Online Methods Upend Consumer Survey Business
LOS ANGELES (AdAge.com) -- Want to know what consumers think? Go online. Internet-based questionnaires this year will account for nearly one-third of U.S. spending on market-research surveys, according to the newsletter Inside Research. Marketers get their results more quickly and -- aided by a brutal price war-for less money.
"Faster. Cheaper. It boils down to that," said Laurence Gold, the newsletter's editor and publisher.
The shift from older methods -- phone and mail surveys, for example-- isn't surprising given growth on the net. About two-thirds of Americans age 15 and older now use the internet, and rapid adoption of broadband makes it easier for consumers to participate in surveys. U.S. spending on online market research has rocketed to $1.35 billion this year from $3.8 million in 1996, according to Mr. Gold.
Domination in three years
"The migration from mail and face-to-face to phone research as a mainstream data-capture platform took more than 10 years. The move to online from phone is taking half that," said Jonathan Jephcott, exec VP of Synovate ViewsNet, the online research and panel division of global research firm Synovate. "It is inevitable that online panels will be a basis for the majority of ad-hoc quantitative research around the developed world within the next two to three years."
Marketers historically have been able to cut costs 15%-20% by moving from mail surveys to online and about 30% by shifting from phone surveys to online, said Kevin Waters, exec VP of TNS Custom Research, part of market-research powerhouse Taylor Nelson Sofres.
Online surveys eliminate the cost of phone interviewers and postage, and tabulation is easy because consumers enter the data. So marketers count on big savings. "Sadly for the market-research industry, this has caused a significant price war," Mr. Waters said. "Prices have dropped, margins have dropped and there is this expectation that it's very inexpensive to do it online."
Online work still has a relatively small share (about 17%) of overall U.S. market-research spending, according to Mr. Gold. The bulk of internet research money is spent on surveys, an application particularly suited for the net.
In contrast, Mr. Gold said, qualitative research accounts for just 1% of online research spending. Qualitative work-such as focus groups or in-depth interviews -- "just hasn't budged" online, Mr. Gold said.
There are strong arguments for both online and offline research -- and good reason to do both. At Kraft Foods, online research is a supplement to traditional research, said Seth Diamond, director-consumer insights and strategy. "Online is not a solution in and of itself to all of our business challenges," he said, "but it does expand our toolkit." For example, insights from Kraft-sponsored online communities helped the company develop its popular line of 100-calorie snacks.
Joe Plummer, chief research officer at the Advertising Research Foundation, advises marketers to start with the objective and then choose the appropriate research method. It may make sense to solicit proposals from firms that offer both online and offline. "Working with them allows you to say, 'Here's my marketing issue, here's my research issue, come back with a proposal,'" said Mark D. Wolf, manager-market research at Guardian Life Insurance Co. of America. Top research firms tend to offer both online and offline; TNS does 40% to 50% of its U.S. custom market research online, according to Mr. Waters.
Marketers do have an alternative: Think small. Howard Moskowitz, president-CEO of research and consulting firm Moskowitz Jacobs and co-chair of an ARF task force evaluating the state of online research, argues the edgiest research is done outside the global giants. Clients open to new ideas would do well to evaluate offerings from both big firms and small, innovative rivals. "It's the Wild, Wild West," he said. "Almost anything goes."