The 2010 Research Buyer Survey

The 2010 Buyer Survey, the third consecutive annual survey of corporations who engage external market research firms, revealed a research business in Asia that is maturing.  Some of the ‘traditional selling points’ of agencies such as product innovation ranks relatively low in choosing an agency, with value add specialism now much higher up in the consideration set.

Clearly in the more specialized areas such as industrial and healthcare research, clients are looking for teams within agencies with past experience in the product line.  And today exclusivity, i.e. an agencies’ commitment not to work for a competitor client in the same product line, is no longer so important and might even be viewed as a disadvantage.

Even in mass market categories such as food and beverage, clients are seeking product specialists within their agencies who are in touch with local market developments in the industry but also with the ability to draw on best practice from overseas markets.

The value and meaning of ‘insight’, a hotly debated subject in the industry in Asia, was put to clients in this survey.  Many clients interpreted ‘insight’ as the ability of the agency to apply the research to the client’s business, integrate the competitive landscape into the findings, and even macro-economic factors such as the buying power of consumers.   Clients talked about wanting their research agency to be able to identify the gaps in the market from the research, and then advise the client in the appropriate strategy for their business.

Based on client feedback from this survey, the relationship that clients want with their agencies sounded like that of a relationship with a management consultant rather than with a market research firm.  This and the fact that (claimed) importance of price ranked relatively low in selecting an agency pointed to a new era in the research business of ‘paid for value-add’.  Although this might be music to the industry’s ears, pricing pressure on agencies is likely to remain.  Several factors are driving this – firstly the industry will see increased competition particularly in Singapore (a market that continues to see new agencies starting up or entering the market each year). But secondly and most ominously it is the increasing influence of procurement departments in contractual negotiations with research agencies.

Of the 213 research buyers interviewed in the survey, around a one-in-four regularly involve their procurement department in contractual negotiations with agencies, and there is expected to be a 10-20% increase in the use of procurement in the next two years, especially with healthcare, financial services, and ICT clients.

The supply market:

Between 80-90% of clients use more than one agency, and similar to all past Asia Research surveys clients are generally open to considering new agencies.  Typically clients maintain a mix of the large multi-national agencies in their portfolio, e.g. Nielsen, TNS, Synovate, and Millward Brown, and smaller local agencies.  Typically clients will allocate regional quantitative or tracking work to the large agencies and the more specialized ad hoc work, including qualitative, to the smaller agencies.

Each market shows specific characteristics in their use of external vendors.  Singapore corporations are engaging a wider portfolio of research suppliers, particularly the independent firms reflecting the huge range and some will argue the over-supply of agencies in this market.  In addition, a third of clients in Singapore now deal directly with on-line panel companies, a business that panel companies have traditionally avoided to prevent conflicts of interest with their core client base of main stream agencies.

In India, the market shows some polarization, with somewhat more clients using management consultants for research compared to other emerging markets, but with more corporations also engaging freelance consultants probably for cost considerations.  In both Malaysia and Indonesia there is yet very little use of on-line panel companies.

Generally the mix of positive to negative comments from clients about the MNC and independent agencies is even, but the MNC firms are frequently criticized for their high staff turnover. The independent firms generally have the advantage of specialism, senior management involvement in projects, and therefore better insight capability.  Evidently some independent agencies are charging more for this value add highlighted by several clients mentioning that the independent agencies are now becoming more expensive.

For many clients they viewed the smallness of an independent agency to be one of their ‘disadvantages’, something that is often viewed as a positive in other parts of the world.

Traditionally MNC firms were seen as expensive and less capable at qualitative research, but in this year’s Asia Research survey some of the larger agencies have been credited for their qualitative capability and competitive pricing among some.

Outlook:

Most clients in the Asia Research survey are also optimistic about their research budgets for next year with 40% expecting to see their budgets increase in 2011 compared to just 6% stating a decrease (the remainder stating no change or did not know).

The survey highlighted a maturing research business, but no doubt the industry will continue to see change going forward.  Notably a third of clients in Singapore are now dealing directly with on-line panel companies.  This is likely to grow and extend to other markets in Asia.  Clients might choose to cut out the traditional agency on more straight forward projects, e.g. tracking work, leaving the more strategic studies to the agencies that are really capable of delivering the insight.

The full data set on this survey is available on a commercial basis from Asia Research.  For details please email: surveys@asiaresearch.com.sg