The Online Market Research Industry:
History, Prospects, and Limitations
Group 9 Members:
Eric Stiever
Atma Sutjianto
Royeni Tjoa
Deborah Trask
Tracy Veara
Introduction
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Market
research involves the collection and analysis of data by organizations for the purposes
of decision-making. A company uses
market research for two primary reasons: to quantify market conditions and
behaviors so that product or service offerings can be optimized to meet the
needs of existing customers, or to identify new strategic business
opportunities. It is a broad and
interesting field, combining “soft” academic disciplines such as psychology and
sociology with the quantitative discipline of statistical analysis.
Traditionally, market research has been conducted using expensive, time-consuming methods such as telephone surveys, “snail” mail, and focus groups. However, since the advent of the Internet age and the incredible technological breakthroughs that have revolutionized the global communications experience, market research has in many ways become less expensive, faster and more intensive through the use of online data collection and analysis methods. According to Greenfield Online, the online research industry more than doubled from the year 2000 to 2001 and continues to grow. This is due to ongoing technological advances as well as the continued growth of Internet usage among the general population. Compared to traditional market research, companies who use online research methods get faster results, making it a very attractive option. However, there are also drawbacks, which will be discussed later.
Online Market Research
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There are many ways to conduct online market research, of which the most popular is the online survey. Surveys are for the most part quantitative in nature and can involve a fairly large sample size. Although online surveys do have drawbacks, for certain products and services they provide valuable information at a low cost.
E-mail surveys are
one of the fastest and least intrusive ways to collect information. Target respondents are invited to participate
in a market research effort via an email containing an embedded hyperlink to
the company’s website. As most people
usually check their incoming e-mails when they have the time to respond, prompt
response times are likely. Also, since
there is no interviewer, respondents are often more objective with their
responses. Surveys by e-mail are a very non-invasive way of
conducting research. Respondents complete the survey at their own convenience,
raising the level of cooperation and the quality of responses given. Furthermore, because e-mail goes directly to
a specific respondent, e-mail surveys are more likely to be received and
returned by the intended target, making the results more reliable.
As
opposed to direct e-mail requests, other companies may use “push” technology to
target a sample population for research.
For example, during an individual’s visit to a particular Web site, an
embedded JavaScript applet might cause a pop-up dialog box to appear in the
user’s computer screen, asking the visitor if he or she is willing to fill out
a short online survey. If the answer is
affirmative, the subject is redirected to the appropriate site to complete the
survey.
Another means of online market research is the online focus group. This research method provides qualitative data about customers’ perceptions and can be especially useful in product development, brand image development and advertising testing. Respondents participate by invitation only, and are usually targeted only if they match requirements specific to the market researcher’s needs. Qualified respondents are contacted and some incentive is presented to them to encourage their participation. The participants are then directed to an online meeting place and introduced to a moderator. The moderator begins the discussion and presents questions that the participants answer in real time. All participants are aware of the responses of the other participants. Software and multimedia developments make this an efficient and effective way to conduct focus groups. It is widely believed that participants who might be reluctant to speak up in a live forum may be more likely to speak up in an online forum.
Competition
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There is tremendous competition within this industry, with dozens of firms doing some form of online market research. Most of the larger firms, such as AC Nielsen Corporation and NFO World Group, offer both traditional and online methods of market research. They stress the need to match the appropriate data collection method (i.e., surveys, interviews, and focus groups) with the desired results. Other firms, such as International Data Group, focus on single or groups of industries (in this case, high tech industries).
There is also a great deal of contradiction within the industry. Some firms feel that success is best achieved through customized research offerings and high-priced, value-added services. Others believe there is more profit in “cookie-cutter” research methods leading to high volume sales.
The biggest threat within the industry seems to be that of cannibalization. Market research firms are concerned that their industry will suffer the same fate as some media companies and online brokerage firms, in that their services will come to be seen by existing and potential clients as a commodity, rather than as specialized, value-added services. Additionally, traditional market research firms fear that the advent cheaper, simplified surveys available online will consume some of their current client base.
For example, NFO, once a traditional market research firm, introduced InsightExpress in 1999. This product allows smaller and mid-sized firms to utilize specialized market research. These services came at too high a price in their traditional form for these smaller-sized firms to pursue. Although NFO was aware that introducing their online product would open the field to even more firms, they felt that it was an eventuality and they chose to be the leader. As technology continues to improve, firms will need to change to accommodate these technological advances if they wish to remain competitive.
