Many b2b companies, rightly so, are asking for more from their market research budgets – what will be the return on investment (ROI) if we spend $100k?
You would think that the pharmaceutical market is like every other industry sector with its ever tightening legislation, generic encroachment, slowing revenue streams and frequent clinical failures. However, according to a study from US-based Cutting Edge Information, pharmaceutical companies are moving away from the idea of hard ROI measurement for their market research where 74% of surveyed companies do not attempt to calculate ROI for market research.
The report, Improve Market Research Impact, says these firms are concentrating instead on levels of satisfaction of internal clients for research. Of the 74%, 39% do not conduct any sort of performance measurement.
The view that hard measurement of ROI is infeasible grows out of the fact that market research comes so early in the chain of events leading to a project launch – it is far removed from the end result. Lead report author Jordan Stone comments: ‘Because of its increased prominence in contributing to central strategy and key stakeholder decisions, many market research groups have shifted their focus from trying to directly tie market research to the success of products. With clients such as business development, ensuring the customer is satisfied and utilizing to the fullest the deliverables and insights communicated has become a better means by which to gauge market research success.’
It is clear that the measurement of the return on investment of market research is a valid concept, even though there are difficulties in making the measurement. The more general the market research objective, the more difficult it is to achieve the ROI measurement. Measuring the ROI on the market research used to evaluate the opportunities in new markets is difficult because so many other factors will influence the success and a length of time will be required before it is possible to check out whether the research was "correct" in the long term. Furthermore, if the outcome of the research project indicated that there was no opportunity, it has potentially saved the company many millions of dollars in what could have been a disastrous investment. However, it is impossible to be absolutely certain whether negative research findings were correct, and in the case of no investment, there is, in theory, no ROI.
A new white paper by B2B International, entitled Making Effective Business Decisions concludes that all significant expenditure in business should be justified. Measuring the ROI of market research is laudable and in some cases it is entirely feasible but it doesn’t come without its difficulties of measurement.
