Extreme makeover

Editor's note: Kathryn Korostoff is president of Research Rockstar LLC, a Marlborough, Mass., provider of market research training. 

What’s our hang up with money? We market researchers are so vigilant about avoiding any appearance of impropriety by mixing our endeavors with lead generation and sales processes that we are missing important opportunities – opportunities that could actually help address some of our greatest challenges: perceived credibility as a profession and quantifiable ROI.

It is time to allow the market research industry to confess: it can be, and sometimes already is, a sales tool. And if market research can be used directly to generate sales, then market research departments can be recast as profit centers.

How is this even possible? Actually, there are four ways.

Path No. 1: Market research online communities (MROCs) as sales incubators.

I have seen many MROCs that already blur the line between pure research and sales. If a company is going to test the effectiveness of coupons, bundling and discount offers by testing them with their MROC, fine. We could also use MROCs for testing referral campaigns.

But why not do it on a bigger scale, track those results and take some financial credit? Some signs indicate MROCs are growing in size; why not use direct and indirect sales activity among these members (some of whom, in the case of branded MROCs, are the highly desirable “superfans”) and claim it as market research revenue? Once MROCs prove to be an effective sales tool, watch the scale grow even more.

Path No. 2: Market research departments as in-house agencies.

Increased use of the in-house research department (or, if you prefer, insourcing) is already occurring. In the past, many client-side organizations used market research agencies – which often had superior tools, superior skills and access to superior sample. Thanks to technology and other trends, these advantages have been eroding and now more client-side research departments have equal skills, tools and sample sources. Add to that the fact that, in some sectors, concerns about proprietary information leaking to competitors are at an all-time-high and an in-house agency model starts to look pretty compelling.

I can already hear people countering, “But an in-house department can never be really objective, so the research won’t be as good.” Ridiculous. Let’s give market research professionals more credit. Many companies have in-house legal counsel and in-house ad agencies; are market researchers less able to maintain professional fortitude? I don’t think so.

In this in-house scenario, the market research department is recast as the in-house market research agency. If organizations adopt this model, then three things could happen:

Market research will become recentralized. In many companies, market research is a mix of centralized and decentralized structure. Certain types of projects are run by the in-house research department (often brand trackers and customer loyalty studies), which may or may not outsource. Other studies have often been under the purview of specific functional areas, which tend to outsource. For example, the sales department may do the occasional win/loss study, product development may do concept testing or pricing studies and marketing may do ad hoc message-testing studies, as just a few examples. In some organizations, these functional areas are contracting with a preferred market research agency directly. But if the in-house agency truly exists, that revenue can be redirected to the new profit center.

Some project costs will be lowered. Some projects will be done with greater financial efficiency, when done entirely in-house. In-house agencies won’t be paying for markups on translation, sample and professional fees.

The new agency may find ways to generate revenue by offering its services to other clients. Some companies have IT departments structured as profit centers – and there are cases where such IT departments make money selling services to other businesses. Market research in-house agencies could certainly consider a similar model and gain further profit.

Path No. 3: Monetizing existing in-house data.

As much as I detest the word “monetize,” I am making an exception because it really is the right word choice here. Many organizations have enormous amounts of in-house data – why not use it to generate revenue?

Consider the recent news about MasterCard and its partnership with Exponential Interactive, a company that analyzes adverting effectiveness. As announced by Exponential in September 2012, the Exponential-MasterCard collaboration is aimed at using MasterCard-collected data about retail purchases to correlate offline and online behaviors. For MasterCard, that means it has potential to make money by using in-house data as a market research product.

Sure, credit card companies are unique in the quantity of data they have – and thus can possibly sell – but it does challenge the tradition of all customer-related data as being stashed for in-house purposes only. If anonymized data can be used to sell information services, why not? Couldn’t an insurance company sell anonymized data? How about media companies? Maybe even Internet service providers? Any company that collects large volumes of data that could be anonymized and combined with other data sources to address market research challenges (finding customer groups with specific needs, prioritizing geographies based on specific behavior patterns) could be sitting on a serious asset.

Path No. 4: Mobile ethnography as research under the guise of shopping.

