The Rise of the “No Frills” Research Industry

Growth in demand for market research is also creating a proliferation of suppliers.  As with most industries, as markets mature there is inevitably a downward pressure on pricing, and the methods used by some research buyers to source quotes is fuelling this process.

The open-tender is the usual practice of the Public Sector, and partly for good reasons, e.g. to ensure that a fair and transparent tendering process is in place and to give newer firms the opportunity to obtain Government contracts and grow their business.  Unfortunately assessments of tenders are often down to price rather than how well the agency is able to execute the project, what experience and insight they can bring, and the quality controls they put in place to ensure data integrity and accuracy.

Indica Research of India commented “A substantial number of Government tenders go to lowest cost bidder who is generally a ‘non-entity’, i.e. not belonging to serious or reputed research agency.  In such cases the quality of the fieldwork is generally very poor, with often a very small portion of the fieldwork actually being carried out and the rest of the work being suspect.  We believe strongly research is a skilled-based professional service, and no sensible research buyer, who genuinely uses research and information for critical decision making purposes, should select a research service provider on the basis of the lowest quote”.

It is distressing that the research business itself emulates this practice through their tendering for sub-contracted fieldwork.  Most agencies in Asia are recipients of the infamous “undisclosed recipient” request for quotes, a standard email that can be sent to all companies in that geography listed in ESOMAR.  There are many firms reputed to operate in this manner.

Piers Lee, Managing Director of Kadence Asia Pacific states, “This approach is not very effective. Companies who source quotations in this way will get diminishing responses over time, and will therefore have fewer and fewer partners to work with.  Through partnership, the best service and quality will be delivered, obviously not at the absolute lowest price, but still within a competitive range.”

Kevin Meyer, Managing Director of Opinion Research Taiwan (ORT) states “With the now prdontevalent use of the internet for sourcing research, ‘blanket requests’ are becoming a daily occurrence.  If the issuing party does not have the time to identify quality suppliers in each market and personalize their requests, then this is a sign of their own lack of quality control”.

Some see the online tendering process as a painful mechanism in this process, which reduces the way research is bought to that in which a company procures its stationery or photocopiers.  The same people who buy the company paperclips now have at least a minimal role in buying high end consultancy research!

So what should the industry do about it?

Some view that commoditization of the research industry is the result of too much industry fragmentation and as such more acquisition and consolidation is required.  There will of course be others who can add value by innovation: a product or research team that the competitors do not have and through this are able control the price again.

Indica commented “the problem has been caused by the industry players themselves by trying to undercut the competition, even at a loss.  This practice has been observed by even the international players with local offices in India who have a compulsion to show unrealistic top line growth to their parent companies.  Consequently a lot of the initiative (for demonstrating value) should come from the top agencies”.

Others argue that quality market research providers should work together either through global, regional or country-based market research associations to draft quality standards and useful tips for research buyers, and comment that most clients would actually welcome such advice and training.

Tim Smyth of Indo-China Research (IRL) comments “Clients have many issues to research but only have X budget. This means that the research can be right-sized to suit the Budget available rather than the best research solution. However, by demonstrating and educating clients as to the value of research for decision making, and how to integrate this into their marketing activities, the industry can attempt to move beyond commoditization”.

Who buys counts!

At the end of the day it will be the research buyer who determines the direction of the industry on pricing.  With so many suppliers in the marketplace willing to offer their services at lower and lower prices, the buyer can always use their market power to ensure downward pressure on prices.

But many buyers have suffered in this way.  Clients who have bought ‘commoditized research’ have complained about reports that offer few insights or strategic direction, but instead have relied too much on fancy charts and standard black box solutions.  Naturally these clients are dissatisfied and feel that the researcher do not spend sufficient time and effort on the analysis, or the researcher is simply too junior to understand their critical needs.

Despite this, an increasing number of clients say they are looking for “quick and dirty research”, or are looking for ‘no-frills’ research, in the same way that they look for ‘no frills’ airlines to take them to their holiday destinations.

Piers Lee from Kadence sums it up by saying, “Although ‘no-frills’ airlines usually gets you safely to your required destination at low cost, no-frills research, either gets you nowhere, sends you to the wrong destination completely, or crashes!  Certainly not a good start to a holiday”!