Ensuring Insights Yield Impact
Prospective clients often share that they’re struggling to fund market research internally and look for guidance from us to help sell their leadership on the investment.
These clients instinctively know that their organization needs research to move an initiative forward or better meet customer/citizen needs. But with zero-based budgets in the private sector and bare-bones budgets in the public/social sectors, our clients are striving to do more with less and prove the value of market research investments.
Clarifying the ROI of marketing research insights is a huge trend in the industry and for good reason. When the contribution of research to the bottom line is clear (private sector) and the ability to impact target populations is strengthened (public/social sector), research doesn’t only provide information or findings; research creates an impact.
Organizationally, consumer insights divisions that demonstrate the ROI of marketing research are being fully integrated into strategic planning and gaining a seat at the table — some companies are even appointing Chief Research Officers.
We’ll provide some rules of thumb to encourage your organization to pursue impactful insights. Future blogs will outline how to best craft research to ensure the outcome provides maximum impact and ROI.
Rules of Thumb – Marketing & Research Spending
Where should we allocate market research expenses in our annual budget?
Because market research can both promote positive action and minimize missteps, there are two main views of how to think about research. Some view market research as risk management and feel it should be a fixed expense, such as another form of insurance against: missing key opportunities, investing in lackluster messaging, launching a failed product, etc.
A more common approach is to utilize market research as a tool to promote the right action, with market research being a line item within the marketing budget.
What’s a ‘normal’ marketing budget for organizations?
Based on Gartner’s 2018-2019 CMO Spend Survey (over 600 US organizations from a broad range of categories), companies averagely set their marketing budget at 11.2% of their overall revenue in 2018.
- B2C organizations tend to devote higher percentages to marketing, than B2B organizations
- Smaller organizations tend to devote higher percentages to marketing than larger organizations
Market research averagely represents 7% of the marketing budget. See the chart below for overall average allocation of marketing dollars:
And when it comes to a specific study, what’s the right scope/budget?
Market research studies typically cost between $10K-200K; with the vast majority falling between $20K-80K, depending on the action to be taken based on findings. Again, thinking of market research as risk management can help direct the necessary scope to both identify opportunities and avoid missteps.
What happens when you can’t afford research and it’s not in the budget?
The Market Research industry continues to grow, with 2019 research revenues estimated at $23B in the United States alone (ibisworld.com), largely because research investments have proven to be worthwhile/pay for themselves over time. Whether or not an organization chooses to invest in research depends on whether they prefer a smaller expense up-front with a smaller return, or a larger up-front investment for a likely larger return.
See below for two different hypothetical examples that illustrate how market research can impact a successful outcome for a private or public sector organization.
Mathematical Examples of ROI of Marketing Research & Impact
We hope this helps you start the discussion of promoting the need for professional research within your organization. The second step to ensure a return on research investment is to agree to success criteria/KPIs up front. When you start with needed impact and reverse engineer your research method to ensure the effort delivers, you can be confident that your research will not be ‘head knowledge,’ but will be a change agent.
Over the next few months, we’ll release a series of blogs to identify which KPIs and metrics best clarify the ROI and impact with a variety of strategic research initiatives. For example, branding, messaging, pricing, customer experience, and program development all create ROI and impact that needs to be measured in different ways.
Don’t hesitate to reach out if you’d like to discuss how to ensure your research yields the desired impact for your organization.