The 2009 Research Buyer Survey

In April 2009, Asia Research undertook its second annual survey of corporations who use external agencies for market research.  The main objectives of the survey were to assess the role of research in corporations’ planning during economic downturns, changing practices in procuring and using research, how clients shortlist their agencies, and brand awareness and perceptions of the leading agencies in the market.

The survey covered a range of industry sectors, primarily in South East and South Asian markets.  Undertaken by telephone, the survey was among individuals in corporations who commission research agencies and are involved in dealing with these agencies throughout the project cycle.  Participating companies had to have engaged at least one agency in the last year; in fact clients who took part in the survey commission on average 5 projects a year.  Response to the survey was positive, and this year 200 individual research buyers were surveyed across five Asian markets.  This edition of Asia Research reports on some of the key findings from this survey.

The Research Business in 2009:

Articles published on the research industry at the start of the economic slump in 2008 were positive about prospects for the research industry in 2009 (see Fusion Consulting Asia Research Q4, 2008).  The belief was that corporations might need more research to navigate their way through the recession and plan for the recovery.  This might have been wishful thinking on behalf of the industry – among the research buyers surveyed in 2009, only 17% report that their research budgets for 2009 had increased compared to 42% stating decreased (the remainder stating no change).  The drop in budget has affected all sectors including those considered to be more resilient to recession such as FMCG clients and the public sector.

Singapore has been hit harder with 51% of clients stating budget decreases compared to just 9% stating increases.

The reduction in budgets reflects the attitude of senior management within these corporations or at least the financial pressures they are under – when asked directly “During economic slowdowns, does your senior management see a need to invest more in market research or commission less to save cost?”, in response 14% of clients stated ‘invest more’ compared to 40% stating ‘commission less’ with the remainder stating that it really depended on situation.  For some companies, for example those not in the FMCG business, research is seen as ‘nice-to-have’ but not essential.  Common feedback among non-FMCG companies was that research, although important, can simply wait a year.  Some even commented that it is difficult to obtain an immediate Return on Investment through research and even if the research identified opportunities, the company might not be in a position to take advantage of them because cuts in other infrastructure have already been made.

The sector where cost saving is a greater priority is, perhaps not surprisingly, the automotive industry.  Conversely companies in the media sector were more inclined to state that greater investment in research might be needed for their industry.

Areas of research that are more important to clients in 2009 compared to the previous year include pricing and customer satisfaction research.  The ICT sector in particular is undertaking more pricing research as well as competitor intelligence, whereas the banking sector is undertaking more mystery shopping.  Although the need to keep customers is important and to price products and services appropriately, evidently some corporations also see opportunities to launch new products and services as consumer needs change and hence are commissioning more product development research.

But the bed rock of the industry is still brand image tracking.  This was the most common type of research being undertaken in both 2008 and 2009.  Generally the view from clients is that if there is pressure on research budgets, their corporations are likely to commission less ad-hoc research compared to trackers, although around two-in-five corporations state that both types of research would be cut equally.

As a result of lower budgets, corporations are trying to get a lot more research for their buck.  One of the more common practices is to undertake fewer projects but to obtain more information from the projects that are commissioned.  This is more evident in the automotive, financial services, and public sectors.

There are also changes to the methods used by clients to procure research.  For example 42% of corporations are seeking more tenders.  This is higher in the public sector where open tenders through on-line submission are a common practice.  However more commonly it’s down to negotiation – 76% of corporations state that they will negotiate more on price, and a third state that they might reduce the number of agencies they use in order to get preferential rates within a smaller portfolio of preferred suppliers.

Another of the more common practices is to save cost by undertaking more research in-house.  This is more likely among management consultancies that have traditionally outsourced the data crunching part of their projects but are now doing it themselves to save cost.

More use of syndicated research is another tactic to reduce costs, especially within the automotive sector.

The supply market:

Similar to other industries that move into a sharp recession, over-supply is a now problem in the research industry.  This is probably most acute in Singapore where over 40 different suppliers are used.  Singapore is one of the most important research hubs in the region and account for nearly half the interviews in this survey.  The market is lead by the big agencies including Nielsen, Synovate, TNS, and Research International. However compared to 2008, their market positions is not as dominant with many of the second tier supplier now very close behind including Kadence, Saffron Hill, IPSOS, Insight Asia, and this year new companies emerging in the higher ranking including Idealog, BDMI, and Harris Interactive.

