What does the recession mean for the MR industry?

It is less than months since Lehman Brothers filed for bankruptcy, triggering the awareness that the world economy was heading off a cliff. In some industries the impact has already been stark, Panasonic have announced 15,000 job losses, NEC 20,000, Boeing 4,500, Hertz 4,000 and even Google has announced 100.

The news in market research has seemed much calmer and some have been wondering whether MR might be recession proof. Surely, the intelligent businessmen will realise that the best way to survive a recession is to use research to spot the opportunities? Over the past couple of weeks I have been blogging, reading Tweeting, and engaging in online discussions to try and estimate where research is heading, and I think the story is depressing.

One of the most credible arguments I have heard about why MR has been OK so far is two-fold.

1. Companies are spending what is left of their budget, and it will be the new financial year that will hurt. The most typical start of new financial years are January and April, we have just passed one, and we are about to reach the other.
2. Most companies’ expenditure on MR is quite small compared to their other costs. In a fast hitting recession like this one the first priority is to make the big savings, such as recruitment freezes, pay freezes, and advertising cuts. Once the low hanging fruit has been dealt with, companies will start to work their way through the smaller items, including market research.

So, where is the evidence? The starkest news I have seen is contained in the first few pages of the most recent ESOMAR Research World magazine. Let me summarise:

• 'Greenfield researcher buyer backs down', Microsoft have been left holding the research baby after ZMCapital Management decided it did not want to be in research after all.
• The Research Industry Summit reports that clients have stopped worrying about panel quality issues. Is that because the problems have been dealt with, or because cost is suddenly more important than quality?
• US research organisation MRA has absorbed rival organisation CMOR, partly due to a desire for cost savings?
• Swiss Internet panels Nielsen and Swiss Net-Metrix have merged, which suggests one or both might be running for cover.
• Larry Gold reports that US market research spending is forecast to drop by up to 5% in 2009, with 80% of research buyers saying they are cutting spending plans for 2009. Syndicated research comprises 46% of expenditure, and is felt to be largely safe. The other half (survey 39% and qual 15%) will carry the brunt of the cuts. This could mean that 5% overall will be 10% for these sectors.

What other recent stories help inform my thinking?

• •Today mrWeb’s lead story is “YouGov Shares Plummet Post Profit Warning”. The key problem seems to be a worse than anticipated performance in the UK. It should be noted that the problem at the moment appears to be slower than expected growth, not decline.
• 30th January, mrWeb reported “TMN Group plc, which owns MR firms ICD Research and iD Factor, says that due to a ‘continued decline in performance’ its profit will be 50 per cent below expectations for the full year, and that it will make staff cuts ‘across the company’”.
• Media Square has sold several of its MR companies, including Viewpoint and The Wire, but it has retained Illuminas.
• Nielsen has dumped new in-store media measurement, because clients won’t support it, and Research reports that they have had to drop several other new products and services.
• A recent Research headline summarised the Harris picture with its headline “50 more jobs to go as Harris restructure US operations”.

I guess I should stress that I could have picked other headlines that paint a different picture, for example the positive news coming from ResearchNow. However, I think the story for most researchers is going to be quite grim.

Ray’s guess about what is happening is:

1. Some buyers of market research will go bust, leaving a trail of debts behind them.
2. Publicly listed reseasrch companies will post bad news, even if it is just reduced levels of growth and profit, and that will hurt them.
3. Some research will remain locked in place, for example store audits, brand trackers, ad trackers, and those customer satisfaction projects that are linked to pay and bonuses. These studies may be trimmed, some countries dropped, but the sector may only suffer marginally.
4. Ad hoc will suffer, especially 'nice to have' research. I expect to see problems for qual, quant, semiotics, ethnographers, and neuroscience.

Any silver linings?

• In Research World, Simon Chadwick suggests that online data collection may continue to grow. However, I suspect that capacity will out-strip growth, leading to reduced prices and increased pressure. I expect to see more mergers and some failures amongst panel companies and providers of basic services.
• Online Research Communities seem attractive. There are certainly a growing number of smallish new companies who seem to be doing good work in this area. I would expect some of the global companies to go shopping, to try to buy this work back.
• I suspect that some of the consultancies will do well, but fear that many others will really struggle.

Please note, these are my opinions, they should not be relied on for financial advice, or even advice. I would like to thank all the people who have been sending me their thoughts, especially via Facebook, and I look forward to hearing more from everybody.

ps I have been in this industry for 30 years, and I have seen plenty of people lose their jobs and companies go bust. But I have also seen some companies do well, under any circumstances. Some research companies will grow, despite the next two years.