Nowadays, information is regarded as invaluable. Any
company needs internal information (generated by individual
departments) and external information (generated by the
widely understood company's environment), in order to work
out an effective marketing strategy. Basic areas, about
which companies would like to be informed, usually include:
market, customers, products and remaining marketing
activities judged by company's customers and competitors.
Do it yourself or outsource?
While most companies gather and process internal
information independently, they usually have considerable
difficulties with gathering and processing external
information. Research based on external sources may be
conducted independently by marketing department. It may be
also outsourced, i.e. to a specialized research agency.
Basic challenges of independently conducted environment
research are e.g. whether the employed staff has suitable
competence, technical and financial capabilities to conduct
the research (i.e. to establish or hire a group of
pollsters, to rent a place for focus interviews). In case
of outsourcing, the main problem is the cost.
How much and why so expensive?
This question ideally summarizes the attitude of managers
towards the offers of research agencies. It is believed
that market research is outrageously expensive, and no
matter how much one would spend on it, the money will be
used entirely. Most complaints are made about costs,
completion time (constantly extended deadlines), manner of
preparing reports (incomprehensible language, charts
without comments), never ending preliminary arrangements.
Obviously, it doesn't always have to be so. There are
agencies which carry out their responsibilities diligently,
keep to deadlines and are still relatively inexpensive.
Cost of research for the employer
What is the cost of market research from the perspective of
an employer, namely, a customer of a research agency?
Several cost components may be singled out: time - wasted
on contacts with the agency, saved thanks to good
communication with the agency; knowledge - needed to asses
the research report, indispensable to decode the numbers
without comments; the so-called psychological costs or
loosing one's temper in contacts with agency
representatives and superiors, saved thanks to easy and
fast exchange of information with the agency; as well as
the price fixed by the agency.
The most important component is the price. Although
managers claim that they take into consideration many
different components while choosing research agencies, the
most essential and important one for them is the price and
the issue of how quickly the research will be conducted.
Many managers dream about finding a research agency that
will solve their problem within 24 hours and for free.
The principle of price fixing
According to research agencies, it is not easy to fix a
price for individual research. It is relatively simpler to
do this for highly standardized research like e.g. omnibus
research. Difficulties appear with tailor-made research.
David Ogilvy stated once that price fixing is a guessing
game. To some extent, it can be expressed in this way. An
example of the practical application of guessing in price
fixing may be price fixing for a bid in a tender. It is a
kind of game between the participants of the tender and the
customer. Apart from fixing the minimum price, at which the
cost of the research will pay for itself, every member has
to guess the financial capacity of the employer (what funds
does the employer possess and how much he can spend on
research), and the financial capabilities of competitors
(what price they will offer and how much they can reduce
the price).
The theory gives three principles of price fixing:
* Cost
* Demand
* Competition
Those three principles are used simultaneously in market
research.
Every agency wants to conduct research at higher prices
than the cost of research. Whereas the cost may depend
among others on the type of research (qualitative research
is cheaper than the quantitative type), methods of
gathering and processing information (those done on the
phone are cheaper than direct interviews), sample size and
availability (smaller samples are cheaper, not easily
accessible respondents more expensive), number of people
engaged in conducting the research and their level of
competence. In some cases, companies agree on a specific
dumping technique and pay extra money for the research. It
is possible if the customer is prospective and e.g.
announces a tender for one commission, but more commissions
may be expected in the future.
Research agencies take into consideration a customer's
financial capacity when they are establishing a price. But
one should not expect exactly the same research to be
conducted for a big industrial tycoon and for a small shoe
producer. The latter will not get a considerable discount
just because of the smaller scope of activity. The research
will be completely different, methodologically adjusted to
the needs and opportunities of the employers.
The research agencies market is driven by keen competition.
Therefore, it is important to watch how prices are fixed by
competitors. Only few decide to publish their price lists.
Among 39 research agencies, which names are present in the
"Media and Advertising Almanac" („Almanach
mediów i reklamy") and those with their own websites,
only three decided to provide their price lists based on
research and only one offers the possibility to order such
a price list.
The matter of price lists
Why don't most agencies give prices for their services?
Because it would indicate standardization of research
techniques and would be in contradiction with what most
agencies emphasize, that is research is tailor-made to the
needs and opportunities of a customer. A lack of price
lists contributes to the price being regarded as a tactical
element, which gives quite a lot of leeway and enables
flexibility of the market.
Besides, even the official price lists are sometimes a
myth. Actual prices are negotiated individually and are
lower than those presented in the price lists.
Nevertheless, one should not expect discounts like those
which are announced in advertisements (40%), but it is
possible to lower the initial price by 5-8%.
What to do to make it cheaper?
A company planning to conduct a market research, and at the
same time, lower the cost considerably, has several
possibilities. First of all, if the company intends to
conduct quantitative research, it may reduce the sample or
give up quantitative research in favour of qualitative
research. Secondly, the company may employ a small research
agency, research science institute or higher education
institution. Thirdly, the company may try to conduct the
research through its own marketing department.
How to compare offers?
Market research offers made by specific agencies may be
compared to one another just as one may compare a Fiat to a
Mercedes. They have only one common feature - both are
cars. Apart from that, only differences are left. Just as
not everyone has to drive a Mercedes, not every company has
to use the services of the ten greatest research agencies
in Poland. Everything depends on the needs and financial
capacity.
What should be considered in choosing the most suitable
offer?
* Is a report included in the price of the basic research
or is it to be paid for additionally?;
* Is a report going to include guidelines for the company
or present the results only?;
* Is a report going to contain raw data in form enabling
independent processing?;
* Is a graphic representation of results (drawings and
graphs) included in the basic price?;
* Are additional calculations, alterations (e.g. during
three months since handing in the report) included in the
basic price?;
* Is supplementary remuneration for the respondents
included in the research cost?
Comparisons of prices
Agencies avoid comparing their offers and especially
prices. Therefore, there is practically no research
presenting average prices of individual services. Most of
them concern market research expenses, agencies' income,
the number of conducted interviews, but not prices.
Market research does not have to be very expensive. It is
high time to acknowledge that not only representative
research (the most expensive one) has sense. The company
has access to a number of methods with different prices.
Every method has both advantages and disadvantages and it
is the company itself that should, with possible help of a
research agency, judge benefits and cost of the chosen
method. One should bear in mind the basic rule, namely,
that research is conducted in order to lower the risk of a
wrong decision and not to confirm the rightness of the
activities that have already been taken up.
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