Why Do Companies Buy Cheap Market Research?

image of chart showing methods of how research surveys are conducted

I read with interest Edward Appleton’s blog (Can MR Clients Recognise Quality When They See It?). Edward was commenting on Reg Baker’s post Final Thoughts on MRMW where he suggested that

“if online and social media have taught us nothing else it’s that clients sooner or later will buy cheap data over good data every time.” Reg Baker

I agree with Edward that cheapness is missing the point with regard to market research. The issue is value or perceived value in most cases. This is why management consultants are able to command such high fees when they often re-package research. They simply present it in a way that is more strategic and digestible for senior management. I have always found research budgets easy to come by when I have been able to demonstrate a clear link with sales or costs. Linking insights to marketing strategy is essential for any client-side researcher. Being visibly part of this process is critical for raising the perceived value of insights.

However, I can also identify with the sentiments expressed by Reg Baker. From my experience in financial services I have observed a number of situations that can encourage cost to override the quality of data. Either for a small qualitative research or a larger quantitative research study.

  • AGENCY ROSTERS:

Rosters that have too much emphasis on cost savings and not enough weight given to building relationships rarely achieve their aims. The result is a bureaucratic straight-jacket and wastes a lot of time and money. You end up with fewer suppliers and agencies have to reduce unit costs. However, this simply encourages agencies to offer a skeleton service. Anything not in the proposal is then an extra. Given the need to show savings. It is then difficult to justify any increase in budgets to cover extras that might improve data quality. This strategy for saving money is essentially counter-productive.

  • COST CHALLENGES AFTER THE WINNING PROPOSAL:

I don’t mind cost challenges, it’s a fact of commercial life. However, random cost challenges where management ask for cost savings after the agency has been selected can have dire consequences for complex studies. This sometimes happens because marketing managers perceive research as an easy area to cut. They don’t see a direct link to short term business goals. Some managers also see research as a commodity. Cost reductions are made by sacrificing sample size or other factors that affect data quality.

  • OBSESSED WITH COSTS:

Some companies love cost reductions. The companies that focus on costs that value functions, like research, have the same as any other cost centre. This means that procurement expect research departments to use methods such as online auctions for competitive tenders. This again is treating research and data as a commodity. It assumes everything including insights can be measured.

  • MANDATORY SURVEY FOR GLOBAL HQ:

When Global Head Offices impose a survey across all their markets, there is a big risk that the research will not be fit for purpose in many countries. The unique characteristics of the UK market are not taken into account by the Global HO. This means that local management do not buy-in to the insights and the study is seen as a necessary evil. One consequence is that the quality of data is not a priority.

  • GARBAGE IN GARBAGE OUT!

There are other situations where cost is seen as more important than the quality of data. Most derive from a lack of appreciation of the potential value of insights. The key take out is that we recognize there is a problem and we put strategies in place to deal with it. From a client-side perspective it is a constant process of stakeholder management, and building relationships with suppliers. However, the best way of demonstrating the value of insights is to deliver data that is actionable and clearly assists management in meeting their set targets and goals.

Recommended reading:
Thinking Fast and Slow

Thinking, Fast and Slow

By Neal Cole

Neal is Chief Optimisation Consultant at Conversion Uplift Ltd. He has over 10 years experience of A/B testing and improving conversion rates for major international brands across multiple sectors, including gaming and financial services.