Critical
Success Factors
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As the online market research industry continues to evolve, there are a number of critical success factors that should be carefully considered. As we know, technological advances have changed the face of the market research industry. In some ways, the Internet has made the market research process more efficient and cost effective. However, it is important for the players in the industry to remember that the sole purpose of market research of any kind is to provide clients with specialized information for business decision-making purposes. The market research industry players should attempt to do the same thing for their clients that the clients are attempting to do for their customers – determine their real needs and meet them with excellence.
Unless the industry can adequately show bottom-line return on investment (ROI) to its clients (regardless of the method by which the data was obtained), the dangers remain that have troubled the industry since before the advent of online market research technology: replacement by other methods of acquiring information, or the results of market research being discounted by decision makers. Market research companies should focus their objectives on serving clients in the area of customer relationship management (CRM). If the industry can provide data that helps clients grow and prosper in a consistent and cost effective manner through online means, then the perceived value of the industry goes up. This should be a major objective of the industry in coming years.
Additionally, for online market research to be an effective new method of collecting, compiling and analyzing raw data for business decision-making purposes, it is important that the Internet continues to evolve into a user base representative of the general population. Since its explosion in the early 1990s, the Internet has been the realm of higher-income, higher-educated, predominately white males, although this is changing over time. Until its usage reaches a point where the sample population is representative of the general population, this may be a factor that continues to limit the usefulness of online market research as compared to traditional methods. The industry is already aware of this and should be willing to continually update its methods and practices in order to take best advantage of the demographic distribution of the Internet’s user base as it continues to evolve.
It is also important that the industry keep the privacy considerations of Internet users at the forefront. Online market research technology is a powerful tool that is changing the face of the industry, and it would be unfortunate if unethical practices in data collection serve to anger and perhaps alienate Internet users. Ongoing controversies involving alleged privacy violations by telemarketers and the uproar over “spam” e-mail serve as important reminders of the delicate nature of this situation. There is a fine line that must be respected if the industry is to flourish in the future.
Furthermore, although the larger traditional market research firms have advantages in research expertise, existing customer bases, and the financial resources to allow access to cutting edge technology, it is important that they evaluate their mission scope to ensure that their focus is not too broad, diluting the benefits to potential customers. For smaller firms, perhaps outsourcing the online data collection and analysis efforts (to companies such as Greenfield Online, for example) will be more cost effective and keep them free to do what they do best: providing bottom-line value to their clients.
Porter’s
Five Forces
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This is an information industry that does research. The predominant suppliers for this industry would include the companies that provide the hardware and software for communications. The suppliers have a limited amount of bargaining power because there are so many firms providing communication services.
The product that market research firms provide can be either specific to the needs of one particular company or it can be general purpose. Companies use this information to develop their markets or products. There are a large number of buyers of this information because it is not limited to any particular industry or any particular company size. This gives limited bargaining power to any particular buyer.
Traditional methods still have some importance within the industry. They provide better results for certain types of research. These methods could be seen as a substitute for online methods but they provide little threat to the companies within the industry since most firms that provide one, also provide the other.
Although the threat of entry into the market research industry was not very high many years ago, the new online technology has changed that. There are many potential entrants into this industry who could easily cross over from their more traditional businesses because of the available technology. These would include accounting and financial service firms, advertising and media firms and information system manufacturers. Currently, there are very few barriers to entry for this industry. Because of this, the industry is very competitive and the threat from rivalry is very high.
Shortcomings
of Online Market Research
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As with all market research initiatives, whether traditional or online, a major drawback has always been the industry’s failure as a whole to fully demonstrate the added value it brings to clients in a quantitative manner. As stated earlier, there has been a failure to adequately show a concrete, quantifiable return on investment to its clients, and this is regardless of the method in which market research data is obtained. The advances in technology and communications do not replace old-fashioned business sense. No matter how data is obtained, and regardless of the cost savings of online versus traditional research models, the market research industry must develop a way to prove that its efforts make a real impact on a client’s bottom line. Some other limitations to consider are as follows:
1. Privacy Act – People need assurance that the information they provide will not be held against them or violate their privacy. It is important to be able to provide this assurance to respondents who share their opinion or ideas that the data collected is only for market research purposes. Until the confidence of Internet users can be obtained regarding this issue of privacy, it may be difficult to obtain the same level of response as traditional methods.
2. Participant fraud - When potential respondents are recruited online, there is no way to ensure whether the information being provided by candidates is true or false. Especially in cases where incentives are offered to respondents, unethical participants may attempt to scam companies by creating more than one personal identity so they can participate repeatedly, even though they do not fit the requested profile.
