Bound by budget constraints, companies are seeking lower-cost methods to conduct market research or forgoing some kinds of research entirely, according to industry observers.
In 2001, U.S. companies spent $6.16 billion on market research. In 2002, that amount is expected to remain the same or drop slightly, said Larry Gold, editor and publisher of "Inside Research," a newsletter that tracks market research spending. Final numbers for 2002 will be released by "Inside Research" in April.
"Companies are not spending," Gold said, based on his projections for 2002.
In 2001, certain areas of market research did better than others. Syndicated researchâdefined as contractual, ongoing research conducted through a market research companyâmade up about 42% of overall market research spending, an increase of about 9% from 2000, according to the newsletterâs figures. Qualitative research, which typically is conducted through focus groups, made up about 18% of overall market research spending, a gain of about 5% over 2000. Traditional survey-based research, which made up about 40% of market research in 2001, was down about 1.5% from 2000, Gold said.
"In tough times, people will lay off survey research and try to do with qualitative research, which is a lot less expensive," he said, noting that some companies have simply postponed or suspended their survey activities.
Don Schultz, president of Agora Inc. and professor emeritus-in-service of integrated marketing communications at Northwestern University, both in Evanston, Ill., said marketing communications professionals have not done a good job communicating the value of market research to senior executives.
"Typically, when times get tough, the first thing that gets turned off is research, and the second thing that gets turned off is marketing communications," Schultz said.
To communicate the value of market research to senior executives, marketers need to change their language, using management talk instead of marketing talk, and they should show the positive impact of market research on items like cash flow and shareholder value, Schultz said.
Some marketers are spending
Bucking these broad trends, some b-to-b marketers have increased their investment in research. Mobile phone provider Nokia has increased its market research budget by 10% to 15% a year over the past few years, said Bernard Brenner, senior manager of Americas marketing research at Nokia, Irving, Texas.
For its b-to-b research, Nokia uses one-on-one interviews or Web-based surveys, from which it gathers customer mobility patterns and information on the leading service providers for businesses, Brenner said. But he noted Nokia does not use phone interviews for its business audience because it believes phone calls are intrusive.
Nokia currently uses Harris Interactive, an online research company based in Rochester, N.Y., for brand tracking of its b-to-b customers, Brenner said.
Another marketer increasing its investment in market research is KeyCorp, a Cleveland-based financial services company serving both business and consumer customers.
Until a few years ago, KeyCorp had only two people in its market research department, relying on outside vendors to conduct research, said Jean Nickels, VP-project manager, market research at KeyCorp. Today, the company has a centralized research group of six people, and all of its departments have access to consistent data.
"The financial services industry is very competitive," Nickels said. "To distinguish ourselves from other banks and brokerage companies, we need a competitive edge."
The company uses focus groups, phone surveys and online surveys to determine how customers perceive KeyCorp, Nickels said.
Two years ago, KeyCorp deployed Inquisite, a software package from Catapult Systems Corp., Austin, Texas, that allows companies to create and manage their own Web-based surveys. Nickels said the online surveys developed with Inquisite are a lower-cost, faster method of obtaining research than other methods.
Jim Spaeth, president of the Advertising Research Foundation, New York, said there is a trend to shift from offline research to online research.
Spaeth estimated cost savings of 10% to 15% for online research over more costly telephone and mail surveys. And he said that companies are investing more in testing creative concepts and overall risk reduction with their market research.
"Even though there is less advertising going on, a greater percentage of advertising is probably being tested," Spaeth said.