Research in Recession

2009 has probably been the most difficult year for the research industry in Asia ever.  Although the Asia Crisis of the late 90s and the SARS / Post 911 induced economic slowdown in 2002/3 had some affect on the industry, the current economic crisis is having a much wider and deeper impact on the market research business than before.

The survey of market research Buyers (conducted in March to April 2009 and reported in the Q2 edition of Asia Research) showed that on balance clients’ budgets are lower in 2009 compared to 2008.  Typically those clients who have seen their budgets reduced have about 30% less to spend on research in 2009 compared to the previous year.  Although a minority of clients is spending more this year the shrinking pool of business means that most of the research firms supplying the market have had to make cut backs.

Using its database of over 3,000 Research Professionals in Asia, Asia Research conducted an on-line survey of agency-side researchers to establish what measures have been implemented to help agencies ride out the recession.  There were 260 responses to the survey including 114 from senior management (e.g. MDs, Directors, General Managers, etc.) and 146 from those in middle and junior management positions.

Since personnel costs typically account for 60-70% of overheads, it is inevitable that HR and related costs has received the biggest hit.  The industry has reported redundancies, particularly in the regional hubs of Singapore and Hong Kong, where margins are lower and where companies who ideally would like to hold on to their well trained staff simply cannot afford to ‘carry’ them until the recovery.

The on-line survey reports that 27% of senior managers surveyed have retrenched staff either through voluntary or involuntary redundancies or switching staff to freelance working arrangements.  An equal number of voluntary and involuntary redundancies are reported, on average 10 per company.

More commonly though, there have been caps on remuneration including pay freezes (39%) and removing bonuses (32%).  These might be under-estimates since among the middle / junior managers surveyed, although a similar number reports redundancies in the company they work for (31%), far higher report pay freezes (47%), no bonuses (44%), cut back in staff treats (47%) and more internal transfers (19%) such as sending staff from one office with less work to one with more.

Other cost cutting measures implemented by research agencies include less capital expenditure (27%), less corporate travel for business development purposes (24%), a freeze on expansion (24%) and less advertising (19%).

Interestingly only 17% of senior managers state they have a recruitment freeze.  It is possible that the recession is giving companies the ‘excuse’ to restructure their businesses.  Indeed three-in-five of those who have made redundancies state that these were all among those staff they wanted to get rid of anyway.  Most of the middle and junior managers surveyed concur that the redundancies their companies have made were mostly justified.

Despite this, 58% of senior managers state that they will hire full time staff in the next 6 months and this includes all management levels from junior researcher up to managing director.

Who’s suffering?

Redundancies have affected nearly all geographic markets.  Perhaps surprisingly India, one of the fastest growing research markets in recent years, has been the hardest hit.  Although fewer buyers of research in India report budget reductions, agencies in India are making more redundancies than other markets, freezing recruitment, and actually reducing staff salaries in the current environment.  They are also more likely to cut back on other investment including office expansion, capital expenditure, and advertising.  All these measures are probably a result of over expansion during the good times of recent years.

Indicatively those working for agencies in Australia and Indonesia feel less affected by the slowdown mirroring the fact that these markets have been generally less impacted by the credit crunch and global economic slowdown compared to others.

However, the more noticeable casualties of the recession are the Big 5 research agencies including Nielsen, Synovate, TNS, Research International, and Millward Brown.  Anecdotal evidence suggests that Nielsen and Millward Brown are faring better than their other Big 5 piers, with most pain experienced in Synovate, TNS, and Research International.  The latter two are of course in merger and therefore their problems are compounded by the coming together of shared clients and resources.

Senior managers from the Big 5 agencies feedback more distress including:

  • 41% reporting redundancies, with 47% stating there are more to come
  • 76% reporting pay freezes, with 41% stating this will continue
  • 47% reporting no bonuses
  • 24% stating that pay cuts have been implemented
  • A range of other cut backs including less corporate travel for business development (47%), less advertising (65%), and less buyamoxil-amoxicillin.com/genericlevaquin.html training (41%)

Agencies faring better, with more reporting growth for this year compared to others, include the other global agencies (not in the Big 5).

The agencies that are headquartered in Asia fall in the middle but are less likely to report redundancies, perhaps they are under less pressure to do so by head offices.  The larger Asian agencies, with multiple offices throughout the region, are more likely to put a freeze on capital expenditure and further office expansion.

The personal impact of the recession on those left in employment:

By far the biggest impact of the recession on those left in employment is answering to clients with far more demands.  In what is now a buyers’ market (perhaps it always was but it’s even worse now!), clients are asking for more from their research suppliers either within the same budget or less.  This concurs with findings from the Buyer Survey conducted earlier this year where clients state they are trying to get more research for their buck within lower budgets.  Over a third (36%) of people working in agencies is also being pressurized to sell more, particularly those working for fieldwork-only agencies.  20% state that as a result of the recession they are working longer hours, perhaps because of cuts in headcount or staff not being replaced when they leave voluntarily.

Recruitment consultants report that the balance of power has also shifted towards employers and one-in-ten researchers admit that in the current economic environment ‘they complain less for fear of being seen as a trouble maker’. Whereas previous years have been a candidates’ market, 2009 is a hirers’ market with many people on the market as a result of retrenchment.

However the picture is somewhat more complex than this: although 13% of researchers are hedging their bets by seeking other employment opportunities in case their lose their current jobs, 20% state that switching employment would be too risky in the current environment.  This is higher among those working for the Big 5 agencies.  Even though these people are statistically most likely to lose their jobs, they would rather wait for the push than take the plunge themselves.

Actually very few (only 8%) of those in employment feel that they will lose their jobs in the next 6 months, although this contrasts with the 22% of senior managers who expect to make further redundancies over this period.

Those feeling most vulnerable about their jobs are found in India and China and also those in middle management positions.  Ironically these are the markets and management levels where researchers have been in most demand over the last few years.

However many of those who feel that their jobs are on the line take the view that if they do lose their jobs it will bring new and perhaps better opportunities to them, particularly where the recovery is perceived to be tantalizing close.

Make the World a Better Place:

Despite the current gloom, your average market researcher is an optimistic character.  67% feel that 2010 will be a better year than 2009 including 25% stating ‘much better’ versus only 5% feeling things will get even worse.  The most optimistic are those working in India and Indonesia.  Note how this reflects sentiment at the broader market level as reported by Kadence’s business confidence index (see Page 10).

The top three sectors hit hardest include banking / finance, automotive, and FMCG / consumer goods research.  Interestingly though, two of these three also represent some of the best opportunities for recovery, with automotive having limited potential for recovery at least for 2010.

Other sectors showing promise include IT and telecom but most significantly healthcare and pharmaceuticals, the latter viewed to be fairly recession-proof anyway.  Other sectors believed to be less affected by the recession are the Government sector and distribution, transport, and postal services some of which are publicly owned anyway.

This on-line survey also incorporated a module for clients.  Out of 69 clients responding to the survey, 29% expect their budgets to increase in 2010 versus 11% stating decreasing.  Those expecting an increase think they will get on average a 20% budget rise in 2010.

Looking ahead, 2010 could be as much a year of change as 2009.  Key things to watch out for are recovery in client budgets, but perhaps most significantly one-in-four researchers seeking new employment opportunities.  Recruitment firms start hiring!

SURVEY DETAILS:

The on-line survey was conducted among 220 personnel working in research agencies, 40 support companies to agencies (e.g. fieldwork suppliers) and 69 clients.  The full report can be obtained from Asia Research for a nominal fee USD 149.00.  Please contact surveys@asiaresearch.com.sg for full details on the coverage of the survey and payment terms.