The Market Research Industry Is Being Squeezed by Consultancies

Faced with myriad pressures in a dynamic marketplace, traditional market researchers are seeing themselves upended by technology and consultancies. Can they diversify before being subsumed by larger players, or is their reach finite?

Much has been written about the Madison Avenue set coping with cuts and revisions to their core mission. (Look no further than the world’s biggest ad spender, Procter & Gamble, which has scaled back its advertising budget by an eye-popping $1.15 billion in recent years while pursuing an “open sourcing of creative talent and production capability.”)

At the same time, agents of change are also shaking up agencies’ left-brained cousins in the world of market research. This sanctum of hard science finds itself in the midst of a years-long transformation that will conclude in widespread adoption of artificial intelligence (AI) in place of many traditional research functions performed by advanced stats nerds, who will see themselves repurposed as boardroom warriors.

That human researchers concern themselves with the impact of technology is not in question. The 2017 Q3-Q4 GreenBook Research Industry Trends (GRIT) Report identifies technology and innovation as the biggest challenges facing the market research industry. Market research suppliers report feeling threatened by the pervasiveness of fraudulent survey respondents, disillusionment with the actionable value of Big Data, skills shortages in advanced statistical modeling and the looming threat of AI eliminating research jobs.

That the industry has floundered amid these emerging trends also seems a given, as evinced by the 70% customer satisfaction rate noted in the GRIT report. Customers here are any client paying for research products, who often include other people within market research, as opposed to pure marketers. In a way, researchers dumping on their own industry’s work product is an even more damning indictment than that of downstream marketers.

What's Wrong With Market Research?

Fixing market research starts with understanding what’s wrong with it in the first place. There are a few ways to parse the dearth of confidence in and poor stock performance of market research suppliers. Murphy interprets the low customer satisfaction as a reflection of market research’s narrow product suite, which fails to meet marketers’ expectation in 2018: advice on what they should do next to grow their business.

This might not appear to be a problem for market research folks, provided they maintain their position as number-crunchers. However, there are signs that role is collapsing, as outsider firms that have spent much of the last decade adding market research arms to their roster of services displace research companies. Consulting stalwarts McKinsey and Bain & Co. have beefed up analytics offerings to tackle data synthesis: The former launched McKinsey Analytics in 2011, and the latter hired market researcher Barbara Bilodeau to lead its advanced analytics group. Tech giants with plenty of capital have joined contention as well. Google’s 2016 purchase of UX platform Dialogflow was followed up by Snap Inc.’s acquisition of intelligence research platform Placed, as well as Amazon’s purchase of data aggregation and visualization brand Graphiq a year later.

These businesses all want to collect the millions of dollars going to market research outfits. And for many complicated reasons related to how companies are valued, Murphy believes it’s easier for the consulting and tech firms to acquire a market research company than vice-versa.

The Role of AI and Automation

As market forces debate and refine the upper levels of what market researchers should provide, the lower and mid-levels are refashioned by advances in technology. AI and automation, with the same processing power that is remaking every facet of business from manufacturing to sales, can also be applied to quantitative data collection and analysis.

But like consultant competitors, AI is a challenge to market research that can no longer be ignored. And of the two issues, it should be the one market research organizations address first. AI wouldn’t be hurtling toward critical mass in a host of industries if it weren’t beneficial to companies across the business intelligence spectrum. And viewed through a different lens, the tech issues that scare marketers can be spun as net-positives for the market research industry.