A few years ago it seemed that the big advertising and media groups were on-track to dominate the Market Research industry – Aegis with Synovate, and WPP with, well, almost anything they could get their hands on.
Recently private equity has also developed a strong interest in information companies, currently with ORC and perhaps most notably with the buy-out of Nielsen. We’ll surely see more from private equity investors in the next decade, but I’m guessing that we’ll see some other interesting trends in the control of marketing research.
One will probably involve the growth and expansion of Asian market research companies. But I’d like to address a more dramatic scenario: the likelihood that those who currently serve and partner with research agencies may come to dominate, or even own them.
Many research agencies are farming out increasing amounts of their operations, relying on independent panel suppliers for fieldwork, out-sourcing back-office DP and administrative functions and using 3rd party suppliers for software and office automation. At the other end of the research spectrum, clients increasingly employ consultants to “enhance” MR information and require agencies to partner with them in producing recommendations. In all of this, agencies have perhaps saved some costs, but also impaired their ability to convincingly claim they offer a “full service” research solution.
As agency researchers we know what we think about such partners – while accepting they have their uses, researchers are often full of complaints about out-sourcing companies, scathing of many software automation and analytic systems and jealous of the fees charged by consultants. Yet, do we know what they think of us? Most of these suppliers and partners are polite, and genuinely adept at client servicing – they are not going to tell their customers exactly what they think. But if, like David and myself, you are no longer a customer and you get some of them aside over a drink you’ll find that many of them have their own complaints. Out-sourcing companies will lament that they are blamed for quality issues that are ultimately a problem of poor briefing, questionnaire design or client servicing by the agency. Fieldwork companies will tell you that their panels are often under-utilised and that their current business models don’t yield close to the real value they deserve for the resource they own. Executives in software and data-mining companies will complain that MR clients often “don’t get” their systems, fail to properly integrate them into research processes and don’t know how to help end-users maximise the value they provide.
I’m not going to take sides on this one, but what I am pointing out is a creeping feeling (justified or not) among some suppliers that their current research agency customer base may actually be a long-term impediment to extracting maximum value from their expertise and resources. Just as researchers wonder how marketing consultants can justify their fees, increasingly the “servants” of market research are feeling that maybe their “masters” don’t deserve their profits.
No-one’s suggesting that such companies will immediately abandon their current customer base and enter into direct competition with agencies. But there are three models for increasing their share of the “top-end” of research spend that they are likely to increasingly employ.
Firstly, some will offer agencies ever more advanced out-sourcing services; report writing, design, advanced analytics, remote researcher help desks and so on. Out-sourcing firms are already starting to employ researchers and analysts for these functions (partly as an added value service, partly because cut-backs mean they increasingly have to support inadequately trained agency-side researchers). This model will ultimately prove irresistible to some agencies who will take the chance to reduce their researcher head-count and essentially become a “brand” with a big sales force and a few research editors employed to ensure that out-sourced outputs are localised. True researchers will move further towards the back-office, at least until clients wake up to what is happening and decide they can deal directly with the out-source company.
Secondly, some such companies, especially where they have appropriate software or IP solutions, will push to increase the proportion of client companies they work with directly. Essentially they will provide the MR departments of client organisations with advanced “DIY” solutions, especially orientated around data integration and easier delivery of information. In the areas of Info-graphics, data integration and advanced analytics this is already happening: software companies often find end-user clients easier to deal with (and more profitable) than research agencies. Best use of this model though, will require either the software supplier or the client MR department to expand their design and analytical expertise and I expect more researchers to move from traditional agencies and be employed as “enablers” of such solutions.
Finally, and most radically, expect to see one or two true “end-to-end” suppliers emerge – companies that could go to a major corporation and say “We can handle your entire market research function – tell us the business issue and we’ll give you the answers in a digestible, easily distributable form”. Before you laugh at the idea of a Vodafone or Unilever divesting all responsibility for market research to one player, consider the likely nature of the offer. A company making this proposal with any credibility could not look like a traditional “full service” MR agency. They’d be large, very large, and possess expertise in data integration and consultancy: their offer would have to encompass pulling together everything from customer data-bases to product tests. They would be experts at handling sub-contractors and would have to be big enough to acquire or buy cheaply the data-streams of Nielsen, IRI, TNS and others. Probably you are already thinking IBM, but there are other alternatives. Consider Tata Consulting, an Indian company that a couple of years ago got the contract to run many of Nielsen’s back-office functions world-wide. Nielsen is only one of their global clients, and their parent (one of India’s largest) is both diverse and vast: bigger than any market research company. Companies like this, should they decide that they want to compete more seriously in the market research arena, are well placed to transform our whole industry.
What can agencies do in response to all this? One thing occurs: if agencies are busy divesting themselves of their fieldwork and operational expertise then what they have left is the research side of the process, the design, and analysis and “people” skills. Yet arguably this “soft” side of research is precisely the part that suffers most from under-investment. Agencies are not doing enough in terms of encouraging efficient working habits, fully integrating useful software tools or training research management and consultancy skills. Any agency that wants to survive and prosper in the next decade needs to tackle this issue. Another priority is for agencies to take their “servants” more seriously: to work much more closely with out-sourcing, software, fieldwork and consultancy partners to develop collaborative ways to maximise value to end-user clients. If agencies don’t do these things then both their clients and their suppliers will start to wonder what their value actually is. In which case I suggest the best bet is to ensure you get much friendlier with your suppliers – it may be that they will turn out to be your bosses before too long.