When Do You Need A Market Research Vendor?

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As published in the Market Research Association’s Alert! Magazine, November 2010.

Market Research Vendors

 

For a while, there has been an intense discussion among marketing researchers about whether DIY research is going to replace market research vendors. Sometimes it feels that way. The rapid proliferation of DIY market research is making some market researcher vendors anxious about their livelihood, while others are simply angry about the trend towards “good enough” research which can potentially produce biased data and misguided conclusions.

 

 Reduced marketing budgets, access to relatively cheap online survey tools, and the precarious position that market research holds in many companies have led many to see DIY research as an acceptable alternative and sometimes the answer to management’s prayers to get at least some data on the cheap.

 

 I know how it is. I was the ultimate DIY research department at several of my former employers on the client side. I was able to provide high quality primary market research at a very low cost, and a quick turnaround. I estimate I saved those companies millions of dollars in research. And that’s what companies are expecting, particularly in difficult economic times. Notice that I say “high quality,” “low cost,” and “quick turnaround.” How? Simple: Expertise and experience.

 

 Did I replace research vendors? Yes and no. My team could tackle many research projects that could have otherwise gone to market research vendors. But there were other instances where I needed to call vendors.

After being on both sides of the river, I think market research vendors will still be needed for years to come despite the spread of DIY market research.

 

 Hiring market research vendors can be beneficial because they can:

 

  • Offer expertise and skills not available within the DIY market research team. To be totally self-sufficient, a DIY market research team would need to have a staff of researchers with expertise and hands-on experience in a wide range of research methodologies, which is costly and nearly impossible. They also need researchers that can interpret results in meaningful ways to offer actionable insights. This requires industry and marketing expertise. These are expensive too. Those who say they do “everything” internally are often limited to do certain types of research with moderate to low level of complexity. You recognize them easily, when the answer is “We have SurveyMonkey.” Sooner or later they go looking for a market research vendor that can help them extract deeper insights from collected data or simply provide a different approach that better answers questions related to the business issues at hand. When the stakes are high, management is aware that “good enough” research is simply not enough.
  •  Provide validated methods and innovative approaches. Many large research agencies have established processes and standardized methods that have been tested over time, which provides consistency in data collection and reporting (e.g. brand tracking research). There are also boutique market research vendors that can provide more custom approaches and innovative solutions (often accompanied with a more personalized attention and commitment). DIY research teams can add value to the service they offer internally by selecting market research vendors that have spent the time and resources on developing processes, learning new methodologies and gathering experiences from different industries that can guarantee data quality and meaningful insights.
  • Alleviate workload for time-strapped DIY marketing research teams. In my experience, there are no small marketing research projects. Even in the simplest projects, there is a lot of work to do. Nowadays, DIY market research teams are often small and don’t have time to handle all the internal requests. They may need to outsource parts of some projects or entire projects as other priorities take place. We see this every day. For some clients we help only with research and questionnaire design and they do the rest. Others ask us to design and program conjoint studies, while they do the simulations themselves. Sometimes we come at the end of the process to analyze the data or write the reports, while in many occasions we take on projects from start to finish.
  • Provide neutrality. Market­ research vendors are neutral judges of research results and don’t have a vested interest in its outcome one way or the other. We don’t feel the pressure to get some hypotheses confirmed and our compensation doesn’t depend on it. Our unique position as a neutral party helps to prevent unbiased results. DIY research teams can also play a neutral role, but sometimes they can’t help but infuse certain bias without knowing it based on industry knowledge and office politics. I have seen many instances in which a DIY research team’s internal clients, hoping to get a particular outcome, explicitly request the use of a particular methodology, (for some reason focus groups are always top of mind), which may not be the right one to tackle the business issue in question. Sometimes the DIY team is able to push back, but at other times they can’t and the internal client wins.
  • Guarantee the anonymity of respondents and confidentiality when this is an issue. Think of employee research. This often touches on sensitive topics regarding satisfaction with management, salary, co-workers, etc. Using a third-party to gather and analyze data helps to protect employees’ identity and avoid any type of retaliation against them. Sometimes this also applies to customer satisfaction research. There are cases in which customers might be unwilling to air certain opinions about a company if they know they are being surveyed by the company’s employees and can be easily identified. Even if customers know the research is being sponsored by a company, knowing that a third party is collecting the data and analyzing it mitigates confidentiality concerns.
  • Provide credibility to research results. Public data gathered internally is often received with some skepticism, particularly if it is favorable to the company’s brands and products, so companies are better off by using a neutral third-party market research vendor that can assure the data is legit. This can also be needed when internal teams in an organization ask for resources to launch a product, invest in an idea, etc. They need a credible data source to explain the rational of their request, and at times this means data gathered and interpreted by a knowledgeable neutral third-party.
  •  Offer access to target populations of interest. There are more and more companies who are mining their customer base and using them as the primary source of sampling. Some companies are creating online communities they can recruit from for research purposes. However, often companies must go outside their customer base in order to identify growth opportunities. Market research vendors can then find populations out of their reach. Even companies who build communities need help to create and manage them.

 

There is the belief that DIY marketing research is always cheaper than hiring an external vendor. If we look only at the cash that could have been paid to market vendors, DIY research is definitely cheaper. However, I would argue that DIY research is not always cheaper. I have seen many cases in which the research needs to be done again due to bad research designs at the hands of inexperienced DIY research teams. In times when many think they can write a survey because of access to cheap survey tools, the need for expertise is often disregarded costing thousands of dollars in wasted resources on decisions made on less than reliable data. In estimating the actual cost of DIY research, companies need to factor in the alternative cost of getting bad data quality, an inadequate research approach, and misleading conclusions.

 

 In short, consider hiring marketing research vendors when:

 

  • The DIY market research team doesn’t have qualified staff to design and execute the type of research needed or the expertise to interpret the results and extract actionable insights.
  • A different research approach is needed to get deeper insights into the issues at hand.
  • The DIY market research team doesn’t have time to handle all research requests.
  • A neutral third-party is needed to avoid biased results.
  • Anonymity and confidentiality are a concern.
  • A credible party may be needed to legitimize the results.
  • The DIY team doesn’t have access to the population of interest.

 

Comments Comments

Matt Foley Posted: February 8, 2011

Hi Michaela – there are some really valid points here against DIY research, which is especially relevant to hear from someone who comes from the client side and understands the pressures that are driving client-side research teams to use DIY methods. I think people underestimate the time requirements with DIY methods, especially with a low entry price point. Your points about third-party objectivity are also valid. I just wonder what the impact will be on full service vendors. If I was on the client side, I would seriously be considering DIY methods given some of the prices I’ve seen from full-service MR vendors. Despite efforts to the contrary, it looks like DIY will be here to stay for a long time now…

Michaela Mora Posted: February 8, 2011

Hi Matt,
Thank you for your comment. I know DIY is here to stay, but vendors too. There is a place for each depending on the client resources and research needs. Regarding cost, there are smaller boutique firms that can be very cost-effective and offer a great service and quality work without costing a fortune. Clients need to be open to use them and don’t be blind-sided by the brand names. In my experience on the client side, I always got a better value for my money from smaller research firms.

Online focus group Posted: February 19, 2011

It is often necessary to commission marketing research to estimate total market size and calculate a company’s market share. Share often is associated with profitability…..

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