OPINION14 July 2009

Upturn won't mean a let-up in pressure, say UK researchers

A new survey suggests the UK market research sector is facing its toughest period for at least eight years. Just how low is confidence at the moment – and is the downturn going to lead to longer-term changes in the way the research sector operates? John Madden, partner at RSM, explores the implications of the survey’s findings.

RSM’s annual State of the Industry survey has measured confidence in the commercial health of the sector for the past eight years, providing an opportunity to see current attitudes in their recent historical context. One thing is clear: confidence is at its lowest ebb since the survey’s inception.

Research providers are under more pressure than ever to deliver the best possible value from every penny of client spend, and there is an expectation among many in the industry that this pressure will not simply disappear once an upturn comes around. The clear message is that an increased focus on providing the highest-quality research at the best possible value will be necessary for some time to come. Here’s what the survey found.

Recession bites
The past six months have been tough. Six out of ten research professionals have seen their budgets decline and only one in 20 has experienced an increase (see Chart 1).

This decline is expected to slow down over the next six months but a third still expect budgets to drop and the proportion expecting an increase is static at one in 20 (see Chart 2). Even with this slightly more optimistic outlook budgets are expected to shrink by 3.5% over the next six months (indicating a year-on-year decline of at least 7%).

Research activity in most sectors is expected to experience a net decline, most significantly in the automotive and media sectors. Most research methods will feel the impact of recession, with face-to-face hit hardest ( 48% expect to spend less on face-to-face research and only 6% expect to spend more). Even in difficult times the industry consensus is that web-based data collection will continue to increase, although at a reduced rate compared to previous years.

So how bad is the current situation? Confidence is lower than at any point in the survey’s eight-year history (the previous low point was the first wave in 2002 ). The fabled immunity of market research to recession appears to be just that – a fable. As one respondent says:

“I think there is a slightly foolish perception – or has been – that research is recession-proof. I don’t think that is the case now, especially if your core business is advertising and NPD.”

The impact of technology
It is not just the global economic downturn putting pressure on budgets. The continued growth of online research is perceived to have played a part in both increasing efficiency and driving down costs. There is no question that research professionals believe online and other technologies such as social networking sites, blogs, SMS text surveying and mobile data collection will be key to the way the industry does business in the future and are likely to apply a continued downward pressure on research revenues.

There is, however, an underlying note of caution about the move towards web-based methods. For the second year in a row more respondents feel that the public image of market research is getting worse ( 18%) than better ( 10%). Poor implementation of online surveys, along with ‘sugging’, is seen as one of the key reasons for this net decline.

“[There are] too many poor quality ‘surveys’ around on the web and continued use of ‘sugging’ from non-MRS organisations.”

“[There are] too many cowboy internet panel companies coming on stream.”

The longer-term view
Does the survey give us an indication of how long the recession will last? We asked an open-ended question: “What impact do you think the current difficult economic conditions will have over the next two to three years?” On the occasions where respondents gave specific predictions for the length of the downturn most say one to two years. But over half of those surveyed suggest that the impact of the economic turndown may continue to be felt over the next two to three years, and maybe beyond (see Chart 3). This is primarily due to a change in culture among research buyers. The current discipline of carefully prioritising expenditure and ensuring the best possible ROI is expected by some to become ingrained, as the following quotes illustrate.

“I think people will be more discerning with what they spend money on, demand value from big companies… who have been doing ongoing tracking with little innovation or added value.”

“I‘m not sure that the industry as we know it will benefit  much from the anticipated recovery as clients have found ways of achieving similar information from different sources.”

“The next twelve months are key. If clients have to cut back and find they can do without then how quickly will they come back?”

Final thoughts
As usual during a recession, there is a view that research providers who supply quality and value throughout the difficult times will emerge stronger and fitter. But even if the recession proves to be short-lived the industry needs to face up to some potentially fundamental changes that are making the commercial landscape more competitive than ever: the continued onward march of low-cost web-based methods and a ‘lean and mean’ mindset among procurers.

[The recession] will weed out incompetent researchers and agencies and force those who are left to think more seriously about ROI of research and how to make methodologies more efficient.”

A total of 345 online interviews were completed in May and June 2009 with clients and suppliers with an average of 14 years’ market research experience. The response rate was 16%.