Over the last decade, it’s been interesting to observe the increasing role of corporate procurement groups in the market research process. Indeed, the increasing prevalence of preferred vendor lists, reverse auctions and rate cards have had a drastic impact on how corporate market researchers interact with their research partners in delivering insights to the organization. As the influence of corporate procurement continues to grow, I think we need to ask a fundamental question: Is procurement having a positive or a negative impact on corporate market research? In my experience, a heavy-handed procurement function is often very effective in driving down costs, but it’s also very effective in driving down the value of market research. Let me wax nostalgic and illustrate my point: Many, many years ago when I was in high school, I worked at a manufacturing plant that was seeking to consolidate its parts vendors. In multiple instances, the plant was buying the exact same screw from different vendors at different prices. Within this context of a highly commoditized product, vendor rationalization makes perfect sense: why buy the same product from different vendors when you can purchase everything for a single vendor at a lower rate? While I totally agree that this argument works in a commoditized space like screws, I question whether it makes sense in a professional service space like market research. In most cases, there is very little variability in the performance of a screw from Vendor A vs. a screw from Vendor B. However, in a knowledge-driven service like market research, there is very high degree of variability in the insight provided by Vendor X vs. the insight provided by Vendor Y. Market research is not a screw, yet procurement continues to screw market research. Ok, bad pun, but it was hard to resist. My point is that whenever an organization begins to treat a value-added, knowledge-service like a commodity, it tends to strip out the value-added knowledge entirely; when procurement treats market research like a commodity, then procurement creates a commodity. We often hear clients express frustration with vendors, saying things like: ‘We spent 500 man-hours, we received a 200-page report, and we received no insight.’ While I empathize with this sentiment, the fact is that procurement doesn’t pay vendors for insights; it pays vendors for man-hours and fat deliverables. Ultimately, there is often a fundamental misalignment between the corporate procurement and corporate market research: market research wants insights, but procurement is paying for man-hours. This misalignment leaves market research vendors in a lurch; vendors know they are supposed to provide insights, but the reality is that they are being paid to provide man-hours. Until market research vendors are incentivized to deliver insights, we will likely continue to see vendors providing a ton of man-hours and dearth of insights.
Dan Callahan is the President of Vivisum Partners and Founder of Research (R)evolutions.
Email Dan at email@example.com