What are the financial benefits of market research? It’s not free, after all. Is it worth the cost? The team at Hinge Marketing has broken down the costs and benefits of market research from the POV of professional services firms.
There are undoubtedly many intangible benefits of market research (eg. better demographic & psychographic targeting, more accurate understanding of your brand positioning and that of your competitors, etc). But there is a much more tangible and direct measure of benefits: organizations that conduct systematic, structured research are more profitable and grow faster.
The above figure shows the growth rate and profitability of professional services firms that do no research, occasional research or frequent research.
Market Research: The Costs
The costs of market research programs are determined primarily by two things: the methodology (eg. face-to-face interviews cost more than online self-completion surveys) and sample size. Generally the larger the organization, the larger the required sample size. Taking these variations into account, Hinge have estimated typical market research costs for both occasional research (1 round per year) and a program of frequent research (4 rounds per year).
Below are estimated costs for a single round of research for three sizes of firms:
- Small ($5M revenue): $10,000
- Medium ($20M revenue): $20,000
- Large ($200M revenue): $40,000
Keep in mind that average market research project range from about 2-8 weeks.
Market Research: The ROI
With estimates for the costs and an understanding of the economic benefits, we can now estimate the return on investment of market research programs. This shows the net increase to top line revenue and bottom line profitability over a one year period:
Two things are immediately apparent from this analysis. First, net return on invested research dollars is significant. Second, the larger the firm, the greater the return on invested dollars. This is a very straightforward relationship arising from the observation that the expense of market research does not rise in lockstep with firm size. Put another way, market research is a must-have for larger firms.