If it’s worth more than it cost, it’s added value!

I have lost count of the times I have heard sophisticated researchers saying that they are doing leading edge work for their client but the client won’t pay a premium. It’s quite simple if you don’t a get a premium you have not convinced your client that what you are delivering is something special. 

Not everyone will like me saying this but researchers do themselves no favors by charging clients for the time a project takes them not by the value of the insights generated. In general, if you’ve got the right people on it, cutting edge stuff doesn’t take more time than the most vanilla research but it’s often worth twice as much in terms of impact on the client’s bottom line. Clients charge much more than production costs for their premium brands, in which they have similarly invested. Commercially, this offsets the low margins on the commodity brands so there’s no reason for resarch agencies not to do the same.

You should be happy to charge by value and not cost if it’s worth it to the buyer. That’s business; you need to take the big gains when you can and not be consumed by some unjustified ‘guilt’ when you raise the price.  As competition makes sure these premiums only last a short time, there is the pressure to constantly improve and invest to ensure the price advantage is maintained. So, overall everyone wins, as better (and usually more interesting) services are constantly brought to market.

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2 Responses to If it’s worth more than it cost, it’s added value!

  1. Phil Worthington says:

    Alastair,
    Isn’t this part of the problem that the market research profession, both agency and client-side, are less ‘skilled’ in terms of getting the ear of senior board members than, say, advertising and specialised consultancy professionals. Instead, market researchers contribution is still perceived to be pinned to data collection – necessary but not creating the value which will catch the attention of the board.

    Could it be the market research profession is not as good at recruiting and/or training staff who have the power to convince the board to pay a premium when value has been given, compared to other related professions? Or is it that the heritage of market research in data collection is forever to constrain it to compete on price, no matter the skill of its professionals?

    • Dear Phil, Certainly, the issue of getting the ‘right price’ for value-added work is linked to the training (and to a lesser extent to recruitment) of those in the research industry. Furthermore, this then is compounded by the resulting perceptions of senior management on the worth of research and hence the price they expect to pay.

      Much of the training in market research focuses on the technical side with respect to sampling, survey design, analysis etc. Moreover, in recent decades the training and development has moved into enhancing the researchers’ broader knowledge of marketing as a whole. The resultant learning is needed for the delivery of most proprietary products designed, usually, to address specific marketing issues e.g. brand equity, price elasticity, advertising communication etc.

      Where the training is often weak or even non-existent is in the commercial area of running MR as a business, coupled with an inconsistent understanding its customers’ ‘hot buttons’ (which is ironic seeing as that research users often buy any agency’s services to better comprehend their own customers.) Many executives in the research field, although excellent technicians, have a relatively low understanding of the profit drivers in their own industry. One upshot of this, is a relatively underdeveloped skill in the discipline of pricing when getting the balance right between the value proposition of the service and the operational cost of providing it.

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