Developments in the Global Market Research Industry by Ted Vonk Budapest, 11 November 2004.

Developments in the Global Market Research Industry

by Ted VonkBudapest, 11 November 2004

MetamorphosisConsumer Trends in Time and Space

2

Agenda

• Developments and changes in the Market Research Industry during the last 10 years

• Future developments until 2010

• Global Industry Study


3

MR: Adds Value to Business and Society

• Connects demand and supply

• MR Creates– Transparency

– Effectiveness

– Efficiency

• Contributes to – Social insight

– Quality of society

The Market Research

Profession


4

Market Research has Scientific Roots …..

However, it became an Industry.. In 2003• Growth of World Market

towards $ 18,9 billion (€ 16,8 billion)

• Europe : $ 8,3 billion(€ 7,3 billion)

• Hungary: $ 53 million(€ 47 million)

• Emerging external challenges

The Market Research Industry


5

External Dynamics Drive Change• GLOBALISATION

• ICT/TECHNOLOGY

• NEW ENTRANTS/COMPETITORS

• LEGISLATIVE PRESSURE

• DIFFERENT REQUIREMENTS

• CHANGE OF POLITICAL AND ECONOMIC SYSTEMS

The Market Research

Industry


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Globalisation of the marketing area

• … the driving force behind growing demand for research– MR has become integral part of marketing mix

• Clients of market research asked for:– Worldwide coverage– Consistent quality– Harmonisation of the ways of working– Branded products

• Mergers and acquisitions in the MR industry– Economies of scale– Research product development– ICT investments


7

Globalisation of the MR industry

Mergers and Acquisitions have reshaped the MR industry landscape•Concentration of providers

– Top 25 agencies: 60% of global turnover

•Acquisitions will continue– In first half 2004: 17 M&A by top 25– Alliances in audience measurement (VNU/WPP)– Publishers and providers of marketing services show

interest in the MR industry

•Listed at the stock exchanges– Different ways of working– Short term policy, shareholders value


8

Top 10 Research ProvidersProvider Country xMillion

US$

VNU (Nielsen Media, AC Nielsen) NL 3.048 TNS UK 1.561IMS UK 1.381Kantar Group (RI, Millward.Brown) UK 1.002GfK Group Ger 673Ipsos Fr 644IRI USA 554Weststat USA 381Synovate UK 358NOP World UK 336


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There is room for small/medium agencies

• Local business• Closer to clients/partnerships• Specific industry (niche) area’s• Growing demand of small and medium

sized companies for research


10

ICT/Technology

• All data collection computer assisted• Shift within data collection methods

– Face-to-face and CATI will go down– Direct registration of behaviour

• Online data collection still to come• Advanced tools for analysis within reach• Integration of information from different

sources• Online delivery of results


11

New entrants and competitors

• No entrance barriers– Anyone can enter the business– No big investments needed anymore

• Competitors from other industries– CRM suppliers– Consultancy firms


12

Legislative pressure

• Legislation is a threat for the MR industry– Privacy laws– Data protection laws

• Legislation does not distinguish Direct marketing and market research

• Restrictive measures limits the ways to conduct MR


13

Self regulation helps….

….to avoid restrictive legislation– Ethical codes and guidelines, quality standards– Do-not-call system, Anti-spam– Adhered to by the whole industry:

“One industry, one voice”

• ESOMAR and EFAMRO have developed several initiatives to stimulate self regulation and to fight against threatening legislation– Monitoring system of drafted legislation– National associations joined these initiatives


14

Different requirements of end-users

• From “nice to know ”towards“ needs to know”

• Research that directly contributes to the business:– Actionable results– Predictive insights– Precise, timely and tailored

• Ability to link propriety data, purchasing data and research data

• Integrated understanding of business• More creativity


15

A different type of MR emerging…

From Risk-Aversive MR

Go/No GoType of research

MonitoringType of research

To a more Strategic one

Needs-drivenInsightfulType of research

http://www.amazon.com/exec/obidos/tg/detail/-/0385501331/ref=lib_dp_TFCV/104-6462036-5213501?v=glance&s=books&vi=reader#reader-link


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Client companies will drive change

Changes in the industry will be increasingly demand driven (“demand pull”)

• 1000 top clients already spend 80%

• 65% of their budgets go to 25 companies

• For “Best Solutions” they will not wait for a top-provider (in-house, outside, new entrants)

…pressure to adapt current MR business model


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The Current Business Model…..

