M&A shows us how technology is shifting value

A decade ago, scale players such as Nielsen, Kantar, Ipsos and GfK dominated the market research sector. Over the last 15 years, however, technology developments have changed how research can be conducted and allowed brands to seek more targeted, granular and actionable insights.

From a provider perspective, technology has given rise to the development of new capabilities. These advancements can be seen primarily through the lens of: 

1. New research capture methods resulting in more data available faster and more cheaply, for example across internet of things (IoT) devices, online transactions, and social media
2. Data analytics capabilities such as AI, machine learning, predictive modelling and sentiment analysis.

Data proliferation has led to lower data collection costs and more sophisticated searches for users. External pressures have also accelerated these shifts as:

1. Increased focus on customer-centric strategies requires more customer insight to power strategic decision-making and create competitive advantages
2. Pressure on market research budgets results in a laser focus on insight studies that show a better return-on-investment
3. Demand for dynamic, ‘always-on’ research leads to a change away from traditional, large-scale discrete research programmes.

These forces have created a shift from the larger-scale traditional models that focus on understanding past behaviour to future-looking, tech-based approaches that allow brands to become more agile and focused within their customer strategies. This change is reflected in market growth, where tech-led models (at 14% p.a. to 2024 ) are outpacing growth in traditional models by a factor of three.

As technology and data proliferation shift what is needed to win in the customer insights market, legacy advantages based on scale do not apply to the same degree. This presents opportunities for newer, more agile providers to win share while incumbents transform their business models to meet client demands.

Themes driving value in customer insights businesses

1.  Tech-led research methodologies

Tech-based research methodologies replicate traditional market research approaches but are conducted more flexibly and cost-efficiently, with typically speedier turn-around times.

Both GWI and Zappi raised over $150m in recent funding rounds, having developed capabilities to generate real-time, granular insights through their AI-based digital platforms. Similarly, Kantar acquired Numerator for $1.5bn in 2021, gaining access to its digital US consumer panel and analytical capabilities.

In addition, the flexibility of self-serve insight platforms such as Dig Insights, Alchemer, and Qualtrics, all recent private equity investments, and the emergence of social listening platforms such as Brandwatch (acquired by Cision for $450m in 2021 ) and Talkwalker, has resulted in strong uptake and usage by insight teams.

2.     Proprietary data and insight generation

Proprietary data and insights are critical for brands to understand their customers and the wider market as these datasets underpin both tactical and strategic decision-making and, in most cases, are difficult to replicate.

The value of this data can be seen in recent M&A activity, with access to GfK’s unique point of sales data in technology and consumer durables which allows brands to measure their market share performance on a granular level a key attraction for NielsenIQ and its subsequent merger, while Kynetec (a recent private equity investment) provides a similar dataset for the agricultural and animal health sectors.

3.     Strategic advisory

Strategic advisory focused on business impact, underpinned by strong industry and/or domain expertise, is driving actionability for clients. Providers who fully understand their client’s challenges can both design the right approach and become a thought partner providing relevant recommendations based on client circumstance.

Strat7, a private equity-backed customer analytics group, has built an advisory practice combining former industry executives, consultants and consumer insights professionals.

Consultancies have looked to combine their senior relationships and strategy capabilities to push into this space through selective acquisitions such as Bain’s acquisition of Pyxis and Accenture’s acquisition of Fiftyfive5.

What’s next for the customer insights sector?

In the mid-term, we see increasing convergence between these three themes. Clients increasingly seek a partner who can seamlessly provide actionable, forward-looking advice based on robust quantitative and qualitative evidence. Therefore, developing an integrated approach that combines best-in-class data and insight generation with impactful strategic advisory will be critical.

Given their scale and entrenched client relationships, some of the incumbents still can maintain an advantage. Particularly for those with private equity backing, an accelerated transformation is taking place. Examples include Kantar’s acquisitions of Numerator, Qmee, Blackwood Seven, and NielsenIQ’s acquisition of ciValue which optimises loyalty programmes using AI technology, improving personalisation and audience building.

However, these capabilities will take time to integrate within incumbent organisations. Therefore, there is an opportunity for independents to scale up, given many have these key capabilities built in from inception.

Jonathan Dufton is partner at Plural Strategy