FEATURE27 August 2009

The surprising face of ‘co-opertition’

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‘Co-opertition’ is a relatively recent addition to the business lexicon. But ‘cooperating to compete’ is a growing trend, as demonstrated by Nielsen and IRI’s agreement to share back-end consumer panel resources.


The two firms have a long and bitter history of rivalry, having previously fought a decade-long battle in the courts over claims – now settled and dismissed – that Nielsen had engaged in anti-competitive practices to exclude IRI from international markets.

Nielsen and IRI may have buried the hatchet over that issue – but you’d be mistaken to think that news of the joint venture meant rivalries between the two companies had mellowed. In an interview yesterday, IRI’s president of consumer insights Bob Tomei and Nielsen senior vice president for North American product leadership Rob Holland made clear that competition for client dollars would be as fierce as ever.

We never thought we’d see Nielsen and IRI working together. How did this joint venture come about?

Holland: This has been a conversation that has been going on since the beginning of the year at the highest levels of both companies and it’s an opportunity to explore ways to leverage some fixed back-end operations and costs to drive synergies in the industry, improve quality and focus in on innovation around our clients’ needs.

Tomei: To emphasise what Rob said: it is becoming increasingly more complicated and difficult to recruit and retain panellists ­– not only on our panels but in the online access panel world. But in particular, given the magnitude of the workload that our panels have of asking individuals to scan items they have bought on a daily or weekly basis, its becoming much more complex and challenging and costly. Clearly there is an opportunity between our two companies to share in that infrastructure. But we need to emphasise that it is only back-room infrastructure we are sharing – this is a production joint venture not a go-to-market joint venture. We hope that with the combination of both of our best thinking – leveraging the Nielsen household panel and, over time, leveraging some of IRI’s panel assets, analysts and technology, and bringing in best thinking from the industry in how we recruit and retain panellists – we can be more effective and efficient.

Holland: This is about reallocating resources in places that serve the industry, and allowing us to compete more openly and raise our innovation agenda more aggressively.

How much are you going to be saving from this?

Tomei: We’re not in a position to discuss that.

How will the merger of resources take place? Each company currently has their own team of people responsible for this side of things and from what we’re reading, the joint venture is basically going to be using Nielsen’s infrastructure, so does that mean that some jobs will go at IRI as a result of this?

Tomei: It’s not so much a merger – we are creating a separate legal entity called the National Consumer Panel Company and we are using as its foundation the Nielsen consumer panel and infrastructure: the group that does the panellist recruitment and retention and communication programmes. As I mentioned, over time we will attempt to recruit some of IRI’s panellists to the joint venture panel to help with replenishment activities and we will also supply the joint venture with 20,000 of our units that will be distributed over time into the joint venture panel. From that perspective both companies are contributing but we are using the foundation from the Nielsen panel as well as the infrastructure. Both companies will own 50% of the new company and the panellists, if you will – the data asset itself – and the infrastructure.

So in terms of staffing for both companies, what is going to have to change there?

Tomei: There are some people here at IRI that will be impacted. It’s really not that significant. We have traditionally outsourced a lot of our panellist functional areas. There will be some transition for IRI individuals but it will be a small number of individuals directly impacted. In addition, the joint venture has some openings and obviously the IRI personnel that are impacted will be given the opportunity to interview for those positions, and there will be other opportunities for those people here at IRI itself, so we really think it is a small number of people that ultimately will be affected.

Do you have a rough figure on how many?

Tomei: No we don’t… we can’t share that.

Holland: With regard to Nielsen, certain employees will be rebadged and will become joint venture employees as part of this move. We’re not in a position to disclose the specific number.

The only area where this joint venture deal does seem a little lop-sided is that Nielsen gets 100% access to the panellists, while IRI is limited to 86%. Can you explain that for us?

Tomei: From our perspective it has to do with the level of required investment. We are going to be in the position for the next four to six months of restating our databases and connecting the new panel into our output and analytical platforms that we deliver to clients. We felt we had to make a balanced approach as to how many new and incremental households we would be able to manage through this transition. We were on a path ourselves, a three-year strategic path, to get to 50,000 static households in our panel. We felt that was the right number based on what our assessment is of covering our clients business. This deal enables us to get to that number two years ahead of time in a more cost-effective manner. To us it was really cost/value balancing. I’m pretty confident that the companies will be at parity within two years and we’re very comfortable with that.

Rob, do you have anything to add on that?

Holland: Just to say that there’s no change whatsoever to the Nielsen’s Homescan panel. We’re just contributing the household sample pool to the joint venture and there will be absolutely no change to any of the services that Nielsen offers today.

Finally I’d like to get your thoughts on what the future is for this type of model. Will you look to replicate this around the world?

Tomei: IRI only operates a consumer panel in the United States.

Holland: From a Nielsen perspective we have no plans to do anything else in addition to this at this point, but we’re always open to opportunities to look for obvious synergies where they make sense so that we can provide more value and greater innovation to the market and redirect resources.

What about in Europe, where you compete quite heavily with GfK, certainly on the panel side of things. Are there any discussions there about sharing resources in a similar way?

Holland: Nothing. Nothing to speak of.

1 Comment

15 years ago

More Profits, No Quality Improvements Promised in ACN/IRI Joint Venture The recent announcement of Nielsen and IRI to create a joint venture to collect household panel data seems to have little or no benefit to their CPG clients. By eliminating the costs associated with collecting panel data from IRI Consumer Network panelists and by using only the Nielsen Homescan pool instead, both Nielsen and IRI will see immediate profits. But what of their clients that have been complaining about data quality and sample size for the more than twenty years in CPG research buyer surveys and in recent market research quality conferences? Apart from the fact that this venture is a windfall (for the IRI organization especially), no mention was made by Nielsen CEO, John Lewis or IRI CEO, John Freeland in their press releases of using this unique opportunity to make quality improvements. Four years of annual surveys sponsored by Inside Research and Prevision Corporation show clearly that the relative data quality of panel data from either supplier is awful. Of ten (10) suppliers of syndicated market research mentioned by buyers of research, the panel data quality of Nielsen Homescan was ranked 8th and that of IRI was ranked 10th. In a 5-point scale where 5 is “very good data quality”, the Nielsen panel product received a 3.8 score and IRI received a 3.4/5.0 in the quality survey just released by Prevision covering 2008 with over 60 respondents for each supplier. In this same survey the best average quality score among custom market research suppliers was 4.9/5.0! Clearly buyers of market research think that data quality is a problem for all syndicated research suppliers of scanner, panel and audience measurement data products. It is time for the same directors and vice presidents of market research that participate in these surveys to make it clear to their panel data supplier that some of the profits from this joint venture need to be spent now to address poor panel data quality. For years, CPG firms have argued for a larger sample size to allow the mass merchandiser channel (e.g. Wal-Mart), new/trace products and promotional activity to be represented properly in panel data reports. This could be accomplished by increasing the JV/Homescan static sample say 50% (e.g. from an estimated 40,000 households to 60,000). This incremental sample could easily come from the IRI Consumer Network panelists that will otherwise be dropped. If Nielsen and IRI ignore this perennial quality problem, then each CPG buyer of panel data should demand lower contract prices in the first quarter of 2010.

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