* Source: The Profit Zone, Slywotzky & Morrison

The Traditional Value Chain*

rapportageonderzoek

Product/Service offering

Inputs,Raw material

Product / Service Offering

Channels The Customer

Assets/Core Competences


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The Current Business Model…..

Characteristics:• Huge investments in “data manufacturing”• Value based on data delivery (tracking, syndicated, simple ad hoc)• Focus on shareholder growth/profit

* Source: The Profit Zone, Slywotzky & Morrison

Traditional Phases of Development in MR (large and medium sized companies)

build up researchtechnology/

build data factory

add local/regional

competence

add domain-specific/

sector competence

add marketing competence

(pre-structured solutions/acc.mgt)


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Reputation vs. Margin

Dominant Business model:

• does not support “Best Solution”/ Consulting Services if they do not help sell data.

• focuses on increasing factory load & coverage

• Helps to sell products and syndicated services

Business Insights

DataDelivery

BusinessInsights

DataDelivery

The amount of reputation

The amount of profit


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…. change of rules of the game

rapportageonderzoek

Product/Service offering Channels

Product / Service Offering

Inputs,Raw material

TheCustomer

Assets/Core Competences

MR Industry to Innovate:

Improve value add ….and move to a much wider context: from data management to decision facilitation

(using variety of sources…..meeting demand for actionable insights)

Reverse value orientation: transform business model

Change in take-off phase


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What does this mean in practice?

• Focus is shifting from the quality of data collection towards better decision support and a clear contribution in improving decision making

• Market researchers need to demonstrate that they can make the difference. Not only providing facts, but also look at the consequences

• MR industry should extend its offer to both data collection and evidence based consultancy– Become more specialists in a certain area– More business oriented market researchers– To be able to analyze multiple, imperfect data sets


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How to enter the added value business?

• Force research technicians to specialize along industries or practices

• Accumulate marketing knowledge around branded products which serve important marketing applications (brand equity, advertising, CSM)

• Attract skilful consultants from management consultancies

• Combine research competence with marketing competence

We are able to think!!!!

And will this happen…..?Vision 2010 study


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Vision 2010 study

• Online study among researchers from all over the world about industry developments

• Fieldwork: June 2004• 1351 respondents (837 providers and 514

clients)


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Expected changesWill the market research industry in 2010 be different as compared with

today?

No, will be almost the same14%

Don't know3%

Yes, will be different83%

(n=1351)


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Changes in Industry composition in 2010

Main changes in the market research industry in 2010in industry composition and ways of working

13%

11%

7%

5%

4%

Stronger Consultancy role

Consolidation of Industry will continue

Split between (large) data providers and (small)specialized consultancies/agencies

Faster research

More focus on decision making(n=1115)


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Research Process related changes in 2010

Main changes in the market research industry in 2010 research process related changes

30%

27%

10%

7%

7%

5%

Shift towards online research

More intensive usage of new technologies

More advanced tools and techniques to analyse

Greater role for (Access) panels, less randomsampling

Delivery via Internet

Quality of sampling will decrease(n=1115


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Trends with impact on ways of working

Trends that will have most impact on ways of working(Industry composition related scenario's)

53%

32%

20%

19%

16%

13%

Clients will require far more creativity and business intelligencefrom providers

Market research will become more important because of greaterincorporation in companies strategic planning

The consolidation of the industry will continue (more mergers)

