Oh Come On! How much does market research really cost?

Last week, I got a cost request from an agency to quote for conducting fieldwork on affluent people. I found the main specs rather odd; people who earn $20,000 a month and spend $1000 over three years on jewelry. (Well, it wasn’t jewelry, actually but I can’t say what it is so for the sake of illustration, jewelry it is)

It was odd because one with a $10,000 monthly salary can easily spend $1000 on jewelry within 3 years and if one has a salary of $20,000, I imagine it wouldn’t be too difficult to spend $5,000 on jewelry in 3 years. Anyway, it didn’t quite add up.

I contacted the research executive to find out what the objectives of this study was and why the specifications were such. Well, to begin with, she wasn’t quite interested in my opinions and but she didn’t really know the objectives and could I just quote for it anyhow. I declined, simply because it didn’t make sense.

A few days later, another agency sent a request for what looked very much like the same study except this time the main specs were people with a $6,000 monthly salary who spend $500 per item in the last 3 years. Now this sounded far more logical and I could get the essence of the objectives of the study from the specs collectively. Needless to say we quoted for this.

Alright, so what’s my point? A research project with the first set of specs would actually cost less than the second request. The end client, no doubt, with cost as a consideration may very well end up going with the first agency. However, the design of the target group doesn’t make for logical sense which means that the findings won’t really be very useful.

Now let’s suppose that different agencies quote on the same specs. Why the disparity in costs then? I have a word limit to write this, which I think I have already exceeded, so here is the abridged version.

Material costs
This covers paper, printing, possibly software licensing and hardware. This usually doesn’t differ much from agency to agency and the costs are more of less fixed unless in the case of hardware, such a PDAs or laptops, one agency may have existing units and another may need to rent, which would increase the costs.

Incentive costs
This is the cost to ‘incentivise’ participation of the target person (although ideally, respondents should be willing to participate without incentives, but this requires another article to discuss!) Again this shouldn’t differ much amongst different agencies. Generally anything within 30mins costs about $5 in incentives for in-home interviews and $10 for up to an hour. This goes up if the target is particularly affluent or perhaps C-level respondents. For incentivizing respondents to travel to a location to participate in a survey, the general rate is about $40-$50 for up to an hour. If you do get respondents to participate for such studies for $20-$30, they are likely to be from lower income households or if you’re lucky, all very eager to offer an opinion. (I always tell my clients, if I offered you $20 to travel all the way to my office to spent 30 minutes, would you participate?)

Data processing costs
This refers to the costs to check, edit, group (coding), enter and clean data. This component shouldn’t differ much either. If X agency takes 100 hours to complete the task, Y agency will probably take just as long. What might impact costs, is if agencies do an additional step of entering data twice to check against each other for errors or conduct a random check of say 10% to check for accuracy.

The two components that will most probably differ in costs are the researcher’s time costs and the labour costs to cover the time spent to collect the data.

Researcher’s time cost
This cost takes into consideration how much time is estimated in interacting with the client, designing the study and reporting on the study. How does it differ? Well, like in a law firm, a senior person’s heavy involvement will cost you more. Although a research director may be involved in the project, it can mean he or she spends time analyzing the results to produce the report or it can mean a research manager or executive does the analysis and reporting while the research director simply vets it. The difference here also means you don’t get the insights of the research director with X years of experience.

Labour costs
This is basically how much someone recruiting or interviewing participants are paid. What can make a difference? It’s the same as the difference between hiring someone with ‘O’ Levels versus someone with a degree or someone with no experience versus someone with 5 years experience or hiring someone untrained versus someone properly trained and assessed. Some agencies use students who treat it merely as a means to make some extra pocket money whereas some agencies use only serious career interviewers, where their care and diligence towards the project have an impact on their future with the company.

Particular to qualitative research, assuming you are looking for Nokia mobile phone users; some agencies might brief their recruiters to look for Nokia mobile phone users (Doesn’t that make sense? Read on) whereas another agency might brief their recruiters to look for people who have mobile phones without specifying the brand they want. Through this process, they will then sift out the Nokia users. Isn’t this quite silly then? Well, in the first scenario, you will get people who say they use Nokia phones but in the second scenario, you will get Nokia phone users. The second example will surely take a longer time and will surely cost more.

Part of this cost should also go towards time costs for quality control checks and processes. Would you live in a building that doesn’t pass inspection for its quality construction? Would you buy a car that isn’t properly tested by the manufacturers? Even Ikea subjects their furniture to quality tests before the design is sent for retail. Would you trust data that hasn’t been checked for quality?

So what is the moral of the story? As a client or someone soliciting on behalf of a client the cost of research, you need to do your part too. You have a right and a responsibility to find out who is doing what for you and how is it being done. Ask for a breakdown, understand what it entails. Only then can you truly appreciate what research really costs.

KATRINA GOH, Chief Executive Officer, Agri Opus PRoBa Pte Ltd