Finding a way through the gloom

researchThe marketing industry is expecting a tough ride, as the economic climate looks increasingly bleak. But downturns provide opportunities for market researchers to prove their worth. By David Benady

As the economic boom of the past ten years turns sour, market research companies claim their services will be more in demand than ever as brand owners boost research spending to find ways through the gloom.

A constant stream of media stories about the credit crunch and soaring food and energy prices is getting into consumers’ heads and giving them an excuse to find ways of saving money. Brand owners need to ensure their products make it onto consumers’ consideration lists.

“The trick is finding ways to do more with less,” says Peter Walshe, global brand director of Millward Brown. “You can use research to get a more efficient portfolio of spend and to do some housekeeping on your marketing.” He points to the experience of laundry detergent Skip in Argentina during the country’s financial crisis of 2002. The brand launched a smaller pack with a lower unit price and then introduced a larger economy size. “Neither move says you are cutting the price, but it is making the brand more relevant to the consumer. It was a very clever segmentation and people had an excuse to keep on using the brand,” he says.

The recession of the early 1990s showed that marketing budgets are often the first thing to be cut when times get tough. But market researchers claim they thrived during that downturn because brand owners needed their advice on how best to spend the limited funds available.

In fact, market researchers can’t lose, it seems. During a boom, brands make profits from a wide array of customers so there is a big research job to keep tabs on them and uncover their motivations. But when finances tighten, companies may find themselves wasting money trying to target groups that are no longer profitable. “More efficient targeting will mean that marketers waste less money on groups likely to provide a low yield,” says Matthew Boot, chief analyst at KDB.

Boots adds that market research can give companies the ability to contact consumers with the information that is most relevant to them. This helps create a sense that the company understands their interests and is able to cater to them as circumstances change. “This customer-centric approach is vital in attracting the shrinking business available and will prove its value in customer loyalty when the economy recovers and incomes rise,” he says.

This ability to work through both sides of the economic cycle boosted research in the downturn in the early 1990s, say market researchers. Another view is that research was savagely cut in the previous recession of the late 1970s and early 1980s and brand owners struggled to come to terms with the economic realities since they lacked data. They vowed not to repeat this mistake next time.

But the increasing use of online research could take the shine off industry margins. Online panels are cheaper than stopping people in the street or phoning them up. Some fear there could be a race for the cheapest research and a reliance on unprocessed reportage, which offers little insight. Such unanalysed research is vulnerable to commoditisation and price cutting since one set of results is similar to another.

However, in today’s increasingly fragmented media environment, finding out which are the most effective advertising media will be crucial as marketing budgets come under pressure. That will mean closely analysing the effectiveness of media for different brands.

TELLING THE FUTURE
One of the greatest challenges brands face is predicting how consumers will behave over coming years. Researchers are struggling to work out how the credit crunch, combined with inflation, will affect the way people consume.

Some see a new frugality tying into a burgeoning ecological consciousness which will lead people to find clever ways of saving money. There are tales of organic food enthusiasts digging out old recipes on how to make the most of a chicken carcass while another anecdote tells of a man buying a Bentley on his BA Amex credit card to ensure he got the air miles.

What makes the situation so unpredictable is that this will be the first experience of an economic downturn for a lot of people, says Davina O’Donoghue, founding partner of Evo Research. “It is going to be difficult to predict which category is going to be hit and which is not.” she says. “There is a split between people whose fixed-rate mortgages have expired and those with six to 12 months to run who aren’t feeling the downturn as acutely.”

Some optimists proclaim that the tough economic conditions could lead to a renaissance of marketing as brands look for clever ways to appeal to customers. Some claim research helped pave the way in the last recession for a rebirth of marketing in the late 1990s. Brands developed value-for-money methods of reaching consumers, such as guerrilla and buzz marketing.

Some wonder whether the downturn will provide a fillip for smaller market research agencies with new approaches to analysing consumers. “As marketing budgets are squeezed, brands should look beyond one-size-fits-all, ‘black box’ solutions and more at bespoke projects that can deliver precision and real value to their marketing,” says Kieron Matthews, head of research at Kadence UK.

The downturn offers wide opportunities for market researchers to show brands that it is not all gloom and doom. But they will have to prove that their input can help brands hang on to their most loyal customers and make the most of their competitors’ weaknesses. Brand owners will be tempted to pursue short-term sales boosts through offers and price cuts, and this is only natural. But researchers will need to provide the insights which help them survive in the long term. Because the upturn is just around the corner. 

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