The state of ‘oversupply’ that some agencies complain about in Asia has inevitably resulted in some commoditization of market research. However, ‘commoditization’ could actually be a desirable outcome for the industry – a commodity (like gold) is by definition a product where customers pay a fair price for something of value. The raw commodity such as gold can also be crafted into something with even more value such as jewelry where customers pay more for a perceived value-add.
The market research industry in Asia could operate the same way, but often the market is infected with “fool’s gold” that results in price instability.
A survey of end-clients conducted by the Market Research Society of Singapore (MRSS) in 2010 showed that clients are sometimes bewildered by how much quotations for research, even for identical specifications, can vary by as much as 50%. This has also been observed when comparing prices between the large multi-national agencies. Clients perceive that for these companies, where resourcing structures are similar, prices should theoretically fall within a much narrower band, e.g. +/-10%, but up to 40% variation in pricing has been observed. Clients have commented that such ‘wild pricing’ discredits the research agencies particularly with their internal clients who have a lesser understanding of the industry.
A study of two mature markets in Asia, Singapore and Australia, might highlight the problem underlying price instability in Asia. These two markets are sometimes viewed as quite similar, mature and with many agencies chasing a fairly limited pool of business (as compared to the multi-billion dollar Western markets). Generally though prices in Australia are stable meaning clients can make better decisions on choosing their suppliers based on the quality of their ‘craftsmanship’, e.g. I pay $10,000 for the survey (the commodity part) and $8,000 for the value-add. The better quality agencies could perhaps charge $10,000 for the value-add based on the quality of the team they put on the project or the level of thought they have put into the proposal.
Contrast this to Singapore where a client can sometimes buy a big agency name with senior team on the project with a well thought out proposal at half the price of the next vendor. The MRSS survey in 2010 also surveyed heads of some of the research agencies and some of the probable causes of price instability in Singapore (likely to be encountered in other markets in Asia too) were identified as follows:
- Regional effect – while Australia is predominantly a domestic research market, projects commissioned in Singapore are often multi-country with significant elements of the project outsourced to other countries or subordinate offices, where interpretation of fieldwork briefs across the region can be very different
- Data collection effect – fieldwork in Asia is still mostly undertaken through traditional data collection methods, e.g. in-person or telephone. These are subject to significant price variation due to effects such as workload of the field department and even interviewer availability. In Australia on the other hand most fieldwork is now on-line where pricing is very commoditized and falls within a much narrower price band
- ‘New Kid on the Block’ effect – whereas Australia has a more stable workforce who are more knowledgeable of their local market, researchers who put together prices in Singapore are often expats. These people are often new to the market with little knowledge of pricing structures of their company. They are also characterized as being desperate to make an impact in their new company very early and will therefore price aggressively in order to get their ‘scores on the doors’. The latter is perhaps pressure on the expat who might have been relocated at considerable cost and drawing a high salary to be seen to ‘perform’ early.
But for the industry to develop with the high standards, clients will need to sort out the jewels from the fool’s gold. Ultimately this is down to the buyer.