How to do market research without spending a fortune

Posted by: Krishna Kumar in Ideas

This post is prompted by the question "How does one gauge factual potential of an idea without paying big bucks to a market research firm?" raised on Twitter by @stallionCEO to @start24x7.

Companies and brands need to continuously understand the market, customer needs, get feedback to their products, etc. The standard way of doing this is to do market research. Unfortunately, market research usually costs a pretty penny and many, particularly startups being hard pressed, are unable to commission market surveys.

Does the high costs of market research mean that startups and other not so well off companies have to do without the luxury of market and customer insight and work as if blindfolded?

No. Not at all.

There are many market research techniques that are not costly. And then there are  alternatives to the costly part of market research.

Do you really need fresh research?

Are you sure that you need fresh research to find your answers? It is highly possible that some one else has researched the same question before and the answers may even be public in places like Slideshare. A simple Google search could lead you to mines of information. Websites like World Bank, Reserve Bank of India, OECD, UNDP, Energy Information Administration and so on are mines of data that you would otherwise pay a consultant for - and chances are that the consultant would go to the same sources anyway - 

With enough secondary data you may be able to do away completely with the intended market research or even cut down its scope and hence the costs dramatically.

If you do decide to go ahead with the research, you need to break it down into its key cost elements. Lets look at the key elements of cost in market research. 

Data collection

Depending on the research agency concerned and the sample size this may in fact be the biggest of all costs in a market research. Most agencies outsource this work to specialized field agencies and just add an a "management fee" on top of their bill.

Can you do with a smaller sample?

The sample size required for a market research is determined by  the total population, the confidence level and the confidence interval you require. As the population size increases, the sample size tends to stay constant and there is no point in having huge sample sizes unless you want to delve deep into the results. Confidence levels are usually 90% 95 % or 99% and confidence intervals are normally around + or - 5%. Reducing the confidence levels from 99 % to 95 % almost halves the sample size you need! Similarly increasing the margin of error also dramatically reduces sample size and costs.

You can play with the numbers here and possibly settle for lower confidence intervals and higher margins of error to keep research costs down.

Can you collect responses online?

Field agencies charge huge fees per interview ( starting from Rs 50 per contact and up to Rs 500 or more depending on the type and accessibility of the respondent. Can you do your survey online and reduce these costs?

There are any number of hosted survey software like SurveyMonkey that you can use to run a survey online. Even if a small part of your survey is done online, there is that much reduction in costs.

Where to get online respondents from?

This is a fairly obvious question and the answers are also equally obvious, if you look around.

A good starting point is your customer and contacts database. Pull out all the email contacts and visiting cards you have accumulated. See how many of them qualify.

Leverage your social networks including Linkedin Groups and Ryze and Twitter and Facebook to get respondents.

Advertise with Google Adwords to draw prospective subjects to your survey, You can  target your Adwords campaign to respondents with the required demographics.

Offering a reward like a lucky dip prize is a sure way to increase your response levels dramatically.

Use college students

If you still need to get the data from face to face contacts, a group of smart college students can get it done for you at a fraction of the cost that a field agency would charge. Here you need to ensure that they are not filling the response sheets sitting at the corner coffee shop!

Do you need a sample at all?

This is a good question to ask before you set out to do a sample based market research. Do you really need a sample survey? The Delphi method, pioneered by the Rand Corporation is an accepted market research method. Simply put, the Delphi method is nothing but asking a group of experts for the answer and making them arrive at a consensus by presenting back to them the anonymous summary of the answers. 

You can automate the Delphi process here.

You could get experts for a Delphi session from the same sources listed above, including your various social networks.

By going the Delphi way, you could reduce your market research costs dramatically if not eliminate them altogether .

Data analysis

Once the sampling is done and the data has been verified, input and cleaned comes the analysis. Most MR agencies outsource this task also. we will come to that in a minute.

Data analysis typically comes in two flavors. 99% of all data analysis is nothing but cross tabs in Excel (or OpenOffice for that matter). The remaining 1% is done in software like SPSS. 

Cross tabs are fairly simple to do if you have access to the source data (like from your online survey). For the SPSS work, you can approach the same people who do the work for the research agencies. 

The report and the presentation

Do you need a detailed report? Some thing that puts in words what the cross tabs  say, and that too in colour printed at twenty rupees a page? Ask the agency to be kind to the environment and do away with all the paper and also reduce the costs in the bargain.

Do you need some one from the research agency to fly down to your city at your expense to read it out to you? Can't you do that over a phone call if not over chat or Skype? I know market researchers are not that technology savvy, but...

Do you need an agency?

Finally, if you can do all this, do you really need that costly agency to do the market research for you? Can't you  do atleast the basic stuff yourselves?

Comments (7)Add Comment
Market Research Services
written by Alex Jones, March 03, 2011
So far, I managed to go though only some of posts you discuss here, but I find them very interesting and informative. Just want say thank you for the information you have shared. Regards, Alex
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Market Research Reports
written by Market Research Reports, November 07, 2009
Nice tips, thanks for sharing it.
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YES Advertise on my site
written by CHINTA SWAMY PRAKASH RAO, November 03, 2009
The most ethical way of separating advertisement and communication
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Market Engineering
written by Market Engineering, October 30, 2009
This is a good informative article.
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Market [Field] Research agencies
written by Sekhar, October 23, 2009
Hi Alphonse,

Market Research Agencies like Incubate can help you out.You can reach them on- www.inqb8.net, voice-040-3060 3807,3060 3808.

Regards,
Sekhar
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...
written by Alphonse, October 21, 2009
Can someone suggest me economical but reliable field research agencies in India. I have an immediate requirement.

Regards,
Alphonse
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"Absolutely... save the penny! A market researcher's perspective"
written by Mrutyunjay, August 11, 2009
Disclaimer: Not speaking on behalf of all research agencies in India (I am no self claiming representative of the industry) but as someone who is a seasoned researcher and runs an “online market research agency”. These are completely honest personal views.

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A. Do you really need research?
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I guess it is not about small or large company and ability to spend... it is little more fundamental then that... "it is about the real need to devote time & money"... "real need to hire a specialized agency/professional who costs"... "real need to know something you more or less already know"... "need to look for something you don't really have with you from any of the existing internal source or other published public sources"... etc. etc.

It is like, you have cold and
1. do you want to take the home remedy for the general cold or
2. you have to go to the chemist and buy some OTC or
3. you need to go the Doc next door for some consultation or
4. you actually need to get a through check up done before you want the medicine to be prescribed by some medicine specialist in a private hospital who charges a consultation fee Rs. 1000 per visit.

You have many choices of shelling out money for a general cold. Unfortunately market research is not always general cold and the options available are not either or situations. "Every marketing problem is research opportunity and every marketing opportunity is a research problem"... you need to understand how can you address the "opportunity" and "problem" better "with or without a research agency", "with or without spending the so called fortune".

I am aware of many companies who grew without any formal research agency hired for many years, only by taking decisions...
1. purely based on intuition and gut feel
2. based on basic commonsensical understanding of their consumers/business
3. by utilizing all the existing sources of information

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B. Data collection:
---------------------------------

Wrong assumption/information... bigger/smaller agencies don't add very high field management fee on sample collection. On top of the out of pocket expenses for fieldwork they primarily charge a time cost for analysis & report writing, typically 30% to 40% of the total project cost. If you calculate it doesn't give them more than 15 to 20% profitability, I am sure that is a fair margin business. Because of the outsourced field work model the cost hasn't gone up, but quality has gone down. Be careful on quality assurance/compliance more than cost there.


B1. Can you do with a smaller sample?
KK is bang on, if you don't need deeper analysis cuts then 1500 to 2000 sample is almost the best sample for any size of universe above 20,000.

B2. Can you collect responses online?
Sure you can, but the cost is not going to be drastically lesser than offline (face to face paper pencil), as online (self filling) is still growing and online agencies like us don't have evolved targeting methods and scale in Indian domestic market to reduce the cost drastically. Don't expect more than 20 to 25% lesser cost.

B3. Where to get online respondents from?
1. Buy regular online ad inventories (websites/ad networks) – huge logistical nightmare if sample size is small
2. Do a SEM campaign to collect sample – need specialised knowledge of setting up a campaign and optimising it
3. Buy from a online sample panel – simplest but will cost you
4. All free sources KK suggested – if sample is small and you are not worried about market representation and source biases

B4. Use college students
Go on your own peril ;-) they are more nuisance then solution, experience will speak for itself. For simpler problems you can still rely, but be careful if the objective is critical.

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C. Do you need a sample at all?
---------------------------------
Depends on objective, Delphi is not a solution to all kind of research needs you may have, it is an alternate method for certain kind of research problem.

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D. Data analysis
---------------------------------
KK is right, basic tabulation can be done by anyone; you need to have simple softwares to do cross tabs. But it is not always simple, sometime the operational aspects are messy... if you have large number of fields, coding issues of numeric as well as alpha numeric fields and not good understanding of how to organize the raw data file for tabulation then a two hour of work (for a specialized guy) may take you 20 hrs of effort. Choice is yours, be careful about the opportunity cost.

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E. The report and the presentation
---------------------------------
KK is right, I come across many clients who doesn't read a soft copy of the presentation/report sent, not even the executive summary (I personally don't believe in giving a printed report anyway) and ask to come over and make a presentation made out of the same report. I am sure many research companies like us don't like doing presentations for every research; many just see an opportunity :-)

If you really need the information, then do spend time on the report to ask questions, interpret & assimilate beyond what the research agency has indicated, as a business owner you are definitely better off than the agency & researcher to figure out what the data indicates.

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F. Do you need an agency?
---------------------------------
Don't put market research guys like us out of business, we don't even cost for 2% to 5% of the marketing budget in India. I am sure, if you don't have a marketing budget as on date and you are someone who can "do it yourself", then now "you already know how to do research; KK's article is very informative".
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