Trusted and tested

Editor’s note: Timothy Davidson is president of Prevision Corporation, a Marshfield, Mass., research firm. Larry Gold is editor and publisher of the Inside Research newsletter.

Business-to-business research has come into its own in the past several years, with twice as many firms increasing their use over the last three years compared to those who have reduced use, according to findings from the 2009 edition of the Market Research Provider Quality/Value Study, which has been conducted annually since 2004 by Prevision Corporation. Among 56 percent of corporate research departments that do business-to-business research, it represented nearly 25 percent of all the projects conducted in the year under study.

In 1911, a pioneer of market research, Charles Coolidge Parlin, recognized that the systematic polling of individuals and statistical applications could reveal market potential and the promise for a new product or service. That idea led over the years to business-to-consumer (B2C) research, namely the collection of responses to questions related to a product’s marketing mix (e.g., its price, promotion and advertising) by marketing departments of major companies offering consumer products or services. Great emphasis has been placed on the use of advertising research to identify effective ads and to provide a means to measure their impact on sales.

Rarely benefited

At first, these B2C market research applications helped the marketing function of business but rarely benefited the sales organization. Since the 1980s and 1990s, the sales departments realized the value in understanding that the opinions and interests of their own customers who were retailers or wholesalers and not the end user. Up to this point, this information was casually passed on to senior levels of the sales department decision makers from the sales force.

There was a growing belief that gathering hearsay information about the retail marketplace from a biased sales force was not as reliable as using a proven market research process. If representatives of the retailers and wholesalers were polled regarding issues of customer service, product placement, revenue margins, etc., the leadership of a manufacturer’s sales department would have a better idea of how to achieve greater sales and profits for their part of the business. This is the origin of business-to-business (B2B) research

Have to be modified

But the statistical theory that underpinned the consumer research process would have to be modified somewhat for business-to-business research in which there may be a population of a few thousand retailers vs. a population of 300 million consumers. Because there are a lot fewer retailers and wholesalers than there are consumers, polling metrics had to be changed, especially with regard to sample selection and size.

As business-to-business research became more popular among manufacturers, other practical problems soon appeared. For example, getting the ideal respondent in a retailing/wholesaling business to answer a questionnaire or telephone interview was a much greater challenge than finding a few hundred consumers willing to complete a survey. Thus the cost of business-to-business research is typically a multiple of B2C research.

Business executives and professionals command much greater incentives for their cooperation, especially those who are either hard to reach or few in number. There are specialized sample firms devoted exclusively to finding them and creating samples. Also, higher-skilled interviewers are required to conduct these interviews, many with college or advanced degrees, who are paid handsomely to talk with their peers.

More recently, social media has gained in importance to business executives as a means to interact with each other. But like B2C, business-to-business research has been struggling to make both sense and use of it. Little has been accomplished so far in understanding its impact and whether researching unsolicited opinions or facts has much value.

Estimated the size

Prevision Corporation has estimated the size and the nature of the business-to-business research market in the United States as part of the Market Research Provider Quality/Value Study, covering 2009.

Of the market research departments represented by the study, well over half (56 percent) reported doing some business-to-business research, demonstrating its widespread use in the business marketplace. Typically, these surveys are among their own firms’ business clients, though top-level executive interviews for strategy purposes among non-related firms are not uncommon.

Its usage has been growing, despite the recession and cutbacks in market research budgets. Thirty-six percent of the study respondents reported having increased their use of business-to-business research over the past three years vs. 18 percent reporting using it less. This is not the case with consumer surveys, which experienced decreasing use pretty much across the board during the same time period, though some few have increased use. Still, the level of commitment to business-to-business surveys is there, having stayed at about the same level for the past three years in 46 percent of the cases, despite the recession.

The study also looked at current business-to-business research use in other ways:

Share of use: On average, business-to-business research represented 22 percent of all the research projects done in 2009 among the 56 percent of respondent firms that do some business-to-business work. Several industries reported much higher levels of projects. Over twice as many in health care products and services, or 45 percent, were business-to-business projects. In the financial (banking, insurance, credit card) and technology industries, business-to-business accounted for 34 percent and 37 percent, respectively, of the total projects done in 2009. These industries typically have a relatively high proportion of their customers as businesses or those businesses wield more leverage with their own customers and thus need to be better understood.

By contrast, other industries used business-to-business much less. Just 4 percent of projects were business-to-business in the CPG industry. And in retail (e.g., stores, restaurants) it was less than 1 percent. Business-to-business projects are essentially non-existent here, given the preponderance and importance of end consumers in these industries coupled with relatively few business customers.

Category use: This varies widely. Among users of business-to-business research, about two-thirds of respondents reported using business-to-business for attitude and usage studies (66 percent) and for customer satisfaction studies (66 percent). Half of the respondents used it for early-stage concept testing (50 percent), for later-stage concept and product testing (48 percent) and for ad/brand tracking studies (48 percent). About one-quarter also used business-to-business for brand equity/market structure studies (28 percent) and for ad copy testing (20 percent).

These research category use levels are not dramatically different than the research categories used in conventional or B2C research. The exceptions are for customer satisfaction, where business-to-business research is used significantly more than consumer research and for ad copy testing studies where business-to-business is use significantly less.

Methods of use: Online sample use is widespread in business-to-business research, given the across-the-board adoption of the Internet use in business organizations. The data collection methods used most often in 2009 were a mixture of phone and online (42 percent of respondents), with surveyors realizing that a combination of both will produce a more representative sample. Online use only was a close second, at 37 percent of the respondents, reinforcing the notion that it is easier to reach respondents online rather than phone, though representation may suffer. Telephone-only use is relatively small at 13 percent, and even smaller still with 4 percent in-person and 1 percent by mail.

About 15 percent of all do-it-yourself projects conducted in 2009 - without the assistance of third-party research suppliers - were business-to-business surveys. This is relatively small compared to B2C projects and typically reserved for “quickie” projects or where projectability to a business population is not a critical issue. This figure is significantly higher for respondents in the health care industry and somewhat higher for respondents in the financial services industry.

Quality: Half of the respondents had differing views on quality. In asking about the quality of business-to-business research in comparison to consumer or B2C research, 27 percent said that they felt business-to-business research quality is higher than consumer studies, with 5 percent of the respondents saying it was much higher. In contrast, 22 percent thought the quality of business-to-business is lower, with just 3 percent saying it was much lower-quality than consumer research studies. The near equal size of these two divergent opinions, with little strong opinion prevalent, together with the remaining half (51 percent) saying quality is about the same in either type of research, suggests quality is not a critical issue in business-to-business research.