MR for Small Business: The Challenge

April 6, 2011

Industry News and Trends

Small businesses can benefit from market research (MR) is many of the ways that big business can but they don’t. On the one hand, the industry is not well set up to serve these clients. On the other, we have not made the case very well that these businesses can leverage market research to build their business.

Most small businesses (except perhaps the micro business) have all of the same challenges that large businesses do. They have a brand to manage, products and services to introduce, stakeholder relationships to address, and a product/ service relationship with consumers.

It is worth considering how the industry currently serves or does not serve them. As a caveat, it should be noted that there is a natural tendency for large companies to primarily serve other large companies in all industries. This reflects the reality that large companies have higher overheads and must charge higher rates. But do smaller agencies provide much market research services to small and medium-sized companies? I believe the answer is no.

The easy answer to why small and medium-sized businesses do not do much market research is the cost. We tend to think of these enterprises as particularly cost conscious and we think of MR services as outside the affordability of smaller organizations. The first point is, perhaps, simply a myth. Although there are no doubt organizations that fail to make the right investments to further their business, this is unlikely to be concentrated among the smaller companies. The real question is not cost but value. How much Return on Investment (ROI) is there from an investment in research?

ROI in the area of market research is an under developed area in the industry and this reflects our focus on larger organizations where the MR budget is relatively small relative to the cost of making the wrong strategic decisions – especially when it comes to new product development and advertising expenditures.

Of course, cost is still an issue. Market research services usually involve primary data collection plus professional services costs. Unfortunately, the cost of a project is often the same regardless of the size of the client. Smaller boutique firms are often more affordable when it comes to professional fees (because they have smaller overheads) but the data collection remains a potential barrier.

As a consequence, the primary way that smaller businesses are likely to access market research data is through other third parties like advertising agencies. For example, most media outlets can tell you the audience that the advertising in their media will reach.  Some of this information is in the form of syndicated MR insights (e.g. the Prizm segmentation from Environics). While there is value in this information and its use, small and medium-sized companies are not getting the full value of the MR toolkit.

It is important to realize that across a number of business issues, an investment in MR can pay significant dividends. Coming soon…. Some  ideas on how you can leverage the MR toolkit to answer these and other questions.

 

Advertisements
, , ,

About Richard Jenkins

Market research professional and small business owner

View all posts by Richard Jenkins

Subscribe

Subscribe to our RSS feed and social profiles to receive updates.

2 Comments on “MR for Small Business: The Challenge”

  1. Ashley Lye Says:

    I think this is an interesting dilemma. There are certain minimal costs associated with any good market research and many small businesses just see those costs. However, the strategic value of good research can be much higher for a small business – making the wrong strategic decision could sink the business!

    The challenge is that entrepreneurs and small business owners do not have the research expertise to conduct their own research and those with the expertise can sell it for far higher prices to larger firms. There are ways to reduce the cost for smaller businesses, however unless there are creative solutions, market research costs will continue to challenge smaller businesses.

    ROI is a useful measure of value, but if you do not have the resources to spend, then ROI itself is of little value. That may be the challenge for the smaller businesses.

    Reply

    • Richard Jenkins Says:

      I agree that we need creative solutions and creative ways to demonstrate the value. Market researchers are not alone in facing the challenges of selling services to smaller businesses. Lawyers, accountants and others all need to find ways to demonstrate value and do so at a reasonable cost. I think researchers have shied away from doing so.

      Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: