Kerry Sunderland
When the ‘global financial crisis’ (GFC) hit in 2009, market research revenue plummeted by 10 per cent. Many expected that the industry would bounce back in 2010, but growth eluded many companies, particularly the big multinational agencies. However, businesses of all shapes and sizes are optimistic about the year ahead.
The 10 per cent decline in market and social research turnover in 2009 was the first time in many years that the industry had experienced ‘negative growth’. The Association of Market and Social Research Organisations (AMSRO) collects monthly figures from 15 companies in the industry (which equates to about 40 per cent of industry turnover). Ipsos Australia CEO and AMSRO vice president Hugh Amoyal says that while AMSRO cannot reveal precise figures, turnover did not recover as many expected in 2010. “Growth was pretty flat in 2010. There were a number of reasons. Firstly, there was talk of a double dip recession around the world in May/June and suspicion that the GFC wasn’t yet completely over. And then we had a federal election. One of the industry’s biggest clients, the federal government, went into caretaker mode and the fact that it took so long to get a decision about who was leading the country meant that the federal government severely put the brakes on any new projects for about eight weeks and that cost us about several percentage points of growth that we expected but didn’t get.”
Amoyal, however, is optimistic that industry will enjoy about five per cent growth this year as the federal and new state governments settle in and most forecasters are generally optimistic about retail sales. “The big issue we’re facing as an industry is a shortage of people. We have a capacity problem. Significant growth in the double digits would demand thousands of new researchers from overseas. Agencies will still struggle to recruit because clients snap up the available candidates first. This will cap our growth in the foreseeable future.”
Amoyal also doesn’t believe there will be any radical shake-up in the shape of the industry in 2011. “The big global companies have now all got a footprint in Australia and are focused on organic growth. If there’s any consolidation, I think it will be amongst the smaller research companies, not the global players. I can’t see anything on the horizon for the Australian market.”
Resilience through resistance
Marc L’Huillier is CEO at Sweeney Research (now one of only a handful of larger, independently owned agencies in Australia, including Roy Morgan Research and Colmar Brunton). He believes that avoiding acquisition has helped the company better weather the downturn. “We’ve been approached multiple times in recent years, but we just haven’t felt it’s the right move for us. We’ve also seen that all of the consolidation in the industry has created some real opportunities for the business.
One of the things we observed in the industry over the past few years was the scale of GFC staff cutbacks. Being independent meant that we didn’t have to deal with mandates from people outside of the organisation. We held firm and ultimately that saw us grow year on year over that period while we know a lot of peer companies went through some very difficult times.”
The boutique end of town
During the past two years a number of new independent consultancies and ‘boutique’ agencies have opened for business. Although coming from a zero base, a number of these company owners are reporting strong growth in contrast to the multinationals.
Many of these new agencies have been established by senior staff who have moved on from the global companies following an acquisition by another multinational.
Mark Sundquist, formerly managing director at The Leading Edge (acquired by Photon in 2004), has recently joined former TLE colleagues Karen Phillips and Darren Kemp at new start-up Fiftyfive5. “The industry has seen this before. It’s part of a natural cycle: a period of consolidation and then a period of fragmentation. If you go back 20 years, it’s probably the last time you’ve seen this part of the cycle. At the time there was significant consolidation during which businesses like Yann Campbell Hoare Wheeler, Frank Small, Reark – a whole range of really sizable, independently owned research companies – were acquired by global companies. Then you saw a whole layer of mid to senior people, who weren’t necessarily part of the financial transaction or rewards, leave to set up their own shop after the mergers fundamentally changed the nature of those businesses. I am not just talking culturally but also strategically in terms of what they focused on and what they were really interested in. It spat out a lot of people who went off and did their own things, such as The Leading Edge, Blue Moon and Jigsaw – a whole range of businesses that have subsequently gone through their own round of acquisitions.’
Ruby Cha Cha was also founded by two former TLE consultants, Kristin Hickey and Ellen Baron, back in January 2008. Baron says the agency has experienced strong growth over the past couple of years of more than 40 per cent year on year and she is very optimistic about 2011.
