• by Tanya Gazdik , July 9, 2013

Despite modest gains during the two previous years, U.S. marketing research firms didn't fare as well in 2012, reports the American Marketing Association.

A rise in online data collection along with a fall in government contracts contributed to a stagnant year.

The industry -- which includes marketing, advertising and public opinion research services -- had total U.S. revenues of more than $9.5 billion, up 1.7% over 2011. But after adjusting for inflation, that number fell to -0.4%. The number of full-time employees in market research was 33,506, down 3.7% from 2011.

The 207 research firms surveyed also collectively flagged against another benchmark, the gross domestic product. From 1988 to 2011, annual growth in marketing research outpaced the GDP. In 2012, it came in 0.5% behind the GDP.

The numbers were published in the 2013 Honomichl Top 50 Report, an annual analysis of the marketing research industry published in the June issue of AMA's Marketing News magazine.

"It would be easy to attribute this dip to a sluggish economy," says Jack Honomichl, founder of the newsletter Inside Research, who compiles the Honomichl Report, with Inside Research Publisher Larry Gold. "But there are underlying factors that help to make it more understandable, such as government spending."

Three factors contributed to the industry's weak overall performance.

First was a pullback in government spending. U.S. federal government agencies are by far the biggest spenders for research services, investing an estimated $6.3 billion in 2012. However, the portion of that expenditure contracted to the private sector was down 18.3% last year.

One long-time supplier to federal agencies, Westat (ranked No. 4 on this year's Honomichl list), posted a revenue decline of 3.1% in 2012 -- the first negative number for Westat since it has appeared in the ranking.

There was also a proliferation of online data collection, which costs less than traditional data collection methodologies. By allowing one to do the same amount of work for less, this leads to a reduction in some survey revenues.

Finally, a slowing of focus group usage, which could signify a growing preference for mining consumer insights from social media sites in lieu of more expensive focus groups. An industry report showed that the number of focus groups conducted in the U.S. grew by 1.9% in 2012, compared with 4% in 2011 and 5.4% in 2010.

On the upside, the eight firms in the Top 50 that specialize in syndicated services fared better in 2012, with total revenue growth of 4.1%.

"During hard times, it is relatively easy to cut back on ad hoc work but difficult to cut back on long-term contracts for syndicated services, especially if they provide input to corporate information systems,” Honomichl says.

The 2012 industry analysis was based on data from the top 50 firms, plus 157 smaller firms whose data was supplied by the Council of American Survey Research Organizations.

The three top-ranking firms maintained their positions this year: Nielsen Holdings N.V., with just over $2.6 billion in U.S. research revenue in 2012; Kantar, with an estimated $929.4 million; and Ipsos, with $590 million. The list also included seven newcomers who experienced stronger years in 2012.

For more information and to view the Honomichl Reports, including profiles of each firm, visit www.MarketingPower.com/honomichl.