Is market research a good business? How to earn money by offering market research services?
Long story short, market research is a great business to consider either as a stand-alone or as an additional service. It is a superb addition to the existing service range of marketing agencies, consultants, and anyone who is working in some areas of marketing.
There are several reasons why most service providers do not specialize in market research. Some of these offer excellent market entry opportunities for professionals who already work in marketing. Let’s break it down.
Why do most marketing professionals avoid entering the market research business?
First of all, to be able to handle market research projects, one needs to be familiar with market research methodologies. It’s important to understand market research industry-related statistical calculations.
Like any business, a market research business needs to invest in getting clients. It requires resources to manage sales, marketing, advertising, and other lead-generation activities. Most market researchers are statisticians and data scientists. They are not very good at marketing. The massive paid ad competition among survey companies does not help either.
Business executives tend to be suspicious about most market research services. Doing a few minutes of online research will bring up demoralizing stories about survey completion fraud, poor data quality, and other despicable practices that are very common on research panels and paid survey networks.
Why is market research a good opportunity for marketing agencies and digital marketing service providers?
Simply put, because the two areas are overlapping. Companies want business intelligence and evidence-based decisions before committing to marketing investment. If they don’t get insights from their current digital marketing partner, they will get it somewhere else.
Let’s see some facts.
The global revenue of the market research industry exceeded 96.8 billion U.S. dollars in 2019, growing more than twofold since 2008. In 2018, North America generated the largest share of market research revenue, representing 54 percent of the total, followed by Europe with 26 percent.
In comparison, the global digital marketing spend was 491 billion U.S dollars. Market research spend is about 20% of online ad spend.
Do your clients pay you 20% of their marketing spend for market research?
Over 90% of small and medium-sized companies engage in market research annually or more frequently. Over 60% of medium-sized companies do market research quarterly, and nearly 20% of them manage multiple market research campaigns simultaneously.
The annual research spend of US-based micro and small businesses is between $1,000 and $5,000 per annum, while medium-sized companies budget over $15,000 on research annually.
The annual research budget increases steeply with company sizes and varies significantly by industry. Family-run local businesses tend to spend less on research, while mid-size companies with multiple shareholders and a corporate-like management structure spend between $25,000 to $40,000 on research per annum.
We are talking about businesses like local restaurant chains, small hotel groups, e-commerce companies, construction businesses, online businesses, tech startups with below 50 employees.
Further good news for marketing agencies and freelance marketing service providers is that over 80% of small and medium-sized companies rely on an external professional or agency for market research.
This means that those few marketing agencies and consultants who offer market research make pretty good money!
What profit margins are we looking at in the marketing research industry? How much money can you make from market research?
In most cases, you can aim for a profit margin between 60–80%
Depending on the client’s requirements, a market research project is a set of services bundled together. Companies need market research data to prepare business and marketing decisions. Depending on the nature of business, the most frequent requirements are:
- Quantitative survey data collection for concept testing
- Qualitative focus-group interviews
- Competitor analysis
- Brand audits
When a company pays for market research, they pay for an end-to-end solution that covers:
- Project planning
- Data acquisition
- Data quality control
- Project management
- Delivering reports and insights
Market researchers earn a profit by marking up data acquisition costs, charging project management fees, and delivering useful reports that turn data into information that their clients asked for.
Let’s see a sample profit calculation
Typically, a small to medium-sized company will pay up to $5,000 for a 1,000 response research project. The researcher will acquire survey responses let’s say at $0.75 each, and charge the client $1 per response, also charging for additional services like reporting and research management.
Deduct the data acquisition cost from the project cost, you will be looking at a $4,250 profit for a simple project.
The standard range of CPR is between $0.6 (USD) and $5 (USD) per complete response — depending on the audience size, location, education, language, and other factors that make it easy or difficult to collect responses from the given target segment.
Cost per complete survey response depends on various factors, mainly on the length of the survey, engagement rates, abandonment rates, and of course survey distribution costs.
Except for focus-group interviews, research data can be acquired with surveys. The primary cost factor for survey market research is the cost per response (CPR) and the number of required respondents.
How many respondents do you need for market research?
There are various confidence interval calculations to determine the required response quota for a research project, but typically companies go for the following:
- 100–200 responses for quick micro-researches
- 500–700 responses, if they need data for serious decision
- Around 10,000 responses from multiple segments when they plan a multi-segment strategy
- Even up to 100,000 responses in case of an extended research project
Data quality is an important aspect of a market research project. Paying less for useless data is practically wasting money. Data cost is not an indication of quality.
First-time market researchers might think that SurveyMonkey Audience or Google Surveys are good options. Wrong. Both platforms utilize incentivized respondent networks where participants only answer surveys to get paid. Over 35% of respondents on incentivized networks are proven to be fraudulent. Another 30% uses incorrect age and demographics settings, and nearly 20% are bots.
Market Sampler solves this simply by not paying for responses. Our public survey delivery system reaches people who are happy to give genuine feedback.
How to get started with offering market research services?
Market Sampler was built for research professionals by research professionals. You can conduct survey research, targeting non-incentivized public audiences, real fast.
With a low cost per response, genuine organic responses, and fast research options, it is not a coincidence that market researchers from all industries use Market Sampler.
You can take a look at the available research tools by registering to our “Partner Area.” It’s free to register.