When you know the cost drivers of any business you put yourself in a position where you can get the best by investing where you will get the best outcome. The same is also true when you commission market research or undertake it internally. Understanding your market research cost drivers means you can feel more confident that when you are commissioning research it will be within budget and it will deliver against your objectives.
This post is about understanding the drivers rather than technical notes on costing a specific project.
Despite the wide range of market research methodologies, frameworks, and collection techniques, underpinning all approaches are similar cost drivers. What changes are their relative impact and whether costs are fixed, or variable and the marginal cost impact when they are changed? For example, for online research using client lists, most of the costs are fixed. While for telephone surveying the majority of the costs are variable. For group discussions many costs are variable, however, some of these costs are variable at the number of participant-level while others are variable in terms of groups and locations.
When designing the best approach for a client, a research consultant looks not only at what design method works best to address your insight needs but also takes into account the different cost drivers with other operational needs, like timing, to create an efficient design. Market research and insight managers working within an organisation also have an eye on how costs play out over the longer term, especially with research among customers.
To help you better understand what drives your market research costs, shown below is a summary of the major cost drivers and hints for how you can manage their impact for more effective and efficient budgets.
- Length of Interview. Longer interviews require more time from all people and resources involved in the research and each, like you, value their time. Not only does time reflect the increased resource requirements, but it also acts as a disincentive to people participating that increases the number who drop out during the survey and accuracy declines from avoidance and lower attention. Cost Saving Tip: Ask only what you need to ask and do it in the shortest way.
- Target Market Incidence. Just like precious gems, the rarer a person is the more expensive they are to find. To get 100 people who come from 10% of the population means 1,000 people need to be approached. However, if only 10% of the population pick-up the phone or click the survey link, then you need to approach 10,000 people. The only time this cost driver is less critical is when people are sourced from your own company’s customer lists and you can target that 10% of customers. Cost Saving Tip: Define your audience based only on the critical few criteria that actually define your target market.
- Number of People. While the marginal cost greatly differs between methodologies, more people means higher costs. The only potential exception to this rule is among customers when used a fixed cost survey platform. However, the temptation when the cost per person is low it to treat people like a commodity and keep surveying them until customer complaints and Target Audience Demand (Number 4) drive up your costs. Cost Saving Tip: Determine the least number of people you need to ask to be able to generalise results then adjust for increased reliability and sub-markets.
- Target Audience Demand. The more other people want to speak with a group the less likely they are to respond to a study, without an incentive. This is why market research among healthcare professionals, IT managers, and other groups come at a high price. Cost Saving Tip: Make sure the target group is essential to your decision making and look to see how you can increase the relevance of your project to them.
- Topic Relevance. If you are reading this article, then you know the power of relevance. The more relevant, either directly or of interest, the more likely people are to want to do your study. Low relevance topics have lower response rates and target audience engagement. A lower response rate means you will need to recruit more people, while lower engagement means more people are likely to drop out while doing your survey and lower quality results, especially open-ended questions in surveys. Cost Saving Tip: Sell your topic to your audience and consider including questions upfront that is more interesting to answer.
- Involvement Costs. Interviewing during work time or requiring them to attend a group discussion, can cost your participants. While some target groups may require reimbursement, others like parents who need childcare while attending a group discussion or are customer-facing employees and business owners who need to work while participating in your research. Cost Saving Tip: Design and time your research that minimises inconvenience and costs to your audience.
- Geographic Coverage. Online surveys are the only methodology not impacted by distance or number of locations, other than those requiring language translation. Cost Saving Tip: Minimise the number of locations to those that are representative or critically different.
- Sample Structure. Related to target market incidence is sample structure. Sample structure is made up of the different sample sizes for sub-groups (strata) and their representativeness. Studies that require complex interlocking quota structures to force representativeness at each segment level will significantly increase costs, especially for tracking studies and may even make your results less predictive. Cost Saving Tip: Use random sampling with top-down stratification as your default, and only use forced quotas structure when absolutely needed and where there is evidence that the structure reflects the market.
- Analysis. Some techniques take more time to learn, more time to design, require larger sample sizes, take more time to programme and analyse. However, more advanced techniques can also provide a greater depth of understanding that delivers more exactly against and sometimes actually reduces field costs. Cost Saving Tip: Understand the cost impact of an approach compared to other techniques.
- The Client. A larger driver of your costs is you. Some projects require more management time from the agency, some clients are high maintenance or choose a level of service that does not match project needs. Clients that know what they need and communicate it clearly, can greatly reduce the cost of their research. Cost Saving Tip: Know what you need, be flexible, be disciplined.
Like developing a marketing campaign, commissioning research or building a broader insights framework, involves knowing what are mandatories and what should really be left to the agency to solve. By knowing what drives your market research costs, your costs are driven by what is important to address your business objective rather than the ‘nice haves’.