How to Justify your Market Research Spend
As cost pressures continue to squeeze margins in these difficult economic times, it is understandable that every penny is scrutinized before it is spent. When companies are in the start-up phase there may be a temptation to avoid investment in Market Research initiatives unless a tangible business case, with demonstrable Return on Investment (ROI) can be built.
Even established companies have to weigh up the benefits of market research against the perceived benefit of investing the money elsewhere in the organisation.
But how can you build the business case?
Defining the ROI for your market research project is difficult to do, as often the benefits can be quite intangible and in many situations the research may reveal that your hypothesis is incorrect, forcing you back to the drawing board.
Previous research in this area has indicated a number of specific challenges that make identifying the ROI of market research particularly difficult:
- The value of the research is rarely restricted to one particular area or outcome, but rather is embedded throughout the organisation
- Certain types of research yield benefit over a long period of time, and cannot easily be linked to the launch of a particular product (such as continuous tracking studies)
- The evaluating the benefits of market research rarely meets the strict definition of ROI as used by accountants or finance teams
- The value of research is too easily undervalued and overlooked as consumers of the research don’t appreciate the impact of their improved level of knowledge
Further to this, even if the initial research project is a success, the ROI is dependent on a number of other things including your ability to translate the research into a business strategy, and ultimately your ability to implement that strategy.
Utilize your research to greatest effect
If ROI is of particular concern to you, there are a number of steps you can take to get the most out of the project:
- If you are testing a particular hypothesis make sure you leave some of the questions open ended. This ensures that you learn from your target market, as opposed to restricting them to answering Option A or Option B.
- You can align your market research with marketing initiatives, using some of the stats or quotes from your research in your latest sales campaign.
- Some firms will allow you to conduct research projects that double as lead generation i.e. they will wither promote your product or services to the panel in some way, or else permit you to reach out directly to respondents.
- Most firms will allow you to specify whether your brand is exposed to participants or not, and there are pros and cons to each. The negative is that you may get biased responses, but on the plus side you get to promote your product and can ask direct questions relating to it.
The other thing to bare in mind is the risk of not doing the research. While there may be no obvious direct ROI on the project, it could potentially save you a significant amount of money that you may have wrongly invested had you not done the research.
Put another way, market research could save you “many millions of dollars in what could have been a disastrous investment.“
It is important that you evaluate the success of the project once it is complete. This will enable you to see whether the project expense was justified, and may also teach you valuable lessons as you how you can improve your research projects going forward.
Don’t get too hung up on the ROI, lean startup emphasises the importance of learning outcomes in the early stages of the project, as opposed to financial gain. Remember, you are looking to build solid foundations on which to grow your business, which with hard work and perseverance will ultimately lead to long term success.