Editor’s note: Daniel Greenberg is vice president of marketing and co-founder of Active Research, Inc., Burlingame, Calif.

Traditional market research methods are rapidly becoming inadequate to meet research requirements for the Internet age. As marketers struggle to keep up with today’s fast-paced business climate, the need for insights into consumer shopping behavior is outpacing the value of traditional research methods. Marketers thus face great pressure to meet industry demand, while product lifecycles are rapidly shrinking in nearly every type of category. The lifespan of a digital camera, for instance, can be as short as six months, with 80 percent of its lifetime revenue achieved within the first two months.

The proliferation of e-commerce has led to intensified competition – particularly for manufacturers and retailers who require more timely research for gaining advantage over their rivals. For example, in 1999 there were three types of MP3 players. Just one year later, there are now more than 60. The Web has also created much more transparency for consumers, who can instantly access product and pricing information online. A more empowered buyer means less control for manufacturers and retailers. This increases competitive pressures unilaterally, placing pressure on profit margins.

Several other factors point to why traditional research methodologies are losing their effectiveness. Response rates are declining, as fewer people agree to participate in research. Those who do participate often do so for the financial incentive – potentially biasing the sample toward more price sensitive buyers. These people also tend to place a lower value on their time – potentially biasing the sample toward lower-income individuals. Unfortunately, the potential for sample bias is substantial. So in an attempt to get quick answers, researchers are increasingly relying on focus groups as a replacement for quantitative research. However, there is a problem when feedback from a few people is used as a proxy for an entire market. Would you want to place a multimillion-dollar decision based on the opinions of six consumers? Many firms do.

In spite of the times, research cannot compromise methodological and sampling integrity. Since time (or lack of) plays an ever-influential role both in research practices and response rates, there is a profound need for real-time research that provides clarity about the rapidly changing marketplace as it evolves. Great value lies in the ability to spot market trends, especially regarding consumer purchase behavior.

The Internet is dramatically enhancing the ability to collect real-time data, although research is one of the last marketing disciplines to undergo automation. In fact a new research category – Market Research Automation (MRA) – is evolving. MRA methodology leverages the Web at all research stages and can reduce traditional research cycles from months to minutes. Thus there are greater efficiencies and cost savings to conduct studies, while offering the benefit of a continuous online window into market trends or the consumer mindset.

MRA tools or services also close the loop between online buyers and sellers by acting as intelligent middlemen in the interactive world. In the process, they give marketing professionals decision support capabilities that are continuously delivered directly to the desktop. Research clients are therefore better equipped to understand what drives buyer purchase, including trade-offs individuals make when determining preferences for products based on brand, feature set and price. Other benefits of real-time research include enabling marketers to differentiate products and develop more precise messaging to multiple audiences, continuously tracking emerging and maturing trends, as well as forecasting product demand.

Since MRA uses the Internet for data collection, there is a concern that the Web population does not represent consumers in the real world. With more than half of U.S. households now owning PCs, the age, gender and educational profile of the Internet population is approaching that of the general public. For certain segments of the population, such as those who purchase DVD players, the online shopper profile is very similar to that of the offline consumer. Finally, with the generic Web user becoming more diverse and representative, an e-commerce study by Harris Interactive found that fully 90 percent of Web users are researching products and services online (June 1999).

These statistics point to an unprecedented opportunity for manufacturers, retailers and marketers to interact with real buyers directly at the point of shopping when they are most engaged. MRA services automate data collection by participating in the conversation between buyers and sellers. Data is collected passively with zero intrusion. Web-based self-service applications also provide a useful one-to-one service to respondents while using Internet profiling methods to capture needed information. MRA then employs data mining techniques to unlock the value from these digital interactions. Since information is gathered from respondents who are actively engaged in a Web site, observational data is clean and free of aspiration-based biases. Response rates to such Web-based data collection methods are also significantly higher than email-driven surveys or opt-in promotions. This process leads to larger sample sizes.

Currently, we’re seeing real-time research or MRA take on an expanding role to include product concept testing and forecasting such aspects as future sales and market share simulations. Because the Internet has spawned unique new market models such as business-to-business e-commerce and dynamic pricing, there are more vertical markets to serve than ever. In addition, MRA is being incorporated into everyday tactical decision making at many levels within a company – from marketing and manufacturing to logistics and procurement managers.

Manufacturers, retailers and marketers are now better equipped to use real-time research to forecast such areas as raw materials needed, the number of units to order and product sales. The growing Internet commerce market is not making market research obsolete, but rather, increasing opportunities for both quantitative and qualitative researchers. The key to providing continuous value to clients is to adopt solid and timely methodologies – the minimum requirement to meet today’s market demands in the new economy.