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Why Do Companies Buy Cheap Market Research?



Editor’s Note: Continuing the debate Edward Appleton launched last week on the drivers of client-side decision making regarding data sources, today Neal Cole shares his experience from client-side as well. It’s a great thing to have so many client-side researchers participating in the dialogue!  Here is Neal’s take on the issue.

By Neal Cole

I read with interest Edward Appleton’s blog (Can MR Clients Recognise Quality When They See It?). Edward was commenting on Reg Baker’s post Final Thoughts on MRMW where he suggested that

“if online and social media have taught us nothing else it’s that clients sooner or later will buy cheap data over good data every time.”

I agree with Edward that cheapness is missing the point. The issue is value or perceived value in most cases. This is why management consultants are able to command such high fees when they often re-package research and simply present it in a way that is more strategic and digestible for senior management. I have always found research budgets easy to come by when I have been able to demonstrate a clear link with sales or costs. Linking insights to marketing strategy is essential for any client-side researcher and being visibly part of this process is critical for raising the perceived value of insights.

However, I can also identify with the sentiments expressed by Reg Baker. From my experience in financial services I have observed a number of situations that can encourage cost to override the quality of data.


Rosters that are established with too much emphasis on cost savings and not enough weight given to building relationships rarely achieve their aims. The result is a bureaucratic straight-jacket and wastes a lot of time and money. You end up with fewer suppliers and agencies are forced to reduce unit costs. However, this simply encourages agencies to offer a skeleton service.  Anything not explicitly included in the proposal is then charged as an extra. Given the need to show savings it is then difficult to justify any increase in budgets to cover extras that might improve data quality. This strategy for saving money is essentially counter-productive.


I don’t mind cost challenges, it’s a fact of commercial life. However, random cost challenges where management ask for cost savings after the agency has been selected can have dire consequences for complex studies. This sometimes happens because marketing managers perceive research as an easy area to cut as they don’t see a direct link to short term business goals. Some managers also see research as a commodity and don’t appreciate that sudden cost reductions will be made by sacrificing sample size or other factors that may ultimately affect data quality.


Some companies are generally obsessed with cost reductions. Such companies are so focused on costs that added value functions like research are treated the same as any other cost centre. This means that procurement expect research departments to use methods such as online auctions for competitive tenders. This again is treating research and data as a commodity and assumes everything including insights can be measured.


When Global Head Offices impose a standardized survey across all their markets there is a big risk that such research will not be fit for purpose in many countries. I’ve seen this in the UK where the unique characteristics of the UK market are not taken into account by the Global HO. This means that local management do not buy-in to the insights and the study is seen as a necessary evil. One consequence is that quality of data is not seen as a priority.


There are lots of other situations that I could mention where cost is seen as more important than the quality of data, but most derive from a lack of appreciation of the potential value of insights. The key take out is that we recognize there is a problem and we put strategies in place to deal with it. From a client-side perspective it is a constant process of stakeholder management, and building relationships with suppliers. However, the best way of demonstrating the value of insights is to deliver data that is actionable and clearly assists management in meeting their set targets and goals.

Many thanks for reading my blog and I would love to hear your thoughts on this important topic.

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7 responses to “Why Do Companies Buy Cheap Market Research?

  1. Another client-side voice to add to the chorus. For me, the value of the answer depends on the impact of the question. A telecom exec once told me a story about an amazing predictive model for the purchase of ring tones for mobile phones. Highly accurate, modeled against behavioral data that was readily mined through existing data warehouses. Actionable targeting for CRM campaigns.

    The problem, of course, was that the vendor’s cost for the project grossly exceeded the incremental value the model provided. And therein is the big problem: for me to spend $500k on a research study, I need to see multi-million-dollar impact…or at least believe that the results are going to create that sort of value for the business, even if it isn’t directly measurable. If I put out a project for bid to 5 vendors with the same RFP and get quotes ranging from $150k to $550k for the same “work”, it’s the agency’s burden to prove why their work is worth 3x somebody else’s.

  2. Honestly the agency charging less, say for above cited example $150k, just want to grab the job, they are not concerned about the core value of data.
    Secondly they might have perceived it wrongly or They might have vast resources to cut cost all across.
    Now the decision of clients becomes crucial as many times clients do not get genuine data for decision, ultimately low ROI, which results loss in long run.

    Just because of few bucks, no one can take a risk of loosing market…

    Difference is also because what tools they are using for data collection.

  3. Dear Neal, why do Companies buy cheap research is a paramount question for all of us who are expecting to have a decent life selling research services. Your answer is well articulated and correct, in my opinion. But in most cases when we discuss this topic in our national Association (Assirm, in Italy), the final conclusion is that there should be something wrong on the Client side. Are Clients looking for getting low prices simply because they are “stupid”?. No, they aren’t. In my opinion the researchers should consider two circumstances: first, that the pressure on prices is widely spread in every department, research icannot avoit this rule simply for onthological reasons; second, that in many cases when the Client fight for lower prices in buying research he is right.

