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FEATURE13 November 2012

The UK market research industry reviewed

The UK economy remains in the doldrums, and the research industry with it. But while cost pressures and rising inflation keep growth to a minimum, Brian Tarran digs in to the annual UK industry league table and finds a business in a state of flux.

Stagnant. That might seem the right word to describe the UK market research industry. In compiling its annual league table, the Market Research Society estimates the industry size at £3.088bn – based on agencies’ 2011 turnover. That’s growth of 6.74% on 2010’s figures, but strip out inflation of 4.48% and
we are left with net real growth of just 2.26%.

“What you’re seeing is a structural change,” says Phil Rance, UK managing director at YouGov. “Traditional, labour-intensive offline research is getting harder to make money out of”

2012 probably won’t be much better. “I think market conditions are pretty similar this year to last year, and I’m expecting pretty similar conditions next year as well,” says Tom Simpson, co-founder of Simpson Carpenter. But to call the UK industry stagnant would be to overlook the changes that are going on within clients and agencies. Rising inflation mixed with falling budgets mask this to some extent – but digging into the league table data shows an industry in flux.

“What you’re seeing is a structural change,” says Phil Rance, UK managing director at YouGov. “Traditional, labour-intensive offline research is getting harder to make money out of – although it was never a great money spinner, frankly, unless you go high-end. Companies like Truth, who are very consultative, can command a fee for what they do, but if you are just trying to make a margin doing traditional ad hoc research, that’s getting harder and harder because there are people out there who can do it cheaper.”

Those people are the companies like YouGov that are taking full advantage of online technologies. They’re cheaper and they’re faster. Methodologists might still argue over whether online is a better way to do research, but the people holding the industry’s purse strings have already decided that at the very least it’s fit for purpose.

Even the methodologically conservative social research field is starting to accept online. “We’re seeing an increasing preparedness among clients to consider mixed-mode rather than pure face-to-face projects,” says NatCen chief executive Penny Young. It sounds like a watershed moment.

It’s easy to see why clients are taking to cheaper and faster methods of research. They cater perfectly to the desire among buyers to get more for less, and more quickly too. That doesn’t just mean more data – they already have plenty of that. What they’re after is more insight, more advice – essentially, more than a report, a presentation and an invoice.

Sam Gardner, a co-founder of Boxclever (a past Best New Agency winner), says: “As researchers we are often unwilling to push the envelope with our insight and use it to build ROI-based conclusions that can directly influence final business decisions. This is because the purist gene within us sees all of the assumptions and imperfections required to reach this end state and pulls us up short.”

Those who are prepared to go the distance stand to rocket up the agency league table in coming years.

The MRS research and insight industry league table

Each year, the Market Research Society identifies the UK’s biggest agencies supplying market research and insight services. Below are the top 25 firms, sorted by 2011 turnover, with 2010 and 2009 data provided for comparison.

Click the table to download the full top 50 in PDF form.

Agency bosses assess the state of play

Market research is a broad church and growth is not uniform across the industry. There are winners and losers – some big, some small. Research takes a tour d’horizon of the UK research landscape with the help of a broad range of companies.

The big agency

Eric Salama
Chief executive
Kantar

The UK continues to be a good market for us. The two things we concentrate on are gaining share but also making all of our work more usable and effective so that clients grow their overall research spend. Grow the pie and gain greater share – that’s our aim. Some of our businesses are Kantar-branded now. We branded them that way because we wanted to be clear that in key areas – Media, Healthcare and Worldpanel – that would be the only place you could get the Kantar offer from. But the way the business is going means that there are more things we need to do at a Kantar level. Striking partnerships with the likes of Google – we do that at the Kantar level. For clients, we have Kantar group account directors.

Clients want joined-up solutions. They are looking to be more effective in their own organisations and to be able to tell better stories internally and that requires joined-up data and insights – to understand the kind of media you watch and what you purchase, the relationship between employee and customer satisfaction.

We’re in a better position than most agencies from that point of view, but it’s also important to say that there are parts of our business – like qualitative research, analytics and storytelling – where you have small and medium-sized players that are really good at what they do. So we have to be nimble and behave in the way those firms behave.

The social specialist

Penny Young
Chief executive
NatCen

Things are looking pretty good at the moment. Our revenues are stable – it’s flat revenue, rather than growth, but that’s better than a decline. We’ve taken on 11 graduate trainees and we’re currently hiring for a new director of methodology – so overall we feel pretty buoyant.