It’s an open market:

One of the more significant findings from the survey was the openness of the market to new market research agencies.  About 70% of corporations are open to considering new suppliers including 28% stating that they are ‘very open’. Sectors more open to new suppliers are the automotive and public sector, although the latter is generally seeking suppliers on open tender basis anyway.

Although clients are open to considering new suppliers, whether business is actually placed with these new agencies will depend on the value proposition of the new agency under consideration.  The survey addressed in detail what clients looked for in a new supplier, the key takes out that clients look for in credentials presentations, and the factors that would sustain repeat business with a supplier going forward.  The results were interesting and diversified and illustrated how much the industry needs tailored services to meet clients’ requirements. Some of the highlights are as follows:

  • Quality of fieldwork is the most important stated factor in whether a new agency would be used or not.  This was particularly high among public sector clients and management consultants
  • Other important considerations include the product and sector knowledge of the agency and their commitment to having senior people working on projects
  • User-friendliness of reports outweighs the sophistication of the analytical techniques used by the agency, innovation, creativity, or dynamism of the credentials presentation
  • Automotive clients look more for innovation and sophistication of analytical techniques as well as industry sector knowledge
  • Automotive clients and management consultants place greater importance on competitive pricing, the latter also place greater importance on fieldwork quality but are willing to trade off on the agencies’ product knowledge, analytical techniques, and user friendly reports which is presumably where the consultants value add is supposed to come in

Overall the number of agencies used by corporations is about 3 on average and on balance there will be no net increase in the number of agencies used.  However, with such an open market there is likely to be quite a lot of hiring and firing of agencies within the client’s portfolio.  There is a slight tendency for clients to switch to smaller firms, with 16% stating that they might use them more in the future versus 10% stating less.  This finding is similar to 2008 and shows that the industry will continue to fragment.

There is also interest in engaging the services of very small independent consultants, e.g. those working from a small office or home office, where clients feel that they can be more value add simply through more involvement of senior staff in the research itself, and more industry sector specialism. It is viewed by some that over time such consultants can better build their knowledge of the client’s products and industry.  Many also see that using such consultants could give them significant cost saving, which under the current environment would be most welcome.

Conclusions:

Evidently the research business in 2009 is shrinking with Singapore being one of the hardest hit.  Indeed several firms report redundancies (a fuller dontevaluation of this will be obtained in the 2009 survey of agency Managing Directors to be reported in Asia Research Q3, 2009).

The pressure on budgets means that research buyers are becoming more skilled in their art of negotiation.  As has been seen in many business-to-business markets, these skills might be carried through into the recovery meaning that pressure on margins could impact research agencies for some time.  However unlike more developed markets, there is still a reliance on traditional research such as brand trackers.  Often very expensive, these trackers do not necessarily inform the client on how best to realign their service, product, or brand offering, something better answered through ad hoc research for which many clients are cutting.  It would be a great disappointment to the board of directors to invest in research in 2009 to be told that their market share and brand perception has not changed since 2008 and not to be given the detailed road map to increasing market share or brand value in 2010.

Interestingly clients (quite rightly) recognize that data collection quality is paramount in choosing a supplier.  But perhaps this is considered (wrongly) a hygiene factor.  Many of the larger agencies who have spent perhaps two decades developing their fieldwork QC systems are now throwing this all away by outsourcing their data collection to external fieldwork suppliers with very basic QC.  Pressure on pricing often means that agencies and management consultancies might buy from the bottom of the market.

The fragmentation of the industry has been recording for two successive years now.  Commercial pressures might result in consolidation and yes, we are seeing a major change in the industry in Asia with the merger of two of the largest players TNS and Research International.  This will mean one less supplier for clients to have to consider.

The prospects for 2010?

The depth and breadth of the global recession is fundamentally changing customer attitudes to branding and how they dontevaluate products and services.  Probably one of the biggest opportunities for clients is to have first mover advantage with consumers and business customers on the recovery.  With perhaps less pressure on budgets in 2010, and a need for corporations to totally rethink their product and corporate communications strategy, the prospects for the research industry in 2010 should be brighter, especially considering that some corporations are postponing some research from 2009 to 2010.

But nothing is definite!  In the 2008 Buyer Survey conducted in April 2008, 45% of clients stated that they expect their organizations to spend more on market research the following year.  How they were wrong… maybe stock market analysts should do more research!