Innovation of the industry will be driven by small agencies/nicheplayers

Consulting companies will take over territory of market researchproviders, turning these providers into mere dataproviders

Clients will cut back on their internal research departments,making providers work with end-users directly

(n=1351)


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Trends with impact on ways of working

Trends that will have most impact on ways of working(research process related scenario's)

35%

27%

22%

21%

15%

14%

7%

Internet research will continue to revolutionize thebusiness

There will be much more data available from differentsources

Respondent cooperation will dramatically decrease

Market research data will be more integrated withCRM-data

Most of data collection will be done via large accesspanels

Parts of the research process will be outsourced tocheaper countries

Data collection will mainly be done by large providers

(n=1351)


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Most likely to happen situation next 10 years

Most likely to happen siuation in next ten years

41%

40%

9%

6%

4%

30%

32%

20%

12%

6%

More partnerships between providers and clientswill emerge

The research market will be divided into dataproviders and information consultancies

No change and same issues as today

Traditional market research will disappear

Don't know

Vision 2010 survey

Marco Polo,


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Most serious threats for MR industryMost serious threaths for the Market research Industry in the next 5-10

years

54%

37%

32%

25%

24%

18%

Missing skills to recognize the difference betweengood and poor quality of research by clients

Decreasing response rates

New competitive sources for information

Other parties adding value to market research data

Government regulation and legislation

New market research companies that leverage theInternet (n=1351)


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Potential success factorsPotential success factors - very important

72%

60%

58%

47%

42%

40%

40%

Understanding business and domain specificissues

Recruitment and training of a new generation ofresearchers

Standards of performance/quality standards

Different/additional requirements for professionalskills

Promotion of the industry/raising the perceptionof the industry

Exchange of best practises

Respondent rates (n=1351

Global Industry Study


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Global Industry study 2003

• Annual study about MR industry turnover • Associations and experts provide

information• 40 associations completed the

questionnaire• Experts estimated the turnover in 21 other

countries

• Figures should be treated as ESIMATES


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MR Turnover per region2002 2003

EU15 6,327 7,608New member states 191 243Other Europe 368 435Total Europe 6,885 8,285

North America 6,707 7,137Central and South America 632 685Asia Pacific 2,239 2,569Middle East & Africa 205 246Total World 16,668 18,922

Turnover in million US$


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Share of global market per Region

%EU15 40.2New EU member states 1.3Other Europe 2.3Total Europe 43.8North America 37.7Central and South America 3.6Asia Pacific 13.6Middle East & Africa 1.3Total World 100.0


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Calculating growth rates….

……means eliminating the effect of changing exchange rates…….

Euro changed from 1US$ = € 1.06 in 2002 to 1US$ = € 0.89 in 2003

By creating a ceteris paribus situation the effect of the exchange rates has been eliminated and the growth rates have become actual


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Countries with a real growth rate over 10%

Real growth rate 2002/03 (adjusted for inflation)

%Chile 30.6China PR. 28.0Bulgaria 23.6Vietnam 23.3Philippines 20.9Mexico 17.2India 16.9Slovak Rep. 14.8Poland 14.7Indonesia 13.4Hungary 11.5Czech Rep. 11.0Argentina 10.0


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Growth rate per Region unadjusted adjusted

for inflation for inflation2002/03 2002/03

% %EU15 2.8 0.7New member states 14.0 11.8Other Europe 7.9 0.7Total Europe 3.4 1.0

North America 5.6 3.3Central and South America 18.1 8.3Asia Pacific 6.4 5.6Middle East & Africa 4.9 1.1Total World 5.1 2.7


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EU 15: turnover 2003 and real growth rate Turnover in Real growth rate

US$ million (adjusted for inflation) EU 15 2003 2002/03

% UK 1.997 - 0.1Germany* 1.805 - 0.1France* 1.580 2.4Italy* 581 2.4Spain* 395 2.9Netherlands* 305 - 2.8Sweden 273 - 0.2Belgium* 164 - 0.2Finland* 113 3.6Denmark 106 - 2.0Greece* 67 2.6Ireland* 59 - 1.7Portugal* 52 0.0Luxembourg* 4 2.7