We are still very dependent on face-to-face and big, publicly funded research projects – typically via government departments. But where we’ve seen modest growth is in qualitative and secondary analysis.

Also in the last year we will have posted about £1m in revenues from clients that are completely new to us. We’ve just won the BBC Purpose Remit survey, we did a big project on age portrayal for them and we’ve been doing modest pieces of secondary analysis for trade unions and charities.

We’ve basically become much more keen on taking smaller pieces of work than we used to be. We’re actively pursuing a much broader range of clients, including some commercial clients – although that’s very early days.

What we are seeing is squeezes on sample and increasingly aggressive contracting, whether it’s on price or the inclusion of penalties for response rates. That’s onerous and that’s a change that feels like it is becoming more common.

But we have been pleased to see the return of big policy evaluations. It felt like they had disappeared for a while, and I’m sure we won’t see the level of policy evaluation that we saw under the last government – but it doesn’t feel like the social research market has collapsed in the way we thought it might have done. Most of the big surveys are continuing, even if it is with smaller sample sizes and tougher penalty regimes.

The pharma expert

Wayne Phillips
Chief executive
Double Helix

2011 was a pretty spectacular year for us – our last year as an independent. We really have a very strong market research and market access team so that was what made us attractive to our new owners McCann Health.

We’re also starting to get pretty strong in the emerging markets, having opened the business in Singapore. McCann Health are incredibly strong in the Asia Pacific region so the synergies look very good for us there.

We’ve had a good recession, but I don’t think that’s because of anything unique about the healthcare market.

It’s as open to problems as any other sector but it seems to be very non-cyclical. We’ve looked at how some of our competitors are doing and some have done as well as we have and others have had it tougher, but it depends upon your clients, the strength of the business and how active you are in different areas. If we were only active in market research we wouldn’t have been as strong as we are today. Growing into market access has been a very positive development for us.

The online specialist

Phil Rance
UK managing director
YouGov

We have just published our financial results for 2012, which are very good. Revenue is up 15% and we maintained operating profit margins of around 24%. That is because we are an online company and we own our own online panel and they are still a very profitable thing to have.

Unlike the big conglomerates, all the work that we do is online – or the vast majority of it is – so profits are not diluted by offline work.

Our strategy is building value-added on to our panels through custom research and, more importantly, through products that make information easy to buy and use. Custom research is 56% of our business, so the products make up 44%. Within that there is a syndicated reports business called Sixth Sense, which did about £1m in the UK last year, but there’s also Omnibus, which we count as a productised offering, and BrandIndex – our brand tracker. That side of the business is driving growth. Custom is still growing at a fair clip – 12% per annum – but the real topline growth is being driven by products.

What we’re seeing is a lot of cost pressure out there and clients looking to get more for less. There’s the move online, which we benefit from, and the move towards syndicated, which we benefit from. But generally, clients are looking for solutions where they can get what they need without commissioning large unwieldy and expensive custom research projects.

The mid-sized agency

Tom Simpson
Co-founder
Simpson Carpenter

Last year our growth was driven by two different factors. The first was a greater demand for supporting companies in how to use their data and get the most out of it. As a result we saw growth from trackers and from qualitative research. They’re opposite ends of the spectrum but each brings you closer to client decision-making in their own way. We also started up a pharmaceutical team and that did very well for us.

Still, the trading environment is not very good. It’s a tricky time for everyone. Clients are struggling to raise budgets and we’re all chasing after them. They want to make sure that when they do commission work they are getting every penny of value out of it. We’re also noticing an increasing footprint from procurement in the decision-making process, so there is intense price pressure on everything.

There is still a market for the mid-sized agency. I wouldn’t go so far as to say it’s comfortable, but there are clients who want to know that they are dealing with somebody senior who has experience in their field. It’s hard to get that at a big company but, equally, they want an organisation that has some weight behind it.

2 Comments

7 years ago

How stagnant? 2% real growth above GDP. 40/50 companies you list show revenue growth.

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7 years ago

As a company specialising in healthcare MR, we certainly didn't see 2011 as a stagnant year. Perhaps healthcare is more "recession-proof", but we believe we have continued to grow (moving into the Top 25) because we remain focused on meeting clients needs. We make sure we provide a top quality service with insights and recommendations clients can use to improve their business - it's not rocket science. Thanks for producing this set of league tables - interesting reading. http://www.researchpartnership.com/news

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