanding of client’s needs, precision, and delivery speed.

Challenge

Some companies now consider market research as an essential service to their business.. However, some are yet to consider market research as priority, for they believe that they have well-enough understanding on the market.

This may pose a challenge for market research companies in Indonesia: to ensure that market research is able to mitigate the risks as well as help allocate budget efficiently to reach the client’s target.

With many new MNC companies coming into Indonesia the competition within several sectors has intensified, however local consumption and demand have increased and many a time companies are left with situations where they are not able to supply enough. This leads to complacency in the marketing teams and they tend to use research as a tick box rather than a competitive advantage. Forward looking companies however continue to use research smartly and effectively.

There are also many companies who use panels for Indonesia wrongly interpreting statistics such as highest Facebook users and highest twitter usage as measures for internet penetration. It shows that they do not understand that internet access is predominantly younger and via mobile phones. Using so called nationally representative panels in Indonesia has resulted in lesser projects being commissioned from abroad. It would be another 5 years before Indonesia would have panels which correctly represent the population and till that time face to face remains the best method to gather data from respondents.

Like with all other countries, we will find that there is a shortage of local talent and many companies rely on expatriates to fill in key gaps. The low awareness of the market research industry, rapid loss of talent who take the free-lance route are other factors affecting the industry.

Drivers of agency selection in Indonesia

Drivers of agency selection in Indonesia

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