Return on investment or ROI. It's something all of us in business and marketing seek but rarely take the time to calculate. When it comes to ROI in market research, it's not as easy to calculate as it is in other marketing arenas.
For example, take paid search, SEM, or pay per click. As a marketing manager you set a monthly budget for paid search terms. You tie these search terms back to campaign tracking codes for visits to your website and goals. Therefore you know exactly how many orders or how many proposals were requested through paid search and you can easily tie this increase in revenue and compare it to what you spent on SEM.
Let's say you spent $1,500 on SEM last month which generated 10 proposals. You won 2 of these proposals, each averaging $3,000 for a total of $6,000. Therefore you spent $1,500 but earned $6,000 meaning your ROI from your paid search is 400%.
Unfortunately in market research, calculating the ROI of a survey, focus group, or market research report is nearly impossible. Certainly changes should be made from the survey results which will have a global effect on your sales but it is difficult to trace back the dollar amount exactly.
Trying to determine the ROI of market research? It is hard, if not impossible to calculate, but here are 5 ways of how ROI is produced by using market research.
The ROI calculation may be as simple as we averaged $150,000 in sales in Q1 the past 3 years however this year we completed a survey and made significant changes to our sales process prior to Q1 this year. As a result our sales increased 50% to $225,000. If you paid $25,000 for the research and it resulted in a lift of $75,000, the ROI is 300%.
However it is often difficult to isolate impacts directly from market research in this approach. In Q1, maybe you hired a new manager? Maybe you changed sales staff? Maybe the industry as a whole witnessed a 50% increase in total sales in Q1 for all parties? Maybe new legislation required industry players to purchase upgraded product which resulted in an influx of orders in Q1? All of these items may have impacted sales in addition to the value market research was able to bring to the table.
Although it may be difficult to calculate an actual dollar amount ROI in market research, here are 5 ways and points where market research can impact return.
Point 1: Improve Marketing Messaging
Market research can provide you answers as to why customers choose your product or service and what factor(s) are most important to them. Through a survey you can understand loyalty drivers to Net Promoter Score (NPS) and specific details as to why they are highly likely to recommend a product or service.
As a result, you can speak directly to your customer using their voice. If you understand why customers buy and can relay those messages back to customers as part of your marketing and sales campaign, it will result in increased conversions and more customers.
Seems almost too simple, but so many organizations think they know why their customers buy only to be surprised decisions are driven by several other factors unbeknownst to them.
Point 2: Hone in on a Target Market
Do you know who your target customer is? What is their age? Gender? What is their household income? What areas, regions, or ZIP Codes do they live in? Do they have children? These are all critical factors to understand so you can better profile and target your advertising.
A simple database analysis or customer insights analysis will provide all of these answers. The level of detail includes recency, frequency, and monetary. How recent did they buy? How frequent do they buy? How much do they spend? These 3 factors are used and broken down across all of your demographic data to provide you with a wealth of information through this consumer insights analysis report.
Point 3: Reduce the Risk of Failure
Very simply, market research reduces risk. It reduces risk of bad planning, bad strategy, and bad execution. Many organizations come to our market research firm for feasibility studies and new product development testing particularly for this reason.
Feasibility studies are used to test new products, new developments, and new buildings. We work with a lot of real estate developers to help them understand the feasibility of new apartment complexes or senior living facilities. Through this analysis we do a market assessment puling in trends and demographics, a competitive assessment to see what else is offered in the market, pricing analysis of amenities and rental ranges, and market surveys targeted to end users to understand appeal and decision-making criteria.
Learn more about feasibility study components here.
For new product development, we manage a lot of IHUT or in-home usage test projects with clients. This involves recruiting, qualifying, and sending consumers new products coming to market to request feedback, likes, dislikes, and likelihood to purchase.
All of this work avoids risky (and costly) failure of a new product launch or a launch to a new market. Market research collects key insights to guide you down the right path.
Point 4: Eliminate Poor Strategies
Are you confident in your strategic plan and the actions you take with your organization? Are you making the right moves to set your business up for success?
If you are not, any market research project could help. Whether it is a focus group to review the advertisements or commercials you are running, a Voice of Customer (VoC) survey to understand what drives satisfaction, or a Voice of Employee (VoE) survey to understand your culture and how it impacts day-to-day operations, market research has the answers.
Point 5: Improving the Customer Experience (CX)
Do you know what the customer journey looks like? What steps are involved in the purchase process from A to Z? Developing transactional surveys can have a large impact on your bottom line.
A transactional survey is something that is sent after a transaction or experience takes place. Some examples include survey links at the bottom of your receipt after you make a fast food purchase, surveys requesting your participation after you call technical support for your cable TV service, or email surveys asking you about your check-out experience after you make a purchase.
Tactical changes and improvements based on survey data from these transactional surveys can have a major impact on ROI. What if you find out 80% of customers who made a purchase mentioned the check-out process took too long? If you can devise a strategy to cut this time in half, it would likely increase satisfaction and convert more users who dropped off.
Contact Drive Research
Drive Research is a market research company located in Upstate New York. Our national market research company works with companies all across the country in a variety of industries. We manage all aspects of qualitative and quantitative market research to provide your organization with the highest potential ROI.
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