As leaders around the world struggle with the problem of how to restart the economy whilst protecting people’s health, we talk to Didier Truchot, CEO of Ipsos, the world’s third largest research company, about the impact of COVID-19 on the company.
The month of March had seen a 40% drop in orders. A third of Ipsos’ turnover is conducted using face-to face methodologies and last month, new orders fell by around 20% because many projects require physical interaction between researchers and participants. Postponements and cancellations represent around 7% of an order book in mid March of close to a billion euros, compared to a usual level of less than 2%.
This followed the first 10 weeks of 2020 when Ipsos had enjoyed its best start of the year since 2011. Orders were over 5% higher than in 2019 with prospects for winning new contracts and only China and a few other Asian markets at a standstill. This changed dramatically as from mid-March, because of the COVID-19 lockdown in Europe, the US and some Asian countries.
Truchot comments “We expect to stay at this level until the lockdown is lifted. There are two key questions: how can we help our clients during the lockdown even if they cannot start new research projects because of the difficulty in execution and what can we do during the post lockdown period which might last for two months or much longer.
“There will be a lot of work for us to do in the post lockdown period, as our clients will have to deal with a different market structure, people’s aspirations, choices and behaviour will have changed in some ways so a lot of what we knew will have to be reviewed and reworked. Our clients will need market research more than ever, and our industry will be central in helping public institutions and private corporations navigate this new and very volatile environment. As one of the companies with resources, scale and coverage, we are in a position to do a good job on this.”
Adapting to the crisis
Have some markets or sectors been more impacted than others? “Some sectors like hospitality or airlines have stopped projects altogether including customer experience. Others such as FMCG and large companies are cautious. They don’t know what they are facing and don’t want their campaigns to seem overly aggressive. Car manufacturers are also very affected. However, our sector is doing better than expected, smaller clients are less conservative than global firms and companies that are relatively new are more active than the more established ones.”
Measures to ensure the viability of Ipsos in the coming period include reducing operational costs such as travel and the payroll, which represents almost80% of Ipsos’ fixed costs. Recruitments and planned salary increases have been frozen and around 700 directors and executives have agreed to monthly salary reductions of up to 20%.
What about face-to-face interviewers? “They have no work at the moment. For some projects such as for the Italian statistics institute for Eurostat, we can run CATI interviews with the same interviewers who would normally visit people at home. Some clients still want us to pay the field force to ensure they are available in the future. In some countries interviewers can benefit from state unemployment measures. In some we have used part of the savings from permanent staff to support some interviewers. And we also had to stop paying some interviewers altogether”.
Deals and overall strategy
This is all in stark contrast to the positive results Ipsos posted for the year 2019 which showed over €2 billion in revenue, a 14.5 % increase on 2018 and the best annual performance since 2011.
Some of that is due to the acquisition in late 2018 of four global divisions of GfK’s custom research business (Customer Experience, Experience Innovation, Health and Public Affairs). Truchot confirms that the integration is now complete.
“We welcomed over 1,000 staff to Ipsos in 2018. Many were doing a similar job as what we are doing, so their integration was not that difficult. There were some interesting pieces in addition, such as panels in the US and UX deals for the US, Europe and China, and shopper research platforms for China, Sweden and the Netherlands that we extended to other markets.
“9% of 2019 revenue (€175 million) came from the integration. Some divisions were not fully integrated by the second quarter of 2019 so the real impact will be higher. We had to restructure some unprofitable programmes, which had a negative impact on the 2019 operating margin but we were expecting a better contribution for 2020. We are very positive about the expansion but the contribution will be less in 2020 than had been envisaged.”
The strong performance is also due to the Total Understanding initiative rolled out in July 2018. “Ipsos has clarified what it offers to help clients better understand how they can use the information we provide. We have a diverse range of offers, and needed to create an organization to support clients to ensure our solutions are integrated and used in a smart way. Clients often allocate research contracts based on technical solutions leading to fragmentation of suppliers in transforming data into information that can be used by the business. We now have a structure of 250 senior experts who work closely with clients to help develop the appropriate offer of different solutions for what the client wants. Right now, things are developing so quickly, it is vital to have a close dialogue with the client to work in the most effective way once the lockdown is over.”
