What is the economic climate going to be like over the next 3 years and how does that impact research?

Tough economic conditions since 2008

We have all experienced the tough economic conditions of the past four years and there has been much speculation as to whether things are getting better, worse or just staying the same.
For the research industry I would certainly say 2008 could have been called our ‘Annus horribilis’, to steal a quote from our Queen; non-essential budgets were in lock down; those budgets that survived were gradually culled throughout the year; Board rooms were a mass of speculation, sometimes over reaction and general panic about how to weather an obvious storm on the horizon.

Through 2009, 2010, 2011 and 2012, though the economy has still not been strong, we did see some improvement in the research marketplace as companies began to unlock restrictions on research budgets, however research teams now were being told to scrutinise every penny, raise tenders for jobs that previously would never have gone to a pitch situation and generally to try and squeeze as much out of already tight budgets as possible. As a research agency we now have to work 10 times harder to win a client and work 10 times harder to deliver the project on less budget. For many big agencies this has been painful because of their established overheads, greater difficulty in being flexible and the overall shrinking pot of money in the marketplace.

Noticeably with so many researchers being made redundant over this period, we have also seen a rise in the number of small agencies being set up providing a double whammy for the bigger agencies as the cake is being reduced at one end and being gnawed at from the other end.

So what is in store for the economy in 2013, 2014, 2015…. and onwards? And what will that mean for the research industry as a whole?

Recently I was at the Customer Engagement Summit in London and there were some excellent presentations. But one that I found particularly interesting was by a behavioural economist, a gentleman by the name of Roger Martin-Fagg. I don’t pretend to be able to repeat what Roger said or explain it in any way that will do it justice, but the essence of his presentation was:

  • UK consumers have been paying off debt rather than spending, which effectively means money is being extinguished from the monetary system
  • The world economy is slowing down rapidly led by Europe which will be in recession
  • The UK will grow next year by no more than 0.5%
  • Interest rates will remain at 0.5%
  • House prices outside central London will continue to fall in real terms
  • Wages will grow at under 2%, prices at 2.5%, so real incomes will continue to fall
  • Individual businesses will only grow by taking market share. This will require superior VFM, customer service is a key component.

So what will that mean for research buyers and sellers?

In our view for research buyers it will mean more of the same:

  • That companies will continue to spend on research, though perhaps the overall pot will not be getting any bigger
  • They will continue to submit competitive tenders and have a very tight view on deliverables vs. cost
  • They will shop around a lot and be open to new offers, new methodologies, new thinking, better value propositions

For the agency we suggest it will mean:

  • We will need to be more creative and add more value to win pitches
  • We need to work really hard with our existing clients and make sure they are getting real value and service
  • Focus more on our strengths and specialism and be more selective in the tenders we respond to, to maximise both our return but also the time client side researchers are having to spend reviewing a higher number of proposals

It is going to be a tough 3 years ahead and research agencies and client side researchers will need all their skill to continue delivering good research on reduced budgets but for those delivering good service and good research, this should not be a problem!

Roger’s full presentation is available to download here.

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