Benchmarking market research firms

Presently, the market research industry is undergoing a rapid phase of transformation, this is led by changes in operating environment of businesses across the globe. Nowadays, businesses are competing with digital disruptive models, these are changing the competitive landscape and becoming truly global through an extension of their reach beyond geographies. In accordance with this, market research firms need to develop a technology-based expertise and move into implementation based consulting. This will assist them not only to advise corporates, but help implement and become part of tangible changes, which they intend to bring in their clients’ businesses. Thus, the traditional market research industry that provides subscription-based research reports (based on survey or opinion poll research), that identify best practices, industry leaders, market share or competitor analysis will now need to evolve and offer specialised data analytics services that can be used to generate actionable insights and execute the same.

The technological developments are not just changing the type of projects and the level of involvement of market research firms, but they are also transforming the way market researchers deal and communicate with their clients. This is blurring the line between traditional market research, data analytics providers and specialised consultants. It is reducing the turnaround time, man-hours spent and costs for the company while maintaining a high-quality output. This is also giving rise to some research and data analytics firms with a very specialised focus on new, yet scalable business models.

For instance, Televisory is a data analytics firm, that provides operational benchmarking services to small and big corporates with a turnaround time of fewer than 3 hours at less than 1% of the price charged by most established consultants. It also gives its consumers the flexibility to benchmark against a competitor of choice in terms of geography, size, target segment of customers and several other criteria with a simple click of a mouse.

In addition, low entry barriers in the industry provide a conducive atmosphere for such evolving business models that compete with established firms in terms of cost and efficiency. The established market research firms charge a premium for their services as they have built an image in the minds of customers. Moreover, they possess years of proven track record. The success of both small and large categories depends on few fundamentals but important principles:

• Build and retain employee expertise - reflected in employee retention rate and utilisation rate
• Invest in innovative ideas and thought leadership skills exhibited through the average value of projects and the mix between customised research and subscription-based research. Secondly, higher the value of projects higher is the value derived by the client in most cases. A well-executed custom research projects are generally more profitable than subscription services
• Continuously improve customer engagement and this is reflected in their customer retention rate
• Generate repeat projects from existing clients - reflected by dollar retention rate
• Contain costs and improve revenues to increase profitability

A few of the above metrics across some prominent companies in research and data analytics such as Neilsen, Gartner, Forrester was compared with the help of the below graphs. 

This provided an indication of the performance of these three companies, while Gartner has the highest customer retention, wallet retention and even the highest hourly revenue per employee, its EBITDA margin was lower than Nielsen. This was because Nielsen had a better efficiency ratio (% of opex to revenue) at 82% compared to 87% of Gartner and 94% of Forrester. Thus, even with a lower customer retention rate, lower hourly revenue per employee and higher employee compensation ratio, Nielsen was most profitable than others as it was undertaking meaningful spending on employee’s growth and product innovation. On the other hand, Forrester and Gartner had higher administration expenses and this impacted their overall profitability. Therefore, one needs to analyse various metrics stated above and draw a correct inference in order to understand the precise reasons behind the success of a market research firm. 

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