OPINION21 December 2010

Managing expectations

News Opinion

The latest ‘state of the industry’ survey from RSM shows that the market research sector has returned to growth and optimism is relatively high after a difficult period. 2011 won’t be a cakewalk, though. John Madden, partner at RSM, digs through the data to unearth some of the challenges ahead.

No-one knows for sure what tomorrow will bring, but our survey provides concrete evidence that market researchers have a track record of being consistently wrong. Every year forecasts have proved to be more optimistic than what transpires, and the industry has consistently overestimated the increase in revenues actually achieved – except in the midst of the recent recession where the forecast proved to be far too pessimistic.

Bucking the trend?
So the forecast for 5.4% growth in 2011 is likely to be wrong. Historical precedent would suggest that we are perhaps over-optimistic during the good times and over-pessimistic during the bad times. Given that we are coming off the back of a relatively good year we are probably being a little optimistic.

The growth forecast also looks a little optimistic when you consider that the economic environment remains challenging. Despite the generally positive outlook researchers have about the businesses they work in, their outlook for the economy – no doubt influenced by the tough government spending review, rising unemployment figures and the impending 20% VAT rate – is less optimistic. More researchers think the financial health of both the UK economy and the UK research sector will get worse than think it will get better over the next 12 months. This contrasts with a net 22% who expect the economic health of their particular agency or company to get better.
So it appears that although conditions in the economy and the research sector are expected to remain tough, many feel that their company is going to buck the trend.

No let-up for public sector
If, as we all hope, 2011 is a good year for the research industry there will still, as always, be winners and losers. Undoubtedly, some of the growth experienced in 2010 was at the expense of those businesses that didn’t make it through the downturn, and similarly some of the expected growth in 2011 is likely to be picked up from failing competitors.

Researchers heavily dependent on the public sector will certainly not be sleeping more easily. More researchers expect an increase in budgets than expect a decrease in most sectors, but a net 29% expect a decline in public sector research budgets next year.

In addition larger agencies have fared better in 2010 than smaller agencies and are more bullish about 2011.

Getting to grips with DIY
So what other issues are exercising our minds going into 2011? The impact of technology on what we do is high on the agenda. Technology makes it more convenient and less costly to conduct research, and the growing DIY ethos among clients has perhaps demystified the process. Historically much of the monetary value in research has been in providing the appropriate tools and operating them effectively. In a market where those tools are becoming ever cheaper, and where clients perceive (rightly or wrongly) that less expertise is involved in their operation, the value of what we do operationally is clearly under threat. In fact, the question of how much ‘method matters’ to clients is a big one for the industry – are some buyers becoming comfortable using methods that are questionable in their rigour but deliver fast results that are ‘good enough’? Is the additional investment required to ensure rigorous and representative samples actually worthwhile?

One response to this dilemma is to come up with ever more sexy-sounding research tools – but ultimately this approach will pay dividends to the provider of the technology and not necessarily the researcher. In any case, what exactly are the new tools that are going to attract a premium from clients? Our respondents are consistently vague about what the new revenue-generating innovations might actually be. Isn’t the more prosaic truth that in most cases a mixture of methods, some tried and trusted and some new, are necessary to meet most client needs

Another response is to highlight the importance of professional research expertise. Knowing how to design a meaningful sample and how to ask the right people the right questions may not be as simple as some of our customers seem to think. Should researchers be more forceful in criticising the cheap research methods that clients have bought into, and tell them that they may not deliver the quality that they need and could actually pose a significant risk to making effective businesses decisions?

My own view is that the only defence against the ever-increasing commoditisation of what we deliver is to focus confidently on the value of our insights and our ability to deliver business improvement. Buyers no longer value the tools so we need to highlight the real value of what we do – analysis and consulting which provide businesses with clear direction and measurable improvements.

We also need to be confident in our role as gatekeeper to the many research tools available and speak up about quality issues, publicise bad practice and be less afraid to criticise research companies who we feel are below standard. We also need to be prepared to tell clients that speed of turnaround is not always compatible with delivering valuable insight.

This confident approach can be very difficult to adopt in a highly competitive environment where clients are used to a ‘just say yes’ culture among their suppliers. But we need to convince clients that it is us, the researchers, who ultimately deliver meaningful business improvements, and that they will be disappointed by expecting cheap, low-quality research tools and practitioners to deliver the competitive advantage they desire.