According to a recent survey with over 650 global financial leaders by Coupa Software that was published this week in Supply Management, more than two-thirds (70%) of companies plan to contain costs by making broad or department-focused cuts over the next 12 months. The majority of respondents (87%) believed a recession is likely, and more than half (53%) expect it to last six months or longer with many firms believing that they are unprepared to manage their spend in a recession. UK respondents were the most pessimistic about the potential length of a recession, with 34% believing it will last more than a year, compared to 21% globally.
Clients will be looking across their whole spend base as we leave lockdown to see where savings can be made and the budget for market research will be on that list as well as all the other areas of marketing. You would hope that companies will spend money on getting a sense of where they are in the market place pre and post COVID and research will be key to that. But if your clients are in the hardest hit sectors such as travel and retail, consumer confidence and spending is going to take time to recover.
From a research agency point of view, I think you have to be prepared for this new era, especially with the constraints of people getting together for say focus groups. That is tough as I know that market research as a category doesn’t see the heady heights of the advertising and media budgets but all marketing budgets will be scrutinised and it is important that the investment in research is seen as a strong ROI – spending money on research will deliver the insight that is needed to grow the organisation.
Clients will be looking at levers to save money. They may look to provide short term commitments – more project based and one off project fees; they play the market more – so you may be asked to provide more competitive quotes than before COVID with an increased number of suppliers as it is a buyers’ market out there; they could evaluate the specifications and buy ‘less’ from you and they may just ask you to ‘show commitment’ and reduce your costs as ‘we are all in it together’ and spend and projects may get deferred until cash flow improves.
From a procurement point of view, we do sometimes see the reluctance of larger research providers (especially those in monopolistic markets) to consolidate global demand and then fragment commercial relationships at a regional (Europe, APAC) level. Perhaps this is a time where they could work with the clients to seek where there are opportunities across a larger foot print to standardise specifications and get increased value. Clients will remember the suppliers/partners that have been working alongside them in this period that we are all currently working in.
I think that ways of doing research and how these relate to an agency’s costs and their overheads now is an area to watch. For example, for consumer insights that would usually be done at a facility, these will be done remotely now. Costs of hiring facilities, staffing and the overhead of expenses to members of panels to come in now may be reduced, and clients will expect costs to reflect overhead reductions. So agencies need to consider this as well.
If you have a virtual research offering, then you will be in a good place as clients will look to utilise this services so make sure you are out there with the appropriate marketing message to make new clients aware.
As in any Procurement dealing, please be open, transparent and work with the requirements that your procurement clients may be discussing with you. Conversely some clients may take the ‘opportunity’ to extend payment terms or ask for further discounts, and I would suggest that you take each of these discussions on their own merit and if you are asked to look at something like this, then have a discussion about possibly extending your contract term with them, or commitment to more projects.
My Procurement colleagues are working really hard to make sure smaller suppliers do get paid and commitments can get honoured where they are in place but budgets have been cut, sales have decreased and the economy we know has shrunk by 20%. But use this time to have conversations with existing clients, ask how you can help and what can you do to help them prepare to come out of this current position. Conversely make sure you are in good shape to protect your long term future and take the opportunity to review your internal and external costs e.g. rent and related overhead costs and hopefully we can all come out of this together in an OK commercial place.
