developments in the global market research industry by ted vonk budapest, 11 november 2004
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Developments in the Global Market Research Industry
by Ted VonkBudapest, 11 November 2004
MetamorphosisConsumer Trends in Time and Space
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Agenda
• Developments and changes in the Market Research Industry during the last 10 years
• Future developments until 2010
• Global Industry Study
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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 data- providers
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….
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