With recession-challenged consumers buying less, looking for deals or switching to different brands, product categories or stores -- some even changing long-held attitudes about consumption -- the degree of uncertainty in business and consumer markets has soared. Yet to save cash, most marketers are cutting back on the research that would help manage that uncertainty. In the U.S., spending on market research has fallen for four consecutive quarters, and chief marketing officers don't expect the situation to turn around any time soon. In fact, most big consumer marketers are seeking to shave 10% to 20% off research budgets.
In flush times, a rising tide of consumption can compensate for less-than-optimal branding, positioning, pricing or segmentation. That's certainly not the case now. At the same time that marketers must pare research expenditures, they face added pressure to secure high-quality data and insights.
So how can CMOs minimize the impact of reduced spending on research? Here are seven steps.
How to get more out of the research you are doing
Savvy marketers focus their research on the products, brands and markets that are key to their marketing strategy. In a recession, it's essential to get a clear read on existing core customers, including those who are most loyal to the brand and those who are most profitable, rather than fritter away research resources on potential or peripheral consumers. When times are good, there is budget available for increased research on secondary products or customers. Now, nice-to-knows that are not essential will have to wait.
ENLIST TRUSTED PARTNERS
Marketers and research suppliers who trust each other and have established long-term relationships can jointly plan how to extract more insights and make better decisions with less money. For example, combining data sets may reveal new leading indicators for changes in consumer behavior. Tracking studies may have an edge over one-off projects. CMOs who trim costs by consolidating their budgets with an integrated-research supplier should insist that the supplier looks for ways for its component agencies to work together as well as eliminate research redundancies.
VALUE EXPERIENCE AND JUDGMENT
CMOs should tap the experience of managers and researchers who've lived through previous recessions with issues such as setting prices. Experience also reveals proxies: For example, in tough times, some marketers use research results from Sweden as a proxy for Scandinavia rather than conducting the same research in all Scandinavian countries.
SEIZE OPPORTUNITIES OVERSEAS
Some large multinational marketers, such as Unilever, are shifting research costs away from Western Europe and toward emerging markets in Asia and Latin America. Compared to developed economies, the costs of research in emerging economies are less and the payoff from incremental insight can often be greater. Brand preferences and consumption levels in emerging markets such as China, India and Brazil tend to be more fluid. Consumer research is critical to aid marketers trying to cement brand preferences early on as these economies develop.
|ABOUT THE AUTHORS|
John A. Quelch
is senior associate dean and Lincoln Filene Professor of Business Administration at Harvard Business School. He also serves as nonexecutive director of WPP Group. He blogs at quelchblog.com
Katherine Jocz is a research associate at Harvard Business School. Previously, she was VP-research operations at Marketing Science Institute.
WITH A DASH
Online research is cheap, fast and the wave of the future. Tools such as SurveyMonkey let non-expert users create custom surveys in minutes. As an alternative to offline focus groups, marketers can assemble custom online panels of consumers for qualitative research on new-product ideas or new ads. Taking the do-it-yourself approach rather than outsourcing to a market-research firm saves money, sure, but you risk getting no more than what you pay for. The opinions of a convenient sample of an enthusiastic online brand community may not represent all users.
DON'T CUT ACROSS
Just as important as knowing where to cut research is knowing where not to cut. When marketers are creating fewer new ads and introducing fewer new products, it is doubly important to use rigorous pretesting to select the strongest alternatives. In categories where the bases for consumers' value judgments are changing, spending a little on copy research can prevent spending a lot more money on ineffective messaging. Adding a few questions to standard tracking studies is a low-cost way to shed light on changes in purchase behavior.
KEEP AN EYE ON THE NEW CONSUMER
Despite budget pressures, smart marketers devote a portion of their market research to getting a handle on future changes in consumer behavior. Are consumers going to revert to previous consumption patterns when the recession ends? Or are they developing coping mechanisms that will endure? What new products and services will they be open to embracing? If, as in the financial-services category, consumer confidence and trust in brands have been eroded, what steps will it take to regain them? The recession will end, and future success depends on being well-positioned, based on sound research, when it does.