Sure, we all know it is unethical to engage in sugging (selling under the guise of research). But what about rugging: researching under the guise of selling? Lots of companies are now offering mobile shopping applications that include digital coupons. In just one example, Seventeen magazine sought to get an extra boost during this fall’s back-to-school season and so launched a “Shopping Insider” app that allows readers to scan magazine images and get digital coupons on their phones that were redeemable at popular stores like Aeropostale and Bakers.

Now, Seventeen may have developed this as a pure sales tool but we researchers see a goldmine here, right? Why not use this kind of mobile phone application and its coupon activity for research purposes? Just seeing what coupons people access tells us something about product desire and then seeing which ones are actually redeemed gives us a conversion rate that will be a treasure-trove for marketers.

Starting in 2013, we will see the proliferation of mobile ethnography applications. Cool new tools such as LifeNotes by 20|20 Research and SmartFly by Gongos Research are just the beginning. By 2015, I predict there will be millions of consumers in the U.S. alone, happily opting-in to mobile ethnography applications and thus consenting to trade their shopping behaviors in exchange for discounts, insider status and deals. All of these resulting sales could be tracked and claimed as market research revenue.

The implications

For the sake of discussion, assume I am right and that market research becomes a profit center. Then what? What are the implications?

Market research will have more respect. The brutal truth is that more people in an organization will respect market research, when it clearly generates profit. Donald Trump doesn’t get his various ploys in the news because they are, in themselves, newsworthy; he gets news coverage because he is so wealthy. Money garners respect, like it or not. And in the case of market research, this respect will come from two sources:

Leaders who bring in revenue get respect. That’s just a business reality. When research managers can draw a straight line from research programs to repeat purchases, greater basket values and overall sales, they will get more respect.

Research that has tangible results will get respected. Research that suggests a future outcome based on hypothetical simulations (think conjoint) gets some respect but is often questioned because it is hypothetical. Research that shows real-world results will be harder to question. A market research cynic can’t nitpick on screening criteria and statistical methods when the results are in the form of dollars spent in the real world.

Market research will have a quantifiable ROI. While not every market research project would have a quantifiable ROI, the market research department – I mean agency – will.

Market research budgets will grow. Thanks to that quantifiable ROI, research investment will grow. The profit generators will allow further investment in both profit-creating and non-profit-creating activities.

Market research departments will need to add new skill sets. Market research management teams will need to add new skills specific to these profit-generating activities and, as important, their financial management and measurement.

A fundamental shift

At the end of every year, we have dozens of market research pontificators publishing their predictions for the next year’s trends. Some are thought-provoking, some are obvious and some have been wishful thinking for years. And 2012 was no different. But all of last year's chatter about mobile research, evolving client-supplier roles and non-probability sampling will pale in comparison to the implications of a fundamental shift in the market research department’s financial structure as a profit center.

You don’t believe me? Have you read all of the above and are still skeptical that market research departments will ever be, in reality, profit centers? Or perhaps you doubt that any of the four paths outlined above will be realized. Then consider this: If research doesn’t do these things, other functional areas and entirely new organizations will. And with less rigor, and possibly ethics adherence, than professional market researchers.

Still not convinced? We have already seen some of the most interesting market research innovations come for outside of the industry in recent years. Survey platform companies such as AskYourTargetMarket and SurveyGizmo, and Webcam research platform MindSwarms, were all founded by people from outside of the market research industry. Many of the social media analysis tools were developed by academics and other non-researchers. And what about Google Consumer Surveys? Again, not from a traditional market research pedigree, yet rocking the research world’s basic tenets to the core.

And inside many companies, some of the coolest innovations in customer insight now come from outside the research department. Analytics coming from IT, prediction markets from purchasing and social media analysis from advertising. What’s next?

If ever there was a time to challenge our conventional thinking about the relationship between market research and sales, it is now.

Intentionally provocative

As you have likely deduced by now, this article is intentionally provocative. Some readers probably have formed a dislike for me, as the author of such heresy. Honestly, I don’t think that market research departments will widely become recast as profit centers. But I do think that it is a concept worthy of consideration, at minimum in order to challenge conventional thinking about what market research can truly accomplish.