One of the by-products of living in a country founded on the principle of free speech is that virtually everybody has an opinion. Whether it’s commenting to their neighbors on the latest Sopranos plot twist, talking to co-workers about the current administration, or even grumbling to their spouse about their like or dislike for a new TV commercial, people want to feel that their views are important enough to be heard and counted.
In the past eight years, the Internet has emerged as the public forum for many of these viewpoints. But while most posted comments end up quickly lost in the vastness of the World Wide Web, there is one area where online opinions are becoming increasingly important: market research. The Internet may have stalled as an advertising and commerce vehicle, but it is quickly gaining favor as the platform of choice for formal surveys on everything from the state of the economy to the latest in packaged snack foods. Dean Wiltse, CEO of leading online research firm Greenfield Online, says Internet surveys now account for about 27% of total quantitative market research, up from about 15% last year and 7% in 2000.
This growth is occurring across every segment, but online is becoming especially important in advertising research. Not only is it far cheaper than traditional phone and face-to-face polling, but the results can be compiled and analyzed in near real time, enabling media buyers and ad agencies to tweak their creative or their media weighting on the fly. Online market research brings with it other advantages as well. “Unlike with telephone tracking, you can provide people with some visual stimuli by throwing up a couple of stills to prompt someone when you’re asking if they remember an ad,” says Eileen Campbell, president and CEO of leading advertising research firm Millward Brown. “Plus it’s a 24/7 world, so you can get some people you may not get during traditional phoning hours.”
The rise of online is coming at an interesting time for the U.S. market research community. On the surface, market research seems to be chugging along quite nicely, accounting for nearly $6.2 billion annually. But along with advertising, market research has always been one of the expenditures that are especially vulnerable in a soft economy. “The research budget is the second part of the marketing budget to be slashed if the numbers are not coming in,” explains Elliott Ettenberg, CEO of the strategic marketing consultancy Ettenberg & Company and the author of The Next Economy. “The first thing to get slashed is advertising, the second thing is research, and the third … is consultants.”
“It’s almost counterintuitive,” adds Elyse Gammer, advisory director for the Marketing Research Association. “But marketing research has always been an area where people say, ‘Hey, look, my gut tells me what my customer wants. It’s nice to have the research to back it up, but if I have to cut my budget, I’ll trust my gut.’ So people float along for a year or two without doing any statistically significant research and they start seeing erosion in their sales numbers and they bring back market research.”
Ettenberg argues that while this type of strategy may be justified under normal circumstances, it is disastrous in today’s environment. “Things are changing much quicker,” he says. “The customer is changing, and more importantly, the values of the customer are changing faster than business can react. For the first time ever in my 30 years of working with companies who deal with customers, most companies don’t understand what’s going on.”
To their credit, the people in the advertising and media buying community seem to have caught on to this quicker than others. Campbell says that while advertising budgets have certainly been hurt in recent years, her company’s work both in testing creatives before they air and in tracking the effectiveness of campaigns while they’re running has actually been on the rise. The reason for that, she says, is that in these difficult economic times, advertising dollars have simply become too valuable too waste.
“When money was free, you’d throw anything on the air and if it didn’t work it was no big deal,” Campbell says. “That’s certainly not the case now. People are being much more frugal with their media spend, so they want to make damn sure the ads that they’re putting on air are good ads.”
In addition to providing the tools to predict consumer behavior going forward, the market research industry is also a bellwether for the overall economy. Steven Campana, executive vice president with Nanuet, N.Y.-based Target Research Group, says market research spending traditionally picks up about three to six months before an economic revival, a trend that seems to be repeating itself. While many companies may not be spending a lot on advertising now, they are beginning to think about their position in the marketplace and how it can be changed to their advantage as business — and their advertising — picks up. “We’re just revamping our branding strategy, so we’ll probably begin doing more focus groups and online surveys as we look to solidify our brand position,” says Daneen Kiger, marketing development manager with consumer data storage company Imation.
Like all market research, advertising research can essentially be divided into two main categories: qualitative research, which is almost exclusively focus groups, and quantitative testing, which involves much larger samples and tends to be survey-based.
It’s in the quantitative category that online has had its biggest impact. For much of the past three decades, the bulk of quantitative research has been done in one of three ways: mail surveys, phone polling, and what are known as mall intercepts — literally stopping people in shopping malls and offering them incentives to fill out a survey.
All three are now being impacted by the rise of online, but Wiltse notes the biggest drops have been in phone and mail. “Spending on mail research decreased from 16% to 15% of total research spending in 2001 from 2000,” he says. “Telephone decreased from 48% to 45%.”
