Budget cuts. Two words that are painfully familiar to many of us in the research industry. According to the latest IPA’s Bellwether report, budgets for research spending continued to contract in the last quarter of 2022; with a net balance of -8.8%. The sharpest reduction since 2021. The IMF has also reported that global growth is projected to fall from an estimated 3.4% in 2022 to 2.8% in 2023.
But, when the going gets tough, the tough (should!) get going. Our Analysts, Thought Leaders and Consultants frequently advise our clients that despite unfavourable economic conditions, there are still opportunities for brand growth – if you know where to look. And we do.
We asked some of our experts to share their views and provide advice on how to manage a research budget – and find growth opportunities – during challenging economic times.
The perks of being data-driven
First, let’s back this up with some numbers. A McKinsey Report revealed that if your business is data-driven, you’re 23 times more likely to acquire customers, six times more likely to retain those customers, and 19 times more likely to be profitable as a result. You need data to be able to perform to the best of your ability. “Being data-driven can help businesses make the right decision for the right market, and the right situations, and deliver the right products,” says Sandra Jones, Vice President, Mintel Insights Content Strategy, Beauty and Personal Care.
There’s always a way forward
Research doesn’t get less important during difficult times. If it was a priority before, it should remain a priority throughout. “We have multiple cases of brands that made breakthrough strategies to grow during a recession,” says David Turner, SVP, Mintel Global Insight Development. “For example, Netflix capitalised on the growing movie-rental model after the 2008 financial crisis. In the same year, Lego revisited its approach and built a new path forward which resulted in a 65% increase in expansion by 2019. Having great insight into what levers can help drive growth, is more important than ever in a crisis. The brands that will invest smartly in that time, are going to be the ones best placed to maximise growth potential when the economic cycle turns.”
Know your market
By identifying the right opportunities, brands can turn the bitter lemons of recession into sweet lemonade. To do that, they need to keep a close eye on the market. Sandra Jones found that “the Mintel Household Confidence Tracker reveals that in the UK, 50% of respondents are better off compared to last year. This means that the opportunities are there.” By cutting marketing and research budgets, brands risk their chance to find relevant openings that can drive the business forward.
For example, “In beauty and personal care, the lead time to launch a new product is two years; depending on the category,” says Sandra. “So, if you decide to stop investing in research and stop innovating, you’re facing a two-year lag, and, when things start getting better, your business will be dramatically behind.”
It’s important to remember that someone has done it before. Brands can turn to history for valuable examples of how others faced similar circumstances successfully. However, it’s also equally important to bear in mind that each recession is different. So, brands need to understand what the current drivers are. What are the conditions right now? what does the market look like?
Sandra explains, “You need to know your consumer, you need to know your market, and you need to know your products”. These are the three key things that brands need to focus on. “You can’t launch a product if you don’t know what your consumers want. Which needs are you going to meet? Which target audience is your focus? Knowing your consumers is essential. And if your competitors are doing that and you’re not, that’s probably going to cost you more than your research.”
Make the most out of it
So, rather than thinking about cutting your budget, think about how you can maximise it. Do you know what type of research you should invest in? “There’s no one size fits all. Do you need to get up to speed? Do you need to understand what’s going to be the inspiration for innovation? Or do you want to know what the opportunities and threats are?” says David Turner. “Although you may need to work on different areas, it’s always important to work with agencies that can say: Well, what next? It’s not just about the methodology. It’s also about the expertise and the ability to partner to help the brand grow and consider future expectations. It’s not just about surviving the next six months, it’s also about thriving in the next five years.
That’s why data on its own isn’t going to help if you can’t make sense of it. You need to know what applies to your business. “It’s important to be able to translate that data into real insight that’s going to help the business move forward,” continues David Faulkner, Director, Mintel Food & Drink. And that’s why tools like ChatGPT will be game changers in terms of speed but won’t be able to answer questions such as, ‘What’s the problem?’, ‘What’s the tailored solution?’ And ‘What’s the quality and robustness of the data?’ You need to trust the data, and that’s one of the things that only good research partners can deliver.
Ultimately, during times of crisis, you need to start by understanding who your consumers are, and then go beyond. What are the drivers? What influences them? “There’s more choice, and there’s more competition out there,” says David Turner. “So, those who have got more data and more insights are going to be better placed to make decisions to win in a challenging marketplace.” Brands need to abandon the ‘tick a box’ mentality. Research isn’t something that you only need when moving a project from one stage to the next and then forgetting about it. “You should keep referring back to it. Research isn’t just for Christmas, it’s for everyday use,” continues David.
So, when facing tumultuous times, and the worry, pressure, and temptation of cutting budgets seem to be the only sensible solution, remember that research can make a difference between stagnating in an even more challenging market and finding the right opportunities for growth. Research is an investment in the future of the company.