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How should we set the market research budget?

Question: We’ve been using market research for more than 10 years. We’ve used the market research services of full-service research agencies as well as specialist Field+Tab agencies. When we send out a research brief to three or four full-service survey agencies, the difference between the highest and lowest proposed budget is often very wide. There were many times when the lowest was just half that of the highest. The same is true when we email our research brief to five or six specialist Field+Tab agencies. The difference between the highest and lowest budget is even wider.

We understand why there would be differences. But a difference as wide as the highest being double the lowest is weird. Is the agency with the highest budget saying that the quality and value of its research is double that of the agency that quoted the lowest budget? If the agencies involved provide solid evidence to justify this difference, then we can get ourselves into some kind of due diligence to validate. But there is no such evidence presented.

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So what we’ve often resorted to is to get back to the agency with the highest budget who usually is the more well-known. We then say that if they can get their budget to the level of the lowest bidder, then the project is theirs. When this feedback is turned down, we make another offer.

Frankly speaking, we never liked this kind of back-and-forth negotiation. What’s your suggestion? How should research agencies set their market research budget?

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Answer: If the start of the process of change is not going to come from the research agencies, and it looks like it won’t, why don’t you as the research user make the move to start the change process? One option you can take is to say up front that for this market research project you have allocated such-and-such a budget. Then say that you wish to get a research proposal that will attain the designated research objectives at such a budget. But be pro-active when crafting your research brief this way.

Here are your pro-active options.

The first option anticipates the research agency being unable to undertake the research and attain the designated specific research objectives at the indicated budget. In such a case, ask which 1 or 2 of the 5 to 6 research objectives would the agency drop to fit the project into the designated objective. If the proposed deleted research objectives are acceptable to you, then the research project is a go.

The second option anticipates respecting all the designated specific research objectives. So it directs its cost minimizing measures to the respondent sample size. For this option, you can say something like the following: “How much reduction in sample size would you propose so that the survey can still be implemented to satisfy its designated specific research objectives?” If the reduced sample size of respondents is acceptable to you based on the logic given, then the research project may proceed.

There’s a third option that’s often neglected. This is in the idea of proposing a simpler study to take the place of the original, more complicated study. A usual case in point is the frequent preference of research using companies to designate, for example, a UAI to find out if a new product from R&D would find some market acceptance. A simpler but more direct study is to conduct a product prototype test. This is typically a much simpler study with lower sample size. Being more direct, it can uncover aspects of the new product that a non-direct UAI would miss like the new product’s specific areas of strength and specific areas of weakness after an actual usage trial by the consumer respondents.

If these benefits from a more direct and simpler lower budget study are known, why would a sensible research using company want a UAI instead of a product prototype test?

Here’s one of the most frequently cited reasons I’ve heard from my own research using clients:

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“We need the big picture that the UAI gives rather than the too specific view in a product test. Remember that we’ve already done a product test in our laboratory.”

Often, the new product came ahead of the findings from a UAI about what are the consumer perceived gaps in the competitor product that the new product seeks to replace.

The gaps that the UAI should have uncovered should have been the basis for the crafting and development of the new product.

While many companies do product testing in the “laboratory” as well as with the consumers, there are many more companies who have found that the two product tests yield similar results. So why do two when one is enough?

When the typical situation in the foregoing prevails and it looks like no change is forthcoming, proceed as recommended above. Let’s take careful note of that typical situation.

As the research user, the situation calls for you to start out the budgeting process by being explicit about how much you are prepared to spend on a research project.

Keep your questions coming. Send them to me at [email protected]

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