    In many cases, I say, not always. We say “research” but it is useful to maintain a distinction among different purposes or objectives of our research: (a) describe the facts as they are; (b) explaining the reasons they are that way; (c) predict how the facts and the reasons could be in the future.

    In the goup (a) we find most of our business: retali panels, research on market share, brand awareness, traditional segmentation, product test, and the like. One century of efforts and improvements has produced sound practices and now all these type of research may be considered commodities. The research results will be reliable if you follow the right procedures, and ISO 9000 and other norms are there to guarantee that you will do. At this level the price is the king, and it should be. The research company should became more efficient (and they are doing this way!)

    In the group (b) we find qualitative research and in the group (c) we find a strange creature who shares the nature of qualitative research, quantitative, and consultancy/advisory at the same time. For these types of research the choice based on price would be suicidal. Correct. Our mission would be to explain the differences among (a), (b) and (c). And the best explanation I could suggest is to show in practice how it works.

    Would you like to share some ideas and go on? That coulb be the subject of a next discussion!

    Anyway, thank you Neal for your brilliant explanation


    +we should distinguish at least three cases:
    (a) should consider three types of research: of the Companyprefer cheap research

  4. My experience with this topic is that much of the reason clients buy ANY kind of data comes down to who is doing the buying. If it’s a purchasing department, then “cheap” is their primary focus, and they frequently don’t even really understand what it is they are buying. If it’s someone in marketing or sales who knows little about research, they are sometimes swayed by the flashiest presentation or the most impressive descriptions; the marketing captures their interest more than technical issues they don’t understand. If it’s someone who actually knows research, then they can make informed decisions about the value versus quality (as well as other trade-offs).

    That’s not to say purchasing, marketing, or sales people are stupid; they’re absolutely not. But they’re being asked to decide on something outside of their area of expertise, which means they often decide on factors which may not be the most critical ones. No different than when I buy something I understand (cars or cameras) versus something in which I’m not informed or experienced (plumbing fixtures or insulation).

  5. Another great article on this topic!
    I think the point about linking insights to outcomes is an excellent one. I really believe that clients need to consider carefully what the payoff for research is / could be when they are in the process of setting budget.
    I know few clients are done spending money on something when they are done paying me — there is often further work to be done internally (e.g. change a product or delivery) and often externally (new marketing communications). All of this expense together needs to have a payoff.

    As an external researcher, it is helpful to have a sense of the larger scope. If I am working on a product where the total revenue line is a couple of million dollars, there is not a lot of room to spend money to make improvements. If a client says they want to take a major business line and double their size in five years, I am looking for an entirely different kind of insight. In both cases, you need to spend the money wisely.

    When people ask us, “what would it cost”, our response should really be “what is it worth to know”, but we try to please clients, and sometimes don’t challenge their thinking when we should. Which is why I come back again to the sense that having a collaborative relationship is so important, because it sets the stage where that kind of honest exchange can occur. An RFP is not a place where that discussion can happen.

  6. I am always reminded of a client commenting on research in China. He was telling me that he could get local moderation and reporting for a pittance of what was charged by highly professional non-locals. He agreed fully that the resulting insights were often not the most useful, but, as he said it. “at those prices we can afford to make a few mistakes!”. The same applies to online research. Even given all the obvious concerns it is now a giant train rolling down the methodology track, simply because of price. Even good clients know the weaknesses, but again it seems to be close enough is good enough as the rule these days.

  7. At this point of our discussion most us us has gained a clear understanding of the reasons why our research is in many cases so poorly paid. With many risks from the buyer side, either. So, speaking from the supply side of the market, what should we do?

    We know that in some cases if the Client looks for the lower price he could be right; in many other cases he is not. In the interest of everybody, buyers and sellers, we should clarify the differences.

    In my opinion Susan Abbott hit precisely this point in her comment when she said that “having a collaborative relationship is so important, because it sets the stage where that kind of honest exchange can occur. An RFP is not a place where that discussion can happen”.

    I strongly believe in Susan’s statement, so my next question is obviously the following: “How could we improve collaborative relationship?”

    There are many ways, I can guess, and I would like to listen your opinions. I mention just one. Researchers should be prepared to invest into their prospect Clients. One way to built a collaborative relationship implies to invested in the Client’s Company and his markets and to show to him some delightful pieces of our work. A good chef, sure of his product, could offer you to taste his “Sacher Torte”. Just a bit; to give you an idea. If it is really good the, price of the slice became less important.

    Promotions are not so widespred in our industry. I think they should


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