Market Research Services
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Industry Overview
The US marketing research services industry includes about 5,000 companies with combined annual revenue of $11 billion. Major companies include Nielsen, Forrester Research, The Gallup Organization, Maritz Research, and Millward Brown. The industry is concentrated: the top 50 companies generate about 55 percent of industry revenue.
Competitive Landscape
Demand is driven primarily by the health of the US economy and corporate profits. The profitability of individual companies depends on managing costs and maintaining a steady flow of work. Large companies have advantages in providing a variety of research and ancillary services to large customers, and in achieving economies of scale in marketing and computerized operations. Small companies can compete successfully by specializing in a research methodology or in emerging niche knowledge areas. The industry is labor-intensive: annual revenue per employee is less than $100,000.
Products, Operations & Technology
Major services are marketing research, which accounts for over 90 percent of industry revenue, and public opinion polling. Other services include media monitoring and analytic services. Many research firms specialize in 1) a discipline, such as customer satisfaction, human resources, or advertising tracking; 2) an industry segment, such as technology or pharmaceuticals; or 3) marketing services, such as focus groups, polling, or psychographics.
Most market research firms perform primary research – they gather and analyze original data. Primary research can either be custom for a particular client, or syndicated and sold to a number of clients. Secondary research uses previously published data and provides primarily background information. Research firms conduct both consumer research projects and business to business analyses.
Marketing research begins with outlining a problem to explore, assessing a new product idea or concept, or testing a hypothesis. The firm works with the client to determine the project objectives, designs an appropriate research methodology and sample plan, chooses a data collection technique, performs the research, analyzes the results, and then communicates those results and recommendations to the client. Research firms generally outline these steps in a contract proposal that includes a project plan and price. The most profitable projects are tracks, projects that repeat but have a one-time setup cost.
The two primary forms of market research are qualitative and quantitative. Large full-service firms typically offer both; smaller firms specialize in one. Qualitative research is used for exploratory purposes with a small number of respondents, such as focus groups of eight to 12, or one-on-one in-depth interviews. Qualitative research is effective to test concepts such as new ads or marketing messages. Results aren’t representative of the general population. Quantitative research, used to draw conclusions and test particular hypotheses, is statistically based and uses random sampling techniques with a large number of respondents so results can be inferred to the entire population.
Market research firms consist of a staff of professionals with various levels of experience and expertise, support personnel with technical and clerical skills, and IT for collecting, tabulating, and analyzing data. Large firms with many professionals may have some economies of scale and produce higher annual revenue per employee ($150,000 for the top 20 firms) than small firms ($70,000 for firms not in top 50). Quantitative projects can involve several interviewers, data tabulation personnel, as well as a senior researcher and support staff. Qualitative projects generally involve one or a few research professionals.
Information technology has made quantitative research more efficient. Computer-assisted phone interviewing (CATI) places phone calls by calling the correct area codes and exchanges and randomly assigning the last four digits. In this way, even unlisted numbers are included in consumer samples. Statistical software has made data tabulation and analysis much quicker. The Internet is also being increasingly used as a data collection tool, primarily with the establishment of web panels. Companies acquire the emails of consumers who agree to serve on the panel and participate in selected studies. Large firms also use project accounting software to track project component costs and billings.