3. Embedded Java applets – Using Java in the programming of market research surveys may make the online survey inaccessible to at least 10% of a company’s target market. Although the Java programming language is considered portable across all platforms, the fact remains that not all browsers are properly configured to adequately make use of this technology, and therefore market researchers may not be able to reach all desired targets due to technological limitations.
4. Page formats – The two most common page formats in online surveys are single-page and one-question-per-page. The biggest drawbacks of the single-page format are that the ability to implement skip patterns and piped responses is eliminated. Meanwhile, the major drawback of the one-question-per-page format is the increased waiting time for respondents, since it requires more server processing time.
Future
of Online Market Research
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In the future, it is felt that online market
research will tend to merge with the advertising, sales promotions, direct
marketing, and media planning functions of businesses. The entire field of marketing will be more
holistic, with market research only a part of the information supply chain
bigger rather than a stand-alone methodology. The field of market research as a
whole should continue its emphasis on consumer insight and the wider value of
understanding the consumer, but should also continue to gear its efforts toward
establishing stronger relationships with the management of the companies who
retain their services. These
decision-makers are constantly faced with contradictory and confusing signals
from their data, and will inevitably be making greater demands than even before
on market researchers.
The theme for future of Online Market
Research is Information Acceleration system.
The goal of this system is to “place consumers in a virtual buying
environment that simulates the information that is available to the consumer at
the time he or she makes a purchase decision.” By using digital technologies to
create virtual worlds that capture several of the most important aspects of the
new product purchase decision, the hope is that this increased realism will
better represent what an actual customer would face if the new product is
actually produced and marketed.
Virtual simulations can replace expensive
prototypes. A much larger number of possible product variants can be tried.
Both producers and consumers will reap enormous advantages if this approach to
online market research is successful.
Companies can provide the highest quality, lowest cost products and
services possible to their customers, while maximizing profits and contributing
to sustainable economic growth over the long term.
Exhibit 1
Porter’s Five Force Analysis
Supplier Power
Supplier Power |
Limited amount of power
due to large number of suppliers.
Barriers
To Entry
Threat of
Substitution
BarriersTo Entry |
Threat of
Substitution |
Rivalry
Very Strong
Very few barriers to entry
Some threat from more traditional business methods.
Buyer Power
Limited amount due to large number of buyers.
References
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DSS Research, Inc. “Competing methodologies: Internet versus Mail Surveys”, 1998, 1999, 2000
Editorial: “Integrated customer relationship management
(ICRM)”, CMO Consulting International,
Fowler, L.N. “Phrenology.” Research, December, 2001
Gillin, Donna. “What Will 2001 Bring Researchers?” ResearchInfo.com, January, 2001.
Lescher, John F. “Online Market Research: Cost-Effective Searching of the Internet and Online
Databases.”
Macht, Joshua D. “The New Market
Research”, Inc. Magazine Online,
Miller, Thomas W. “Market Research and the Information Industry.” CASARO Journal, 2000,
In press.
“Online Consumers: Beyond Fiction to Fact”, Research on Research (Market Facts Interactive)
Market Facts, Inc. October 2001
Rau, John. “Beating the Odds: A Step by Step Guide.” Investors’ Digest, September/October, 1998.
Schafer, Heiko, Kimberly-Clark Corporation, Donna Wydao. “Product Testing: Is the Internet a good fit?” Market Facts Interactive, September 2000.
Smith, David “Guided by voices.” Research, December 2001.
Spaeth, Jim “The “Relaunch” of Market Research”, Informed (Journal of Advertising Research Foundation), Vol.4, No 5, Oct. 2001.
AC Nielsen Corporation: www.acnielsen.com.
Actis: www.actis-emarketing.com.
Business Resource Software, Inc.: http://www.brs-inc.com.
Council for Marketing and Information Research: http://www.cmor.org/whatis3.htm.
CMO Consulting International: www.webCMO.com
Dun & Bradstreet: http://www.dnb.com.
eMarketer: http://www.emarketer.com.
Forbes, Inc.: www.forbes.com/1999/10/21/mu4_print.html.
Green Field Online: http://www.greenfieldonline.com/.
Hoovers
Information Resources: www.infores.com.
Insight Express: www.insightexpress.com.
International Data Group: www.idg.com.
iResearch: www.iresearch.com.
J. D. Power and Associates http://www.jdpa.com.
Managing Patent Information: An Emerging Two-Tiered Approach to Business Information: http://www.derwent.com/patentguides/mp_synopsis.html.
Multex: www.multex.com.
NFO Worldgroup: www.nfow.com.
Rockbridge Associates: http://www.rockresearch.com.
Survey Site: http://www.surveysite.com.
Wired News: http://www.wired.com/news/privacy/0,1848,51520,00.html.