Market research costs - how much?

Nowadays, information is regarded as invaluable. Any company needs internal information (generated by individual departments) and external information (generated by the widely understood company's environment), in order to work out an effective marketing strategy. Basic areas, about which companies would like to be informed, usually include: market, customers, products and remaining marketing activities judged by company's customers and competitors.

Do it yourself or outsource?

While most companies gather and process internal information independently, they usually have considerable difficulties with gathering and processing external information. Research based on external sources may be conducted independently by marketing department. It may be also outsourced, i.e. to a specialized research agency. Basic challenges of independently conducted environment research are e.g. whether the employed staff has suitable competence, technical and financial capabilities to conduct the research (i.e. to establish or hire a group of pollsters, to rent a place for focus interviews). In case of outsourcing, the main problem is the cost.

How much and why so expensive?

This question ideally summarizes the attitude of managers towards the offers of research agencies. It is believed that market research is outrageously expensive, and no matter how much one would spend on it, the money will be used entirely. Most complaints are made about costs, completion time (constantly extended deadlines), manner of preparing reports (incomprehensible language, charts without comments), never ending preliminary arrangements.

Obviously, it doesn't always have to be so. There are agencies which conduct their responsibilities thoroughly, keep to deadlines and are still relatively cheap.

Cost of research for the employer

What is the cost of market research from the perspective of an employer, namely, a customer of a research agency? Several cost components may be singled out: time - wasted on contacts with the agency, saved thanks to good communication with the agency; knowledge - needed to asses the research report, indispensable to decode the numbers without comments; the so-called psychological costs or loosing one's temper in contacts with agency representatives and superiors, saved thanks to easy and fast exchange of information with the agency; as well as the price fixed by the agency.

The most important component is the price. Although managers claim that they take into consideration many different components while choosing research agencies, the most essential and important one for them is the price and the issue of how quickly the research will be conducted. Many managers dream about finding a research agency that will solve their problem within 24 hours and for free.

The principle of price fixing

According to research agencies, it is not easy to fix a price for individual research. It is relatively simpler to do this for highly standardized research like e.g. omnibus research. Difficulties appear with tailor-made research.

David Ogilvy stated once that price fixing is a guessing game. To some extent, it can be expressed in this way. An example of the practical application of guessing in price fixing may be price fixing for a bid in a tender. It is a sort of game between participants of a tender and the client. Apart from fixing the minimum price, at which the cost of the research will pay for itself, every member has to guess the financial capacity of the employer (what funds does the employer possess and how much he can spend on research), and the financial capabilities of competitors (what price they will offer and how much they can reduce the price).

The theory gives three principles of price fixing:

* Cost
* Demand
* Competition

Those three principles are used simultaneously in market research.

Every agency wants to conduct research at higher prices than the cost of research. Whereas the cost may depend among others on the type of research (qualitative research is cheaper than the quantitative type), methods of gathering and processing information (those done on the phone are cheaper than direct interviews), sample size and availability (smaller samples are cheaper, not easily accessible respondents more expensive), number of people engaged in conducting the research and their level of competence. In some cases, companies agree on a specific dumping technique and pay extra money for the research. It is possible if the customer is prospective and e.g. announces a tender for one commission, but more commissions may be expected later.

Research agencies take into consideration a customer's financial capacity when they are establishing a price. But one should not expect exactly the same research to be conducted for a big industrial tycoon and for a small shoe producer. The latter will not get a considerable discount just because of the smaller scope of activity. The research will be completely different, methodologically adjusted to the needs and opportunities of the employers.

The research agencies market is driven by keen competition. Therefore, it is important to watch how prices are fixed by competitors. Only few decide to publish their price lists. Among 39 research agencies, which names are present in the "Media and Advertising Almanac" („Almanach mediów i reklamy") and those with their own websites, only three decided to provide their price lists based on research and only one offers the possibility to order such a price list.

The matter of price lists

Why don't most agencies give prices for their services? Because it would indicate standardization of research techniques and would be in contradiction with what most agencies emphasize, that is research is tailor-made to the needs and opportunities of a customer. A lack of price lists contributes to the price being regarded as a tactical element, which gives quite a lot of leeway and enables flexibility of the market.

Besides, even the official price lists are sometimes a myth. Actual prices are negotiated individually and are lower than those presented in the price lists. Nevertheless, one should not expect discounts like those which are announced in advertisements (40%), but it is possible to lower the initial price by 5-8%.

What to do to make it cheaper?

A company planning to conduct a market research, and at the same time, lower the cost considerably, has several possibilities. First of all, if the company intends to conduct quantitative research, it may reduce the sample or give up quantitative research in favour of qualitative research. Secondly, the company may employ a small research agency, research science institute or higher education institution. Thirdly, the company may try to conduct the research through its own marketing department.

How to compare offers?

Market research offers made by specific agencies may be compared to one another just as one may compare a Fiat to a Mercedes. They have only one common feature - both are cars. Besides, only differences are left. Just as not everyone has to drive a Mercedes, not every company has to use the services of the ten greatest research agencies in Poland. Everything depends on the needs and financial capacity.

What should be considered in choosing the most suitable offer?

* Is a report included in the price of the basic research or is it to be paid for additionally?;
* Is a report going to include guidelines for the company or present the results only?;
* Is a report going to contain raw data in form enabling independent processing?;
* Is a graphic representation of results (drawings and graphs) included in the basic price?;
* Are additional calculations, alterations (e.g. during three months since handing in the report) included in the basic price?;
* Is supplementary remuneration for the respondents included in the research cost?

Comparisons of prices

Agencies avoid comparing their offers and especially prices. Thus, there is virtually no research presenting standard prices of individual services. Most of them concern market research expenses, agencies' income, the number of conducted interviews, but not prices.

Market research does not have to be very expensive. It is high time to acknowledge that not only representative research (the most expensive one) has sense. The company has access to a number of methods with different prices. Every method has both advantages and disadvantages and it is the company itself that should, with possible help of a research agency, judge benefits and cost of the chosen method. The basic rule should be remembered, i.e. that research is conducted in order to minimize the risk of a wrong decision and not to confirm the rightness of the activities that have already been started.

Article Source: http://www.rightbiz.com

This article has been translated by mLingua Worldwide Translations, Ltd. mLingua provides professional language translations in all major Western and Asian languages, software localization and website translation services.

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