Upselling and cross-selling deliver growth, but CEOs don’t rank it a priority

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The first-half results from the listed research companies were truly a mixed bag. The general themes were:

1. Difficult economic conditions: everything slowing down but, in general, Europe is bad; emerging markets are good
2. Digital strategies: everyone has one, but their importance to the business varies
3. Ad hoc is flat (at best): but syndicated and continuous businesses are growing
4. Media measurement of any sort is growing fast: it’s also twice as profitable as market measurement
5. Organic growth initiatives are preferred to acquisitive growth
6. Execution issues have restrained top-line growth for some companies

That last point is particularly important. When the world is in upswing, you can take a few chances, and if one or two of them go wrong, the environment is forgiving.

But this is not a benign environment. This is a difficult trading environment, and getting the basics right – executing correctly – is paramount.

Yet Ipsos, Informa’s Professional & Commercial division, Forrester and Harris Interactive, among others, all suffered from execution issues in the first half of 2013, and these issues were reflected in their results.

ComScore and Gartner, on the other hand, came out top of the pack. Furthermore, ComScore was one of a very small handful of information firms who were able to increase their revenue expectations for the full year. Many firms reduced their guidance. ComScore is now expecting annual growth of about 15%.

So what is ComScore doing right? Not only are its products sold with a sales force using a subscription model, but it is extraordinarily adept at upselling (or cross-selling to) its existing clients. This is a rare skill. In the first half of 2013, 82% of its incremental revenue came from upselling existing clients. It’s a similar story at Gartner. The curious thing is that upselling/cross-selling rank as high priorities in our surveys of CEOs in other information sectors, particularly in downturns. But it hardly features as a priority for market research CEOs.

Do the evolution

Upselling and cross-selling might be important, but this doesn’t mean that companies can’t pursue strategies to evolve their businesses in a downturn.

Traditional full-service market research firms have doubled their number of organic growth initiatives over last year. There were more product launches (hopefully for cross-sell) in the first half of 2013 than in the whole of 2012. They established nearly as many international subsidiaries as they did in the whole of 2012 and distribution agreements are nearly double 2012’s total.

And, even with the preference for organic growth, there were 88 M&A deals in market research in the first half of the year; 29% more than in the corresponding period in 2012, and 57% more than the whole of 2010. Historically, it was the large global firms responsible for most of the deals, but in the first half, 74 different companies – ‘traditional researchers’ or otherwise – added MR services to their propositions.

The road ahead

Now is the time when forecasters downgrade their predictions for the current year and boost forecasts for the next. Comparing the 2013 half-year results with previous years, we expect the industry to grow at just under 2% this year. Revisions to GDP and advertising growth forecasts have been downward, so – globally, at least – spending on information services will be as constrained as 2012.

There is, however, a real reason to be optimistic if you are in the UK. Purchasing indicators are significantly up for Q2 and Q3, and UK advertising forecasts for 2013 lead the mature economies. Add into this heady mix a UK feel-good factor concocted by a royal birth, sporting success and a summer with sunshine, and suddenly the UK domestic market research market has all the right ingredients for a very promising second half. Not so much as a fair wind, but a fair gust. We shall see.

What of the significant increase in forecasts for 2014? At the moment, consensus global GDP growth forecasts are 3.4% for 2014 (up from 2.6% in 2013 ) and advertising growth forecasts are 5.4% (up from 3.6% in 2013 ). Can a football tournament deliver so much? We fear forecaster exuberance. Economists tell us that we do have green shoots of growth, but it’s the wrong type of growth – driven by consumer borrowing – and that will be short lived. But at least it benefits credit information vendors.

Stuart Butler-Smith is the founder and CEO of Research Ratings