MarketTools Blog

After speaking at the recent ROI on MR conference in Chicago, I have been paying particular attention to the “results aspects” of our most recent client engagements.  While this is not the first time the market research industry has tackled the ROI question, there's a new urgency to the quest to prove the relationship of insights to outcomes. There are many research departments and groups that are still waiting for management to ask them about the Return on Investment for research – but some companies are already pushing suppliers to prove ROI on a per-project basis, and a few forward-thinking market research organizations are actively incorporating data about impact on business results as a part of their deliverables. 

One of the conference themes focused on ROI measurement.  Tactical market research – such as late stage concept tests, graphics tests, or messaging tests – is easily measured, and ROI can be readily calculated.  Strategic market research – such as A&U studies, segmentation, or migration analysis – is tremendously difficult to measure, and a focus on ROI can lead organizations to conduct fewer strategic research projects.  This is the critical industry dilemma:

The value of marketing research is highest when:
–    Large investments are at stake
–    Long time horizons are involved (strategy development)
–    Uncertainty of business success is high

ROI is easiest to measure when:
–    Results are focused on the short term
–    Baseline performance standards are known (uncertainty of business success is low)
–    Investments are small and easily changed

A Model for Calculating ROI on MR?
Because most research organizations are highly focused on data and analysis, it’s no surprise that ROI is thought of as a strict financial calculation.  But the data for traditional ROI calculation is not always easy to obtain.  Sales and operational metrics are often not shared with the insights department, and certainly not shared with research suppliers.  How then can we “prove” ROI with this dearth of information? 

I wasn’t the only person at the conference to bring up the PIMS (Profit Impact of Market Strategy) database as a possible model for an industry-wide dataset that could be used to calculate different ROI metrics for multiple research types.  PIMS started as a project to gather the variables which account for business success within General Electric in the 1960s and 70s, and has since grown to over 3,000 corporations over 40 years.  Participating organizations contribute detailed financial and operational metrics on their markets, strategies and products.  Subscribers are able to mine the data for specific scenarios, including ROI calculations of specific strategies in specific industries. 

Following the PIMS model, a third-party organization would be needed to manage the data for market research and insights organizations, allowing them to deliver ROI metrics that would stand up to financial scrutiny – not exactly a simple proposition.  In addition, the process for calculating ROI becomes more problematic given the speed of change, especially in product development.  Insights organizations need to determine if establishing a set model for calculating MR ROI is really the right approach to solve the problem at hand.

If ROI is the Solution, What’s the Question?
Market insights organizations are starting to find ways to evaluate how research investments relate to business decisions and prioritize efforts based on those relationships.  Yet the conference attendees agreed that less than one-third of research projects are devoted to strategic studies of business impact. 

In order for insights organizations to showcase the value of research, we need to strongly align research results with recommendations that directly impact business decisions.  Too much research sits on shelves because there is no actionable plan that was extracted from the data.

One way to look at “ROI” for market research would be as the Relevancy Of Insights and their impact on business outcomes, as some of the major client organizations attending the conference suggested.  This approach would elevate the strategic role of MR and Insights organizations, and highlight the benefit of exposing suppliers to the wide variety of business issues that prompt research projects.  By giving business decision-makers the opportunity to leverage their research suppliers’ knowledge, they’ll be better able to match research results and insights with unique business opportunities.  And by directly relating insights to alternative decision-making options, as well as correlating customer preferences to bottom line purchases, the value of research will be boosted.