MARKET RESEARCH FEATURE: Understanding Consumers in Tough Times

The global economic outlook is bleak and Asia is beginning to feel the effects of the downturn. As the region faces tough times and consumers become more value oriented, it is crucial for brands to gear up in understanding how the needs of their customers are changing and adapt strategies to the new reality. Adaline Lau looks at the latest trends in research and how accurate data can steer you through these turbulent times.

It’s no great secret that marketing budgets are among the first to go in a slowing economy. But while there will be pressure on the budget in times of recession, marketers will often be under greater pressure to show a return on marketing investment. Research, many agree, must be a central player in this process. Pete Cape, global knowledge director for Survey Sampling International, says research is the only way to prove, in the short term, the impact of marketing on brand values and therefore brand health.

Instead of cutting the market research budget, Jill Telford, North Asia CEO for Synovate, says smart marketers will recognise that now, more than ever, the need to invest in research and understand how consumers are responding to the prospect of recession.

For instance, what categories and product features are ‘must have’ and which ones can be dispensed with for the time being as they do tend to change in difficult times. She finds younger consumers are much more positive than their parents about the near and medium term future, as they are beginning their careers and feel that they can only go up in terms of earning power and ability to spend.

So are marketers spending enough in market research? According to figures from the European Society for Opinion and Marketing Research (ESOMAR) 2007, market research as percentage of ad spend for Hong Kong and China is 1.5% compared to Singapore at 4.9% and Malaysia at 4.5%.

Despite the low percentage figures, Fanny Chan, managing director for The Nielsen Company Hong Kong, says the market research spending of most clients is “reasonable” and the industry is experiencing a healthy increase in investment that is more than inflationary figures.

However, she says that in recent years research spending has shifted from the saturated and mature markets of Hong Kong and Singapore to growing markets like China. Chan says smaller markets suffering from smaller budgets means marketers become more conscious in spending their money and will need to learn how to use their money better.

But despite the fact that budgets are shrinking, major business decisions are still worth millions of dollars and marketers today are less likely to operate based on gut instinct. This is where market research becomes important because it primarily reduces risk, informs decision making and assist strategies by providing market based information.

Research allows marketers to have a better understanding of their customers and potential customers’ needs and motivations so that one is less likely to make mistakes in the product or service offering. It helps marketers to understand where consumer preferences are heading so that they are less likely to be left with an outmoded product or service. Besides, consumers can be fickle, so it is important to track changes in their opinions and preferences so as to be able to respond accordingly.

James Fergusson, strategic head of sectors for Taylor Nelson Sofres (TNS), says 80% of new product launches fail as they do not meet consumer needs. To increase chances of success, market research if conducted properly provides actionable recommendations that will take the product to market for example based on where it should be advertised and what colour it should be.

“Research eliminates risk by providing real consumer insights to ensure the offer meets people’s needs that will save the business money and have a direct impact on the bottom line,” Fergusson says.

Marketers could use research for several purposes. For instance, market research could be used to gauge appeal for new products or product variants in an existing market. Cape explains that either the market structure is known or accurately estimated in which case the research can help estimate likely future demand or the research can help define who the more likely customers will be thus feeding in to the media plan for advertising or other promotional activity. The role of researchers then is to interpret what the customer says they will do and produce realistic estimates of what they will actually do.

For some, market research is used less to find new markets and more to identify key segments or groups of consumers with high potential in existing ones. Telford says segmentation is relevant to most markets since it helps marketers to focus their efforts and budgets on the consumers that will bring them the best return on investment and will avoid wastage.

Indeed, Deepender Rana, chief client officer for Millward Brown, Africa and Asia Pacific says segmentation allows companies to identify and reach out to the segments in the market that are more willing to spend at a  premium, and those that are resistant to a downturn particularly in highly saturated and competitive markets such as the mobile phone market.  

Chris Farquhar, managing director for Cimigo, says his company has recently conducted a large scale segmentation analysis with a large mobile phone network operator in Hong Kong to get a better understanding of local consumers. The segmentation analysis involves looking at the different segments that exist in the market, and think about how they might offer service plans and potentially products and communications to consumers in a way that is more meaningful than consumers have in the past.

Farquhar says segmentation allows companies to think about their customers as not just a specific demographic group, but as individuals with differing lifestyle and attitudes. He adds that by dividing the market and conducting a profiling and segmentation exercise, clients will get a better understanding of how communications can be more tailored and insightful.

Research is also a key part of the product development process by talking to consumers to get their point of views using research techniques to find out which features are more likely to be successful in the market and if the product will get enough market share. Rana says talking to influencers or mini experts can also help in spotting new trends that are beyond branding to come up with new ideas and thinking.

The market research industry is changing in the types of information people are looking for. In Asia, consumer needs from the emerging and developing markets are different from matured markets and Fergusson observes there is a shift from quantitative to qualitative research methodologies.

Qualitative research which used to consist of focus groups are now evolving with technological advances to more on observing people, watching them and asking questions to reflect the real world also known as ethnography, which is the study of human beings in their natural environment involving the observation of what and how respondents accomplish different tasks.

