Should Research Agencies be Paid for the Value of Their Insights?
An article in the October 2011 issue of Research Live (“The Value of Research” by Tim Phillips – it didn’t appear to be in their online edition, but there is an alternate take here) on the topic of Agency remuneration prompted me to share my thoughts as a client-side researcher on the subject of ROI and market research.
The article suggests that remuneration for performance is an urgent topic (if in a somewhat sensationalist/ melodramatic manner, not to say one laced with tired jargon such as “time is running out…” “perfect storm…”) Agencies, so the gist, can look forward to tough evaluative times.
It’s an article where none of the really big players such as Ipsos, TNS, Gfk, Nielsen (to name a few) are mentioned at all, nor are the views of the more hip boutiques represented. So there is a sense of a lot of people either not willing to talk, or hadn’t been asked for their views.
It’s an important topic, though, as the value perception goes to the heart of how much Senior Management is prepared to invest of their total budget to Insights. We compete for share of wallet.
Here’s a Client’s personal view on the question of whether Agencies should be compensated according to the impact of their insights – I repeat, purely my personal views:
- Agencies that deliver powerful insights are worth their weight in gold.
- This will invariably lead to excellent client-agency relations, repeat purchase, preferred supplier status – any number of things that will lead to enhanced revenue and possibly increased margins for suppliers.
- Individuals within Agencies tend to be the source of great insights. A minor point but: should we Clients reward individuals – or their Agencies? And how would this work in practice?
- Measuring the impact, let alone the value, of a particular insight is extremely difficult, when it’s just one input into a business decision – competitive activity, trade partner shifts, distribution changes, pricing movements…there is a whole raft of other variables that can and do impact market position and sales/ share growth.
- How do you share the value of a decision that leads to cost avoidance? Money not spent may have been technically saved, but there is no incremental revenue factor and no additional money in the pot.
- Agencies, as Kathryn Korostoff points – http://bit.ly/90BJpD – don’t have control over implementation.
- Value perceptions are critical, especially amongst those who control budgets – Top Management. Concise, timely and regular snap-shot recommendations from the Insights Department is one way of upping the value perception stakes.
- Benchmarking expenditure on Insights as a percentage of total sales is a good way of establishing how much money a given company in a given category should spend on CI
Is the debate over ROI for Research a productive one? I wonder. Maybe a more interesting question is to ask what margins Market Research Agencies deliver their owners in comparison to other types of Marketing Services industries, including Communication Agencies be it PR, WOM, Social Media or traditional advertising media.
Looking at the comparative margins would be interesting from a value perceptual perspective – as no doubt the likes of Martin Sorrell did a while back when he diversified WPP in the early days into Marketing Services, including research.
Another interesting and perhaps subsequent perspective would be to look at industries that have changed radically due to the arrival of new technologies or disruptive business models, and draw analogies for our own space. The airlines industry in Europe has seen the likes of easyjet, Ryanair significantly erode the share of traditional competitors due to a better grasp of what is valued by a vast swathe of customers. Technology is another interesting one – lets say mobile phones. Again, shifts in value drivers have lead to huge changes in the industry landscape.
From a client perspective, the drivers of the moment in research remain for me: speed (often research is regarded as too slow), cost/quality balance (some areas of research are regarded as expensive by many marketing folk for what they deliver), authenticity (we’re making huge strides here with derived, observational/ethnographic and neuro-science related techniques) and impact (responding pertinently to the “So What?” question). The list isn’t exhaustive.
My prediction for what it’s worth – Insights in whatever form or shape, however delivered, will remain extremely value for the foreseeable future, and market forces will answer the value question for us.
Curious, as ever, as to others’ views.