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New EU member states Turnover in Real growth rate US$ million (adjusted for inflation)

New Members 2003 2002/03Poland 97 14.7Czech Rep. 53 11.0Hungary 53 11.5Slovak Rep. 12 14.8Lithuania 7 9.9Slovenia 6 5.3Estonia 6 2.0Latvia 5 - 2.8Cyprus 3 2.0Total 243 11.8%


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Other Europe

Turnover in Real growth rate US$ million (adjusted for inflation)

Other Europe 2003 2002/03

Bulgaria 7 23.6

Norway 90 - 3.9

Romania 12 - 3.8

Russia 85 4.6

Switzerland 162 4.1

Turkey 50 - 8.4

Total 435 0.7


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Price Index of Research

USA 242 Italy 92Japan 230 Greece 81Sweden 180 Portugal 77UK 170 Czech Rep 76France 158 China 70Germany 152 Turkey 70Belgium 138 Poland 52Netherlands 137 Russia 50Finland 116 Ukraine 48Spain 115 India 37Austria 105 Bulgaria 29


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Countries with highest MR spend per capita US$ per capitaUK 33.80Sweden 30.82France* 26.40USA 22.88Switzerland 22.55Germany* 21.90Finland* 21.72Norway 19.94Denmark 19.89Australia 19.60Netherlands* 18.97New Zealand 18.11


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Spending per capita in East and Central Europe

US$ per capitaUK 33.80USA 22.88Hungary 5.31Czech Rep. 5.19Slovenia 3.24Poland 2.52Slovakia 2.17Croatia 1.99Bulgaria 0.87Russia 0.59Romania 0.55Ukraine 0.31China 0.30India 0.06


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Domestic and international clients

Domestic Clients from Clients outside

countryBulgaria 55 45Czech Rep. 80 20Hungary 84 16Poland 89 11Romania 78 22Russia 75 25Slovakia 64 36Slovenia 74 26Total 76 24


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Consumer vs Non-Consumer Research

Consumer Non-consumer Research Research

% %Romania 88 12Czech Rep. 80 20Hungary 79 21Slovakia 78 22Russia 70 30Slovenia 68 32Poland 64 36Bulgaria 60 40

Total 78% 22%


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Expenditure per research method

Total Total quantitative qualitative Other

% % %Czech Rep. 82 13 5Slovakia 81 15 4Slovenia 80 15 5Russia 75 25 0Hungary 72 25 3Romania 71 18 11Poland 68 20 12Bulgaria 65 25 10

Weighted Total 81 14 5


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Spending quantitative research methods f-to On-

Post Tel -f line Other Total % % % % % %

Bulgaria 0 10 50 0 5 65Czech Rep. 1 14 40 1 25 82Hungary 1 18 50 1 2 72Poland 0 8 44 0 16 68Romania 0 6 53 11 1 71Russia 0 20 55 0 0 75Slovakia 0 20 57 0 4 81Slovenia 3 40 32 3 2 80

Netherlands 16 29 23 20 0 88Total 7% 20% 31% 6% 16% 81%


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Online research starts to take off slowly

• Netherlands in the lead: – 2003: 20% of all Market Research on-line

research– 2004: about 40%– Shift towards large access panels

• What makes it happen in the Netherlands?– Internet penetration over 70%– Constraints of other methods (non-response,

costs for interviewers)– Acceptation by clients

• Other countries will follow soon


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In Conclusion

• Market Research industry is full of changes• Transforming to a major industry• The need for change is recognized• A lot of change has still to come• Period of change is a period of

opportunities

• However, market researchers need to demonstrate that they can make a difference….

Developments in the Global Market Research Industry by Ted Vonk Budapest, 11 November 2004.

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Transcript of Developments in the Global Market Research Industry by Ted Vonk Budapest, 11 November 2004.