The most obvious reason for companies’ gravitating to online research is cost. Joel Friedman, founder of Surveywriter.com, said a typical market research survey, regardless of what platform is used, can quickly escalate into the six figures. But online at least helps keep those expenses in check. A typical online survey costs around $8 per CPI (cost per interview) — about the same as mail, but considerably cheaper than the $30-to-$50 CPI for telephone and mall intercepts. “Most of that’s because of the people you need to hire to either do the phone interviews or recruit people in the malls,” Friedman explains. “Both of those can be very labor intensive.”
But almost as important is the fact that consumers seem to prefer online surveys, finding them not only less intrusive but also more convenient. “A lot of people are willing to participate in surveys, but only if it’s done on their timetable,” says Beth Rounds, senior vice president with Custom Research Inc., one of a host of firms now outsourcing their online work to companies such as Greenfield Online.
In the advertising world, online has become especially popular as a way to track an ad’s effectiveness. “Ad tracking is used for a lot of different purposes, but the biggest one is understanding the return on your media investment,” Campbell says. “Are you getting awareness, and what’s the source of that awareness? Is it coming from a company’s TV spend or is it coming from their print spend?”
“They’ll set thresholds,” she continues. “They’ll say we want to keep a fair amount of our money spent in TV until the awareness hits a particular level, and when it hits that level they can back off, moving from prime to off-prime or from network to cable or print.”
But outside of the cost, Campbell argues that most ad tracking can be done just as well through phone polling and mall intercepts as it can online. And when it comes to testing ads prior to their launch, the only area where online is gaining is in print campaigns. “I would say our print business is now 70% offline, 30% online” Campbell says, adding that in areas such as TV copy testing, the market is still dominated by either mall surveys or focus groups. Though they may seem like a vestige from a bygone era, focus groups continue to be the dominant methodology for qualitative research. According to John Houlahan, founder and president of Stamford, Conn.-based FocusVision, there were 225,000 U.S. focus groups and an additional 250,000 that were done overseas. Almost all of them were conducted the old-fashioned way: gathering people in a room and having a moderator lead them through questions and answers dealing with everything from the latest ad for toothpaste to the newest packaged snack foods.
In recent years, there have been some attempts at introducing virtual focus groups, where people in different locations are gathered online and led through a product or ad evaluation. But Rounds says, “A lot of the things you’re trying to do in a focus group — getting feelings and emotions out of people — you can’t do in a medium like online. So much of this is face-to-face and letting clients see the whites of people’s eyes.”
But the Internet is having an impact on focus groups, and that’s through the use of streaming video, which eliminates the need for advertising executives and their clients to go to a remote location to see the ads or products being discussed in person. Currently, the market for video streaming is dominated by ActiveGroup and FocusVision, who between them have equipment in about a third of the 700 focus group facilities in the U.S.
“[Video streaming] means that ad execs don’t have to travel out, so companies don’t have the wear and tear on their personnel,” notes David Nelems, president and co-founder of Atlanta-based ActiveGroup. “But the bottom line is that it just helps them get to the marketplace faster with their decisions. You can have your whole ad team as well as your client watch, and then you can do a debrief on the chat or you can do a debrief on the teleconference afterward.”
Nelems adds that video streaming also helps even before the formal ad work begins. “What we’ve seen more of lately is when agencies are pitching an account, they’ll do some creative work and focus groups on the forefront,” he says. “So when they do their presentations they’re able to say, ‘Look, we’ve done this work and we already know what your customers are thinking.’”
With video streaming and archiving, they can now integrate clips from the focus group directly into their presentation. “So they can say, ‘Rather than me telling you what to think of the ads, why don’t we hear what your average customer says?’” Nelems says.
The rise of the Internet in market research does have its critics, who, while conceding that it has its place, worry that today’s marketers have become too infatuated with the low cost and seeming ease of online surveys.
“I think that we’ll see eventually that online will take its place as a prominent method of collecting consumer information, but its relevancy will be relegated to a certain type of research,” says Patrick Galloway of San Antonio, Tex.-based Galloway Research.
“I think there are some questions regarding Internet interviewing that media buyers should always raise,” he continues. “First of all they should question the sample frame, i.e., where is the sample coming from and what is the incidence of non-response. There are also issues of security. It’s easy to find out who you are and why you’re doing it.”
To borrow a term from the industry, there’s no doubt that market research is “trending” toward online. “A lot of companies are finding online simply the better way to do it, so we’re winning more and more of that business and there is a shift from mall or phone to online methodologies,” says Wiltse.
But Campbell says that regardless of the methodology, ad agencies and media buyers need to start viewing market research not as a roadblock or added expense, but as an increasingly necessary component of any advertising program. While 95% of the time they are hired by the client rather than the ad agency, Campbell says, “we far prefer a working relationship with the agency. We’re not in the business of killing advertising — we’re in the business of making that advertising better and more effective.”