The top-line numbers show slight industry growth, but an analysis of the underlying facts behind the market research industry in 2012 points to a weak, downward trend. Read on to see who’s making headway and who’s struggling, prompting movement in the Honomichl Top 50 rankings.
More than $9.5 billion was spent within the U.S. for marketing/advertising/public opinion research services in 2012 through U.S.-based, for-profit research firms according to this, the 40th annual analysis of market research industry trends.
Revenue inputs from 207 research firms form the database for this analysis: the Top 50 firms by revenue plus 157 research organizations that provide revenue information on a confidential basis to the Council of American Survey Research Organizations (CASRO). The 50 largest firms get line-item identity on the Top 50 list starting on page 35. Each was asked for calendar 2012 revenues sans nonresearch activities and work done outside the U.S. That then was compared with the comparable number for 2011 to get the growth/decline rate. If a firm made an acquisition or divestiture during the year, adjustments were made to get an apples-to-apples comparison.
Following the Top 50 list, you will find an extensive profile of each Top 50 firm, including ownership, top management, acquisition activity, service offerings and revenues from outside the U.S. In toto, the Top 50 firms had U.S.-only revenues of $8.7 billion, or 91% of the 207 firms’ total. In 2012, 24 of the 50 firms reported a revenue decline or an increase not large enough to cover inflation. The chart at right shows how that significant indicator of industry health has trended in recent years.
Other input came from CASRO, which provided together, in aggregate, revenues of 157 member firms not included in the Top 50 list. Each firm, on average, had revenues of $5.4 million. Together these 157 firms had revenues of $847 million in 2012 (almost all within the U.S.), or 9% of the total.
The database of 207 firms had U.S. revenues of $9,539,700,000 in 2012, up 1.7% over 2011. But after adjustment for inflation (2.1%), the so-called “real growth” was -0.4%.
Another benchmark is Gross Domestic Product, the estimated value of all goods and services produced in the U.S., as calculated by the U.S. federal government. As the chart below shows, on average, between 1988 and 2012, growth per year has run ahead of the GDP by 4.2%, a roundabout way of saying that its relative value was running ahead of the economy in general. But in 2012, research industry growth was down 0.5% compared with the GDP. You’d expect this trend to impact employment, and it did. The Top 50 firms in 2012 had 33,506 full-time employees, down 3.7% from 2011.
It would be easy to attribute this dip to a sluggish economy, but there are underlying factors that help to make it more understandable, such as government spending. The biggest spenders for research services in the U.S. are, by far, agencies of the federal government, which spent an estimated $6.3 billion in 2012, and over recent years, that has grown. But in 2012, the portion of that expenditure that is contracted to the private sector was down 18.3%. Three Top 50 firms are long-time suppliers to federal agencies: Westat, No. 4 on the list, gets 96% of its revenue from government agencies; Abt SRBI gets 83%; and ICF International gets 70%. You’ll note that Westat’s revenues were down 3.1% in 2012, the first time since Westat made an appearance on the Honomichl list that the company has reported a downer year. Some of that may have been attributable to governmental cutbacks.
Other factors contributing to the industry’s performance include:
Focus Group Usage Slows: The 15th Annual Focus Group Index, developed by Stamford, Conn.-based FocusVision Worldwide, reported that the number of focus groups conducted in the U.S. grew by 1.9% in 2012, compared with 4% in 2011 and 5.4% in 2010. It could be that the mining of social media websites has come to be preferred for “insights” regarding consumers’ whims and fades, in lieu of more expensive focus groups.
Online Data Collection Increases: The well-established trend toward the use of online data collection for survey projects has revenue implications. It is presumed that online data collection costs less than traditional data collection methodologies and therefore onecan do the same amount of work for less—and this reduces some survey revenues.
Syndicated Service Stability Provides Some Support: Total industry revenues in 2012 would have been down much more but for the “floor” established by those Top 50 firms that specialize in syndicated services under long-term contracts, such as Nielsen, IRI, Arbitron, J.D. Power & Associates, NPD Group, comScore, Rentrakand National Research Group.
These eight firms, in total, saw 2012 revenues grow by 4.1%. The balance of 41 firms that specialize in custom, ad hoc projects saw revenues decrease by 0.7%. During hard times, it is relatively easy to cut back on ad hoc work but difficult to cut back on long-term contracts for syndicated services—especially if they provide input to corporate information systems.
Election Year Bolsters Results: In U.S. presidential election years such as 2012, many ad hoc survey firms benefit, either directly or indirectly, from an infusion of hundreds of millions of dollars spent for political polling. The decline of the industry’s ad hoc survey segment would have been more but for this.
Changes in List
As usual, firms come and go from the Top 50 list, and 2012 was no exception. There were seven newcomers: Symphony Health Solutions, No. 15 on this year’s list, was formed in 2012 and includes AlphaDetail, No. 45 on last year’s list. Public Opinion Strategies, which has a strong private-sector business base, also is a major player in political polling and 2012 was a boom year. The other five—Perception Research Services, RDA Group, Leo J. Shapiro & Associates, LRA Worldwide and Kelton—experienced especially good growth in 2012 and they replaced firms that did not or that declined to participate for reasons of their own, or both.
Revenue per Employee
A by-product of this analysis is the ability to calculate revenue per employee. For Top 50 firms alone, this was $259,000 per full-time employee in 2012. You can see how this has trended over recent years in the chart on the previous page.
However, the Top 50 data are heavily weighted towards large database companies with syndicated services. You’d expect the number for small, ad hoc survey firms to be different, and it is. Looking just at the 157 full-service CASRO firms not in the Top 50, their revenue per full-time employee was $257,718.
These data demonstrate increased productivity in the research industry, and quantification of that is difficult because there are so many factors at work: employee morale and training, incentive programs, improving management, etc. But one important factor, certainly at play in the research industry, is more capable, easier to use and less-expensive software, and there has been a profusion of that.
While the 207 database firms in this year’s analysis had revenues of $9.5 billion, there is a lot more to research spend within the U.S. than that. Agencies of the U.S. federal government spend $6.3 billion, but we know that $735 million of that already is included in the 207 database firms, so let’s add a net of $5.6 billion to the $9.5 million, for a total of $15.1 billion. In addition, there are dozens of not-for-profit survey research centers, usually associated with universities, such as the University of Chicago’s NORC and the Survey Research Center at the University of Michigan. Their work, in toto, could easily add more than $100 million to our running total, but since some is paid for by agencies of the federal government, let’s just add $100 million to be conservative. That brings our running total up to $15.2 billion.
Numerous large U.S. corporations do considerable research in-house, especially in the area of customer satisfaction measurement and new product development. This work could easily add $300 or $400 million to our estimate, but no one has a clue as to what that sum is. Adding $300 million is conservative and that takes us up to $15.5 billion. Numerous other marketing service firms—like advertising agencies and consultancies—have internal research departments to back up their project work and there is no knowledge of this sum, but it is safe to assume that it would add at least $100 million to our total, bringing it up to $15.6 billion.
While the total spend on market research in the United States should be estimated, my analysis of 207 research revenues is one way to calculate, with some specificity, the trend vectors and to help explain why they happened.
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