Ipsos also acquired Maritz Mystery Shopping and Askia earlier in 2020. The acquisition of the Maritz business was not part of Ipsos’ long-term strategy says Truchot. “The opportunity came up and was facilitated by the person who is in charge of our mystery shopping in the US. This was an excellent opportunity at a reasonable price as they had very good researchers.” On the other hand the acquisition of Askia was part of the overall strategy. “It has a great data processing capacity with a high level of automation and great software to help our clients develop a capability for DIY research.”
Commenting on why the top research companies are struggling with growth, he says “we were not positioned in the most dynamic segment of the market. For instance, using secondary data was not well developed in the large international companies which tend to dedicate their coverage to sell traditional market research projects.
“The established companies have been very conservative and the sector was not moving as quickly as it should have. I also think we have not adjusted quickly enough to help clients to find DIY solutions which we should not see as a competition but should help clients to help themselves, and do it well through software, question libraries and a hotline to support them. “
The new normal
The fact that no one knows how long the lockdown will last makes it difficult to plan. “We use data from hospitals and centres that specialise in providing expert information about the pandemic The later the lockdown ends, the more difficult it is to manage with for instance just half of revenue but 80% of costs over a long period of time” says Truchot.
Whilst some projects have resumed, by switching from face-to-face to phone or online methods, most will not restart until after containment measures end. Some clients are reluctant to change the methodology of specific types of research such as audience measurement, which have fixed protocols to ensure comparability but the uncertain situation is also impacting demand. “It’s not just that face-to-face is no longer possible as we can use online for more than half of our projects, but some studies such as customer experience or new product testing have been cut as some clients wonder if it makes sense to talk to consumers when their life has been turned upside down.
“We also don’t know what consumers will want in the ‘new normal’. I think their behaviour will be different, particularly as the virus will not disappear and even if the lockdown is lifted, there will be new rules and restrictions. For instance, it was announced in France that we should not book our summer holidays because of uncertainty. Clients have postponed some of the work they wanted to do, and I agree with those who say that the corona fight is a marathon not a sprint.
Given that China is relaxing the lockdown, does this provide an indicator of what could happen? “The level of new orders in February was 10% of what it was a year ago, but we hope to see a recovery in April or May. Our offices are open and clients in some sectors are looking at behavioural changes, for instance, will more Chinese buy a new car as they don’t want to use public transportation? Even if it is a very specific market, we can learn some lessons. We have programmes working with clients to monitor how long it takes to return to a structure, what consumers will do and what they want. We might use this as an example for other markets, to monitor the demand for work and whether it would be possible to return to original projects. The signals are positive but it’s too early to tell, we might end up with 10% less than forecast.”
Does research and insights have a key role to play in helping companies navigate this unprecedented change? “We can also help clients to develop scenario planning. But today, our clients are more focused on tactics for the short- to medium-term than on long-term strategy, and we help them in this.”
“We should not over position market research as a new partner for doing everything. However we should also not undersell what we do, so we should also convince our clients that we can support them with the right set of information and the analytical capability to help them avoid making mistakes. Because the new market may be very different from what they know. We need to re-check assumptions from before and see whether and to what extent they have changed once the lockdown ends. Clients need to relook at what they were planning to launch in the spring, to examine consumers’ willingness to adopt a new product, how they will react to a marketing campaign, whether or not they trust a website or blog.”
Truchot is positive about the role of research in helping companies deal with the COVID 19 pandemic. “We have the tools and techniques that can assist clients in understanding consumers and knowing what to do once the lockdown is over. Companies everywhere will have to adjust choices to the new situation. Market research is very well equipped to do that so this will provide our industry with some unique opportunities to help our clients.”
