One of the most common questions about market research is about the value and return on investment (ROI) for advertising.
Many brands and companies want to know...
- What am I going to get?
- What value does market research bring to my advertising and marketing strategies?
- Is market research for advertising worth the cost?
- Is it worth the investment?
- Do I need market research for a successful marketing campaign?
These are all asked (or at least thought about) by prospective users or buyers of market research.
So how can one prove the ROI of market research for advertising? It is possible, to a degree, through careful measurement and before/after tracking.
In this blog post, our marketing and advertising market research company discuss a real-world example of our client using UX research to improve their website and what return they saw from doing so.
Market Research ROI for Advertising: Real-World Example
Our market research company, Drive Research completed a study with an e-commerce client.
The client utilized Drive Research for User Experience (UX) market research to make tactical improvements to its website to improve conversions and sales.
Our team worked with the client to understand the before and after data.
The feedback from the UX research drove critical changes to the eCommerce website.
Direct comparisons were made to understand changes in sales from before and after the market research was conducted.
- This project produced a 665% ROI for the market research.
- The uptick in sales was nearly 7x the cost of the market research to the e-commerce client.
To learn more details of this project, read our case study: User Experience Research Produces a 665% ROI
Market Research ROI for Advertising: A Theoretical Case Study
The ROI of market research in advertising is a bit more challenging to assess.
In a perfect world where the project budget was not a concern, an advertising agency or marketing company would create a full A/B test with a team of clones.
- One team would be assigned to run a full $100,000 advertising campaign using market research.
- A second team would be assigned to run a $100,000 campaign without using market research.
Each team member would be directed to replicate the group size, identical personalities, backgrounds, roles, and resources.
In order for this theoretical case study to work, the only variable that would be different is one team would use market research while the other would not.
Obviously, this is impossible.
But let's continue anyway. We can show you this theoretical example. 👇👇
Team 1: Market Research is Not Used for Advertising
First, let's walk through an example of the launching of an advertising campaign without market research.
ABC advertising agency decides to launch a yearly campaign for a retail client which may involve...
- Web design
- Paid search
- Social media
The retail client is looking for the best recommendation to fit their $100,000 budget.
The advertising agency team of 5 brainstorms regarding factors such as:
- What channels are the best fits to reach potential customers?
- What segments of customers are perceived to be most valuable?
- What messages would motivate general consumers to buy?
- What design and graphics are the best fits for the campaign?
This is all developed from internal conversations with the retail client and the ad team.
The client bases their knowledge of the market and customers on subjective feedback and experience.
The ad agency used hunches and educated guesses to assist with the next steps.
Therefore, the team decides to run a campaign using television, a new website, paid search, SEO, and eBlasts.
The campaign runs for 12 months and fulfills the entire $100,000 budget allotted by the retail client.
After 12 months the ad agency and client reassess sales growth since the campaign began over 12 months ago.
They review online sales, in-store sales, conversions, and other channels which resulted in direct sales to compare to the total spend of $100,000.
Here is what they found.
- Overall the advertising campaign was deemed a success.
- The $100,000 campaign resulted in a lift in sales of $250,000. Therefore the return on the advertising was 2.5x.
- There was no additional expense in market research.
By all means, this was a resoundingly positive outcome. No market research was needed to get there.
However, we suggest you review the outcome of Team 2 below.
Highlights with No Market Research
- Campaign Budget: $100,000
- Channels Used: Television, Website, Paid Search, SEO, eBlasts
- Cost of Market Research: $0
- Direct Sales from Campaign: $250,000
- ROI of the Advertising: 2.5x
- ROI of the Market Research: N/A
Team 2: Market Research is Used for Advertising
Now, let's walk through an example of the launching of an advertising campaign with market research.
The same ABC advertising agency launches its annual campaign for a retail client in which the same channels of advertising are considered.
Similarly, the retail client is looking for the best recommendation to fit their $100,000 budget.
The advertising agency team decides to set aside $10,000 (10% of the overall budget) for market research at the beginning of the process.
The market research results would be used to:
- Profile key segments of customers.
- Decide the choice of the retail location.
- What types of advertising mediums they use.
- Tests visuals and messaging to be used in the advertising.
This is all accomplished through a cost-effective online survey with their target audience.
Rather than rely on client perceptions and guesswork, the market research definitively answers all of the questions surrounding the campaign.
It quantifies the gut feelings and provides facts and evidence to help the client and advertising agency with the next steps.
The market research uncovered insights such as:
- The market research tells the advertising agency to target these 3 customer profiles that spend the most. Plus, the top 2 reasons customers chose the retail location.
- The research shows that the majority of the potential growth to reach new customers lies in the website design, SEO, paid search, and social media (not television or eBlasts as Team 1 had thought).
- The design feedback teaches the advertising agency that Visual B among the 5 tested resonates most with the customers.
As opposed to what was done with Team 1, this team decides to run a campaign using the channels the research guided towards.
Now, the campaign of $90,000 plus the initial investment of $10,000 in market research runs for 12 months and fulfills the entire $100,000 budget allotted by the retail client.
After 1 year, the ad agency again reviews the sales return.
Here is what they found.
- The campaign was a major success.
- The $90,000 campaign resulted in a lift in sales of $450,000.
- Therefore the return on the advertising was 5x.
- The cost of the market research was $10,000 which resulted in an uplift of sales of $200,000 when compared to the campaign without market research.
- The ROI of the market research is 20x.
A $10,000 investment resulting in an increase in sales of $200,000 compared to the outcome with Team 1 where no market research was used ($450,000 minus $250,000).
Highlights with Market Research
- Campaign Budget: $90,000
- Channels Used: Website, SEO, Paid Search, Social Media
- Cost of Market Research: $10,000
- Direct Sales from Campaign: $450,000
- ROI of the Advertising: 5x
- ROI of the Market Research: 20x
Final Thoughts: Market Research Increases Advertising ROI
Based on this example above, not only did the market research offer a high ROI (20x) but it also increased the ROI and success of the advertising campaign (from 2.5x to 5x).
At the end of the day, the investment of $100,000 did not change. But, the money was spent smartly and the impact resulted in increased sales. Far beyond the cost of the market research.
No one would say Team 1 was unsuccessful right?
Even without market research, the advertising agency of Team 1 was still able to run a successful campaign and the client was happy.
However, with Path 2, the market research proved to offer an even higher level of success and ROI.
Without conducting market research, the advertising agency nor the retail client would know how well the campaign could have performed.
Market research increases your chance of success and lays a foundation for sound marketing and strategy.
Drive Research is a national market research company based in Upstate New York. Our team works with brands across the country to assist them with custom market research projects to fuel marketing and strategies.
Interested in learning more or receiving a quote? Contact us through any of the four ways below.
- Message us on our website
- Email us at [email protected]
- Call us at 888-725-DATA
- Text us at 315-303-2040
George is the Owner & President of Drive Research. He has consulted for hundreds of regional, national, and global organizations over the past 15 years. He is a CX certified VoC professional with a focus on innovation and new product management.
Learn more about George, here.