Return on investment or ROI. It is a ratio all of us in business and marketing seek but rarely take the time to calculate.
Are you trying to determine the ROI of market research?
It is hard, if not impossible to calculate. Here are 5 ways of how ROI is produced by using market research.
Why Calculating the ROI on Market Research is Challenging
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 URLs for visits to your website and conversions.
Therefore you know exactly how many orders or how many proposals were requested through paid search.
It makes it very easy to tie this increase in revenue and compare it to what you spent on SEM.
The process of determining marketing ROI looks something like this...
- 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%.
How Market Research ROI is Different
Unfortunately in market research, calculating the ROI of a survey, focus group, or report can be extremely challenging.
In some cases, the ROI calculation may be as simple as the following example.
In the past 3 years, a company averaged $150,000 in sales during Q3.
Prior to Q3 this year, they completed a customer satisfaction survey and made significant changes to their sales process.
As a result, their sales increased 50% to $225,000. If they paid $25,000 for the customer survey and it resulted in a lift of $75,000, the ROI is 300%.
However, here's the problem.
It is often difficult to isolate impacts directly from market research in this approach.
There are other factors that could have impacted this sales growth such as:
- Hiring a new manager
- Changing sales staff
- Industry experienced sales growth as a whole
- New legislation required industry players to purchase upgraded products
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.
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.
Learn more about the benefits of measuring your net promoter score in this short video.
Point #2: Hone in on a Target Market
Do you know the key demographics of your target customer such as:
- Household income
- Market areas, regions, or ZIP Codes they live in
- Marital status
- Interests and hobbies
These types of demographics 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 recently did they buy?
- How frequently 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 the 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.
Through this analysis, our team executes various components such as:
- A market assessment puling in trends and demographics.
- A competitive assessment to see what else is offered in the market.
- A pricing analysis of amenities and rental ranges.
- Market surveys targeted to end-users to understand appeal and decision-making criteria.
Learn more about feasibility study components here.
New Product Development
For new product development, we manage a lot of IHUT or in-home usage test projects with clients.
This involves qualitative 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.
This type of 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!
Market research answers key business questions including:
- Conducting a focus group to review the advertisements or commercials you are running.
- Conducting a Voice of Customer (VoC) survey to understand what drives satisfaction.
- Conducting a Voice of Employee (VoE) survey to understand your culture and how it impacts day-to-day operations.
Learn more about the power of data-driven decision-making.
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 of transactional surveys 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.
- 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.
We manage all aspects of qualitative and quantitative market research to provide your organization with the highest potential ROI.
Interested in conducting a market research study? Contact us:
- 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.