Sundquist is also optimistic about the year ahead. “Our aspirations aren’t defined by size or growth expectations but, having said that, we’ve grown dramatically in a pretty short space of time – we’re up to 10 people after only six months. The offer is getting traction in the marketplace. As other businesses have been acquired, evolve and shift direction, it creates a bit of a vacuum in the marketplace for businesses like us to fill. This was why businesses like TLE, Jigsaw and Blue Moon had success about 15 years ago. The same thing is happening again now.”
However, like Amoyal he believes the industry is talent starved. “One of the big problems we’ve got at the moment is that the industry as a career path isn’t a destination of appeal for a lot of graduates. Two, very few businesses in Australia are training and developing people, compared to five or six years ago when a lot of training was going on. This is a result of the fact that a lot of the bigger businesses have had a tough few years financially. Also a lot of people have gone freelance while others have traded off careers for lifestyle. The net effect is that the stocks aren’t being replenished and the older fish aren’t as active as they once were, so there’s a bit of pressure on the talent base in the industry.’
On the front line
In the operations area, Amoyal doesn’t predict any major changes in 2011, given that some of the biggest companies have already moved their field operations offshore and most of the major players have already launched dedicated field houses. Nielsen and Synovate have both moved computer assisted telephone interviewing (CATI) operations to New Zealand, while many other medium to large agencies now have independently branded, standalone operations companies (Ipsos has iView, Colmar Brunton has Your Source and so on). However, ANOP has recently shut its CATI room and STW Group has just launched a new CATI business called Touchpoint Research Australia. Previously part of research consultancy AMR Interactive but now a completely separate entity, Touchpoint will provide specialist CATI, data processing, coding and other data entry services (while the STW-owned Online Research Unit will focus on online data collection).
With an established fieldwork room comprising more than 85 stations, Touchpoint operations director Helena Harrison claims it is already one of the larger providers in the country. “Touchpoint is its own entity with its own management structure. We will focus on large scale projects, fast turnaround projects and take overflow from other research companies if required.” Harrison believes “it’s going to be an exciting year but a tough year given the economic climate.”
Looking forward, Amoyal says, “I don’t think the clients are going to change their methodologies radically in the short term but there will be a slight shrinkage in CATI facilities. I think it’s just a natural process of this sector getting smaller and smaller. It is going to become less and less profitable and that will be the challenge for the big companies but I think it’s still two or three years away before we see any big players pull out.”
Harrison admits it’s getting harder to reach potential research participants because of the shift from landline to mobile and VOIP phones, but she believes people still like having conversations. “CATI still has a valid place in the research mix. It’s not dead. It just needs rethinking. We have to look at how we make contact with our respondents.”
This time two years ago, many researchers predicted there would be consolidation in the panel market. That hasn’t yet happened, but Amoyal believes consolidation in the panel market would be “good for clients and probably for the industry as well.” Of course, new technology is also spawning data collection players with expertise in online community and social network platforms (like Vision Critical) and location-based services, such as GPS Interactive, the new wholly-owned subsidiary of GPSi Group. “The great thing about our industry is that there are so many new technologies and tools that enable interactivity with people and give us deeper insights about how they live their lives and why they make certain decisions,’ says GPS Interactive managing director Jason Buchanan. “There’s a lot of potential to get a deeper understanding about what makes people tick.”
Buchanan says there are also interesting possibilities with RFID, Bluetooth and facial recognition technologies and he predicts that by the end of this year, neuroscience will increase in popularity as prices come down. “There’s always going to be pressure on budgets to justify why new methods and technologies should be used but the tipping point will be this year or early next year. As more case studies about actionable findings come through, budgets will adapt.”
L’Huillier sums up many people’s sentiments when he says, “I think it’s really healthy and exciting that there’s a host of new companies emerging in the industry. It’s great to have people with passion and creativity invigorating things. While we all ultimately compete, our view is that it’s important that the research industry continues to evolve and change shape.”
Kerry Sunderland is managing editor, Research News
Originally published in the February 2011 edition of Research News and reproduced with the permission of the Australian Market and Social Research Society. For more information about AMSRS: www.mrsa.com.au
