The defining point when looking at top performing departments is that they consistently measure the ROI of their insights in a quantitative way.
The ROI of Insights is not about conducting research projects better, faster and cheaper. The ROI of Insights is about making real and measurable business impact using insights derived from marketing research.
This important topic was addressed in the fifth and final session of a five-part Insights Association and Olivetree Insights webinar series: ‘Insights, A Source of Strategic Leadership.’ The following is a recap of the key points from the expert panel.
Andrew Cannon, Executive Director, Global Research Business Network
Simon Chadwick, Managing Partner, Cambiar
Ben Gilgoff, Executive Director, Global Customer Insights, Merck
Slow Progress to Strategic Partnership
A groundbreaking study by the Boston Consulting Group in 2008-9 broke corporate insights departments into four stages: Traditional/Emerging (Stage 1), Business Contributors (2), Strategic Insight Partners (3), and Sources of Competitive Advantage (4). The study found that only about 10% of departments fell in stages 3 and 4.
Cambiar and the Yale Center for Customer Insights joined with BCG to update the study in late 2015. They found that some progress had been made, as 15% of insights departments were considered in Stage 3 and 5% in Stage 4. Interestingly, the defining point when looking at top performing departments is that they consistently measure the ROI of their insights in a quantitative way.
There is no shortage of bad ideas nor executives who prefer to trust gut instinct over spending on consumer insights. It’s up to the insights team to show how they can help their business partners look smarter, make better decisions, and improve the probability of success.
The Benefits and Barriers of Measuring ROI
The panelists stressed that the ROI of insights is not about conducting research cheaper and faster. In fact, simply completing the same number of projects typically done in a year for less cost is not generating a positive ROI. Rather ROI is about the impact the insights team has had on business performance and measuring that impact.
This leads to the importance of truly defining the business issue before starting any project. Insights teams and their business partners aren’t always good at doing that, but it is a critical step in being able to design a project that will deliver the insights needed to make an impact.
— Insights teams and their business partners aren’t always good at defining the business issue, but it is a critical step in being able to design a project that will deliver the insights needed to make an impact. —
The teams that have reached Stage 3 & 4 have realized a number of benefits through measuring ROI. They report:
- Increased stakeholder satisfaction
- Greater budget and more control over the budget
- More freedom to innovate and initiate strategic work
- Increased resources
- A seat at the strategy table
If ROI measurement is so valuable, why are so few measuring it?
One big reason is that nearly half of departments are still at Stage 1: either newer teams or are just “order takers” conducting research that is requested by their business partners without clearly identifying the business issue that needs to be addressed. In stages 1 and 2 researchers are doing a lot of DIY research, running tables, and creating charts. In stages 3 & 4 there is more talking to partners about the key decisions that need to be made. The quality of work improves as you move up the scale.
Secondly, inertia is an issue. The belief that you can’t measure insights ROI – “a lot happens between conducting the research and market action” – making it impossible to quantify the impact.
The experts recommend using the following framework for measuring ROI and the business impact of insights. This framework is detailed in GRBN’s Invest in Insights Handbook which also provides some great “how to’s” for measuring ROI.
- Dimension 1 Granularity: Build ROI measurement from the ground up using 4 levels of granularity: Projects; Business Decisions; Business Lines and Overall Strategic Priorities.
- Dimension 2 Perspective: While its preferable to use an actual ROI, its typically more feasible to create a forecast ROI. This is largely due to the time lag between completion of a research project and getting a product to market. They point out that all companies use forecasting for budgeting sales revenue and expenses, the insights department should be able to forecast potential revenue or cost savings based on the insights derived from a research project. Not every ROI measurement will be 100% accurate, but it’s a good step in starting to quantify impact.
- Dimension 3 Shades of ROI: This is the most critical of the three dimensions, as it serves to address the reason many don’t seek to measure ROI at all – much of our work can’t be measured on a financial basis. Anecdotes, feedback from leadership, and surrogate measures should all be considered.
— All companies use forecasting for budgeting, the insights department should forecast potential revenue or cost savings based on the insights derived from a research project. —
Thus, the team recommends considering surrogate measures of ROI such as customer retention, preference, willingness to recommend, awareness, ad likeability, and brand tracking. These might not measure financial ROI, but they are strong, quantifiable measurements of likely consumer actions.
The speakers also emphasized the following to achieve successful ROI measurements:
- Take the long term view of projects versus only looking at the next quarter. Think about research done in the past 1-2 years and report on how the present results were impacted by the research.
- Don’t try to measure ROI in isolation. It can only be achieved by working with stakeholders and business partners – finance, accounting, marketing, and sales can all help with forecasting and feedback on projects.
- Strive to get out of the business of “doing” and become “thinkers.” Form coalitions with teams. Business leaders will respond positively if you tell them you want to quantify the decisions research is helping them make.
By measuring the ROI of Insights, the insights team strengthens the understanding of the value of research throughout the organization and proves its professional worth. In this way, the insights team can become strategic partners of leadership and a source of competitive advantage for their companies.
Author: Carol Shea, President, Olivetree Insights
Photo by Jason Briscoe on Unsplash
The Australian Market and Social Research Society is linked globally to 45 associations through its partnership with the Global Research Business Network (GRBN) and the Asia Pacific Research Committee (APRC). Click here to read about the AMSRS global network. This article is originally sourced from Insights Association website.