Fergusson cites examples of ethnography that includes observing people in their house or following them shopping, which unlike focus groups are not stimulated environments where people are conscious of what they say and will be less likely to speak on an emotional level.

He says ethnography is also useful in emerging markets for marketers to grasp the concept of what life is like in Asia. For example, baby formula in a matured market involves a mother going to the supermarket but that same product category in rural India where there is no electricity supply will be a different story altogether. 

China also poses a challenge for researchers especially in penetrating and understanding consumers outside of the tier one and two cities due to the many cultures, languages and dialects. The key challenge is getting the sampling right in the country because of the complexity of the market.

The internet is also changing the way market researchers operate. Fergusson says traditionally, the time spent interviewing in quantitative research is around five to 30 minutes and qualitative between one to two hours. The internet has allowed researchers to revisit keep going back to the same people to get longitudinal measures that are much more realistic in understanding usage behaviours and barriers to usage that increase the value of research. People also tend to be honest and open via the internet, which means the research is more effective and has a stronger impact in driving client decisions.

At Millward Brown, the company has integrated the advances in web access and developments such as blogs and social networks to come up with the ideablog research tool. It is basically an online forum for idea development.

The ideablog allows the sharing and development of ideas via blog like discussions that allow topics to evolve over the course of a project, has media upload capabilities that allow consumers to upload videos, pictures and website urls along with comments to help fully communicate their ideas.

The ideablog also has mini-polls and surveys which help to identify concepts, guide discussions and provide quantitative context. This includes image mapping, which is an interactive exercise using images either uploaded by participants or provided by the client or research teams as well as profile pages that enable participants to describe who they are and share their interests with others.

Marketers could then make use of ideablog to gain reliable qualitative insights and test ‘big ideas’, for new product development, for developing communication or media planning concepts, aiding brand strategy or positioning development or for other creative research projects.

To track the rapid changes in consumer profiles and habits in internet usage and ownership, Euromonitor has developed a blog tracker analysis for its Passport database. Those data are important now not just in terms of advertising but also as a sales channel and information medium. Therefore, it is increasingly important to monitor those new communication channels where blogging is far more influential among some population segments than traditional above-the-line communications.

Claire Briney, global client development manager for Euromonitor International, explains that Passport is a simple to use and allows clients to navigate from millions of statistical data points to supporting written analysis. She adds that the data and analysis can support a wide range of business functions across an organisation from corporate strategy planning to product and brand management.

Synovate has a brand value creator tool which is unique to the company and measures both what consumers feel about a brand and what is preventing them from buying it. According to Synovate’s Telford, it is “the best validated brand equity measure as it predicts what people will do and therefore links to market share”.

“Until brand value creator was developed, research could only measure the first of these two parts of the brand equity puzzle,” Telford says.

Connections is another ad test tool from Synovate that rather than asking whether people like or dislike an ad, it looks at the ad’s ability to impact brand equity and at its long term ability to create connections between the brand and people’s lives.

Another recent development is real-time research using experience data that is collected using people’s mobile phones called Mesh planning. Experience data is collected in real-time to overcome the problem of people having to remember where and when they saw brands and what impact it had at that time.

Mesh planning captures experiences using sms texting. For instance, at the start of the week, a participant is sent a text with a pre-coded list of the brands, the touchpoint and how positive the experience was and all the participant had to do is to reply to the message using the codes in the original text that only takes seconds.

Craig Griffin, managing director for Mesh planning, says experience data could be use by marketers to understand total customer experience that can help with channel strategy and media spend. It could also be used to evaluate how certain campaigns are working or to increase the effectiveness of the campaign as it rolls out or for future campaign planning.

Another innovative tool making its way to Asia is a strategic investment from Nielsen in NeuroFocus that applies brainwave, eye-tracking and skin conductance measurements to track the effectiveness of advertising, branding, packaging, pricing and product design across a broad range of consumer touchpoints. Neurofocus will be useful for marketers in the FMCG, television, film and emerging media industries.

While online methodologies seem to dominate the market research landscape today, Telford says “it is important to be aware that one size does not fit all and to select methodologies that are appropriate for the purpose”.

She says online research is great for sensitive subjects like erectile dysfunction but less good for surveys amongst middle aged and older consumers and general products.

However, Telford points out that the megatrend in research is less about data collection and more about how data is used.

“It used to be fine to provide data to clients, but now that data is plentiful and easy to find, the value in market research lies in asking the right questions and making sense of the answers,” she says.

To make the most out of their research investment, Cape and Telford agree that marketers should be very clear in their research and business objectives and to brief the agency as thoroughly as possible. Fergusson adds it is important for marketers to be as transparent as possible and that a true partnership will enable the agency to hone in on the critical factors. Rana advocates a multi-disciplinary approach and says collaboration is extremely important. He suggests getting all parties from the client’s internal executives to advertising and media agencies together in the same room.

Marketers should also give time over the project to give all parties a chance to review and reflect on what is being proposed to ensure it really meets the need and answers the questions. Finally, communicate the budget with the agency and as Farquhar says, “look for value for money but don’t be looking to save money”.