Competitive co-operation finds favour

As clients demand greater cost efficiencies, market research agencies are setting a trend for pooling their resources. Morag Cuddeford-Jones reports

When market research specialists Nielsen International and IRI agreed a deal last month to integrate their back office systems, many were shocked. Both big players in the tight-knit panel research sector, the two businesses had been in direct competition for many years.

The deal involves the two companies pooling technological resources and respondent assets while remaining ostensibly fully competitive on the analytics side. By working together and competing at the same time, being termed “coopertition” by many in the industry, it appears that the two organisations are being more targeted about where they spend money. Is this now set to become a wider trend in research? In the case of Nielsen and IRI, the “coopertition” seems to have come about because the two businesses felt there was little advantage to be gained from using two sets of technology and respondents to glean essentially the same answers. Panel research entails high costs and significant ongoing investment on a global scale. Combined, the companies’ investment power and expertise can command significant control of this niche area.

Special case
While one merger does not make a trend, the beginning of 2009 also saw the purchase of TNS by Research International, although it looks as though it will be the former that retains the overall brand.

Lightspeed Research global chief executive David Day says that while the Nielsen/IRI deal is “a special case” based on the peculiarities of the panel research market, he thinks that ‘coopertition’ is the “continuation of a general trend”.

Tim Knight, director of Nunwood, adds that this competitive co-operation between agencies is a sign of clients demanding a more costeffective research solution from their suppliers.

He explains: “Clients are being smarter. They realise they don’t need one agency for the whole project and can tailor the approach to best suit a project’s needs. Global megabrands are saying that they can’t afford to be mass market in their approach; they need to be more discerning.”

Andy Moore, director of customer insight for global marketing at Vodafone, agrees that good relationships between his suppliers are vital. “We need to focus on getting good minds working on a project together. It’s about openness and a willingness to share ideas.”

Simon Everard, group chairman of Kadence International, sees this trend for creating more bespoke solutions between multiple agencies as a definite advantage for smaller operators, which can move quickly to make deals and benefit from the trend. He argues: “The big players are sausage factories. The brand name packages that they offer look impressive but I don’t believe they offer innovative, creative solutions.”

Branded analytics
Unsurprisingly, Andrew Czarnowski, chief executive of TNS-RI, disagrees. “Being large, we have more resources to invest and our branded analytics are world-class – we have a team of 50 in our Munich office employed to spend their time just thinking,” he says.

He does admit, however, that the clients his company works with are demanding a new spirit of collaboration. Czarnowski adds that when WPP acquired TNS, it “awakened an ambition that wasn’t there before”. Now brands are asking the merged company to create solutions with its sister agencies: “Clients have asked us to co-operate with Added Value and Millward Brown.”

While “co-opertition” may be desirable from the side of the clients, which may find economies in their agencies combining some operations, it can be tricky for smaller agencies to balance being co-operative with the need to be competitive and survive the recession.

“Sometimes I’ve even seen two different departments in the same large agency pitch competitively against each other for work, so competing and co-operating at the same time can be an issue,” admits Mark Speed, joint managing director of research agency IFF (see case study, above right).

Speed suggests that if clients want “coopertition” the agencies will simply have to work things out. “It’s a small industry. Everyone knows everyone else to a certain extent, so it’s a case of sorting the issue out among ourselves.”

But he admits that the business imperative will always out: “If it appears that someone else has an agenda that isn’t going to work for you, you’ve got to be brutal,” he says.

How agencies manage who is going to take the lead role in any “co-opertition” arrangement versus who will join the pitch as an auxiliary is often a question of give and take. According to Nunwood’s Knight, this is something that takes time to develop.

We need to focus on getting good minds working on a project together. It’s about openness and a willingness to share ideas.

Andy Moore, Vodafone

“It takes longer to get co-operation going but as agencies get into the mindset, it can be a plus. We sign legal agreements not to compete as a rule but we often have some kind of other formal agreement in place,” he explains, although he adds that a few partnerships “have been developed on the basis of trust”.

Lower costs
The “co-opertition” trend may provide some cost savings, but doesn’t it diminish the range of choice for client businesses in the long term? Lightspeed’s Day is unconvinced the Nielsen/IRI deal will be the start of a mass migration to the “co-opertition” business model. He says: “A lot of consolidation isn’t really what the client wants anyway. More players creates a market, keeps costs lower and efficiency and innovation high.”

Vodafone’s Moore argues, however, that the industry will regulate itself appropriately. “I don’t feel that increased consolidation will bring less choice. There are generally low barriers to entry and if homogeneity does become an issue, organisations will splinter off,” he says.

Other market research industry insiders are equally unsure whether “co-opertition” will have a fundamental effect on the industry or simply become one tool among many.

Kadence International’s Everard believes consolidation will increase, while Nunwood’s Knight thinks independent medium-sized agencies will continue to play an important role.

“We will probably see more joint ventures bringing qualitative and quantitative practitioners together,” claims Everard. “Clients are not concerned about the ‘how’ of their research delivery, just the information and the output.”

Rowland Lloyd, chairman of the Market Research Society, concludes that efficiencies demanded by clients will not cease simply because the recession seems less harsh at present. He warns that those agencies that survive without consolidation will be the ones that continue to behave as if times are tight.

“In this recession, the commercial environment changed rapidly around the globe,” says Lloyd.

“It will be interesting to see what comes out the other side.”

Case Study: UK Commission for Employment and Skills

The “hypermarket” potential of using a fullservice global agency can have its advantages
– the adage “no one got fired for hiring IBM”rings true for many. But for some clients, size doesn’t matter when it comes to getting the job done.

Mark Spilsbury, chief economist for the UK Commission for Employment and Skills, says that when looking for a market research agency, he had an open mind about suppliers. “We offered a pitch for 79,000 interviews to all comers,” he explains. “But no single agency had the capabilities to finish the project alone in the time we needed.” As a result, Spilsbury decided that cooperation had to be introduced to ensure the work could progress at the desired speed. Even the usual industry big-hitters had to pitch for piecemeal elements of the commission’s study.

Since no full-service agency could settle every aspect of the account in the time required at a competitive price, the multifaceted agency approach was the one chosen on this occasion.

Spilsbury eventually decided to take on medium-sized independent operator IFF as the lead agency, responsible for delivering its own research as well as managing the input from a number of other support agencies.

The approach wasn’t without its inconveniences, even for the client. Spilsbury admits: “We talked for a long time about how we would have to manage several agencies rather than just one and decided that we needed a lead contractor to make it work. But I’m not convinced that splitting the variables across several agencies is necessarily the best idea.”

Using IFF as a lead agency did help the commission manage the process, however, claims Spilsbury. The agency agreed that as long as it was able to project manage the study effectively, the client would take a back seat in this area. “As long as they managed it, we would stay away from it,” Spilsbury reveals.

For IFF, the experience was about setting boundaries and understanding everybody’s role clearly enough for the co-operation to begin in earnest.

“Working with other agencies may bring in expertise we don’t have but it is challenging,” IFF joint managing director Mark Speed admits. “You have to have the responsibilities sorted out at the beginning and lay down some fairly common rules, such as no disagreements in front of the client.

“You have to accept that there will be disagreements that must be worked through and toe the line as far as taking a common approach to the project is concerned.”

In the end, says the commission’s Spilsbury, there is one ultimate truth that overrides any concerns about co-operation between agencies of any size. He warns: “We’ve got things that need to be done and we want our people to get on and do them.”

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