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OPINION12 January 2011

Tax breaks for MR could make small even more beautiful

A proposal for tax relief on consumer research would encourage SMEs to invest in insight, writes Jessica Bower of Sundance London, but research providers need to play a role too in making their services accessible and effective for growing businesses.

A group of fast-growing UK FMCG companies is calling for tax relief to incentivise small start-up companies to use consumer insight – recognising the vital role that insight plays in creating powerful brands and building a stronger private sector.

“The prospect of financial stimulus for insight will undoubtedly be welcomed by the UK research industry. But it’s still a long way from becoming policy, and there are question marks over how it should be implemented”

The proposal, supported by children’s food brand Ella’s Kitchen and men’s grooming label King of Shaves, calls for a 175% tax credit on money spent to build customer closeness – the equivalent of current funding for technological R&D. In an article in Real Business, Paul Lindley, founder of Ella’s Kitchen, says he sees this transforming the prospects of many small businesses: “The best brands will be bigger businesses, generating more employment, more transactions with suppliers and underpinning a stronger economy.”

The initiative has roots in many sources of business wisdom, not least last year’s Millward Brown Optimor’s BrandZ ranking which again showed the top 100 strongest brands to be more financially resilient than their peers in the S&P 500 index. Many estimates indicate that brand strength can contribute around 30% of a company’s worth, often outweighing the value of tangible assets or technology.

The prospect of financial stimulus for insight will undoubtedly be welcomed by the UK research industry. But it’s still a long way from becoming policy, and there are question marks over how it should be implemented. There are also implications for how the research industry can best deliver value to smaller, nascent companies at the start of their commercial journey.

Funding for technological R&D typically focuses on areas where ‘market inequalities’ discourage investment in the innovation that is vital to a country’s long-term competitiveness. This can mean accounting for distorting factors like the lack of recognition for the full cost of ‘unclean’ energy sources (which makes ‘clean’ energy disproportionately expensive); supporting basic research which would not be viable alone, but which serves as a building block for applied research that generates income; or helping firms meet the high costs of entry to high-tech sectors.

Arguably, these issues are less relevant for consumer insight, so defining a range of MR activities eligible relief may prove to be a real minefield for the taxman. A survey commissioned from an independent agency represents clear financial outlay, but what about social media ‘listening’, or the valuable activity of simply spending time making connections between key information and accessing deeper insights?

Yet it remains true that smaller companies, particularly start-ups, often lack the insight needed to drive their brand and deliver true customer excellence. Many who are familiar with market research tend to see it as a big-budget item, providing large-scale surveys for established major brands. Others in the SME community simply remain unaware of the benefits of research in building a more financially successful company.

Stakeholders such as venture capital organisations have a part to play in ensuring that smaller companies use this vital business tool as part of their development path. But the research industry itself must take an active approach too. Start-up brands may be less instantly recognisable, and can be more financially constrained as clients, but recent UK success stories, from Trunki luggage, so popular with young British holidaymakers, to Levi Roots’ Reggae Reggae sauces, remind us that brands that start small do not necessarily remain that way. Small companies also offer an opportunity for researchers to play a truly consultative and transformative role within the business, bringing insight and broader marketing expertise that many do not have in-house.

“This new proposal represents a great opportunity for the UK research industry, but it also places a responsibility on researchers”

Researchers nonetheless need to acknowledge the challenges of working effectively with smaller companies. There is a clear need to educate on the benefits and most appropriate approaches for insight, requiring researchers to act as mentors and trainers as well as insight hunters. They must be proactive in identifying the real business issues and insight needs – and this demands experience and commercial acumen.

While tax credits will encourage more research spend, the initiative can only realise its intended economic benefit if smaller brands really do get demonstrable value from their insight investment. This issue is already recognised by the government’s Export Marketing Research Scheme, which pairs grant funding with support from research advisors who can apply extensive experience to the challenges facing SMEs that want to export to new markets.

This new proposal represents a great opportunity for the UK research industry, but it also places a responsibility on researchers to ensure that insight not only becomes financially accessible, but also delivers on its promise as an essential element of building a sustainable and successful brand.

Jessica Bower is an account director at brand building agency Sundance London. She started her career in qualitative research at Research International in London and Singapore, and spent two years working with the British Chambers of Commerce, supporting SMEs in exploring international business opportunities.

2 Comments

9 years ago

Hey Research-Live, the best way of having an online debate is NOT to have separate articles, but to link them! Anybody interested in this topic might want to look at your article from last week at http://www.research-live.com/tax-breaks-for-mr-anyone?/4004328.blog, at the comments below it, and possibly at my blog post at http://thefutureplace.typepad.com/the_future_place/2011/01/the-case-against-tax-breaks-for-market-research.html. I feel the key to helping small businesses is not via tax credits (i.e. blunt instruments that distort the economy) but via direct action which can be grants, advice, and support. For example, my daughter's online business [http://www.mish-online.co.uk/] which opened its first physical shop yesterday was greatly helped by a small amount of money and plenty of support and advice from the Unlocking Cornish Potential scheme http://www.cornwall.ac.uk/ucp/index.php. With grants and advice a small company can apply the most appropriate measures for their business. With tax breaks for market research a company would be pushed towards a specific solution, even if it were not the best solution for them. For example for some small companies a DIY research solution or one based on social media mining might be more relevant that research from a market research company?

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9 years ago

"Hey Research-Live, the best way of having an online debate is NOT to have separate articles, but to link them! Anybody interested in this topic might want to look at your article from last week..." ...which we had already linked to under the Related Articles tab at the top of the page, but thanks for the suggestion anyway.

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