Measuring the return on an investment (ROI) is part of good business practice. Both large and small companies must calculate the value of the items they buy, as well as the processes they create, in order to determine whether the time, effort and money they are spending to obtain and/or facilitate each of them is actually reaping any benefits. But how do you appraise insight, especially that which you acquire via specific market research endeavors? Take a look at the short answer:
But, First, What is ROI?
According to Investopedia, ROI is basically “a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.” To calculate ROI, you divide the value of the benefit of the investment by the cost of the investment, like this:
ROI = (Current Value of Investment - Cost of Investment) / Cost of Investment
Of course, it’s a lot easier to estimate “hard” ROI for the things you are doing in the present than it is to consider “soft” ROI for those things that might contribute to your company’s success over time. For instance, with little difficulty you can tally the leads generated through an online ad and compare them to the amount of money you spent on making that ad to figure out whether your time and money were wasted or not (i.e., hard ROI). It’s a lot more complicated, though, to speculate on the value of all the things you do to encourage brand loyalty, positive customer experience (CX) and overall customer satisfaction (i.e., soft ROI items). This is because hard ROI is largely quantitative in nature, with X investment equaling Y amount of money saved or earned; soft ROI, on the other hand, is ultimately qualitative in nature, with X actions equaling Y perceptions, which only then can represent Z amount of money saved or earned. Hard ROI is often finite and exact, confined to a specific project or investment, while soft ROI is evaluated across many different initiatives over several (if not many) years, making it much harder to assess.
What This Means for Market Research ROI
Just because it’s hard to assess the ROI for our market research efforts doesn’t mean we can’t or shouldn’t make the attempt. On the contrary, and as already stated, all companies need to measure ROI, even the not-for-profit ones that still have investors and board members to keep informed and appeased. Here are a few tips to getting a better ROI from your market research investment:
- USE market research - Too often companies undertake a market research project but don’t use the information they gain. If you send out a survey (or conduct a focus group or post an online poll, etc.), make sure you know how you’re going to analyze and then use the feedback you get. Otherwise, you’ll have a negative research ROI.
- Be Specific - Market research ROI is improved when you have a specific problem identified and are prepared to use consumer feedback to address it: the more vague your focus, the lower your rewards will be because you won’t have any expectations against which to measure your understanding in the future.
- Assess Your Objectives Upon Completion - After completing an market research study, you should sit down with a team of people and talk about what you learned and whether your findings justify your expense (of time, effort and money). Don’t be fooled by findings that might contradict your expectations (as in discovering that there really is no market for the product you were contemplating or that the price point you wanted to move toward really isn’t feasible). Sometimes unexpected and/or negative findings can improve your overall ROI by saving you the effects of bad business decisions down the line.
How CFR Can Help
Historically, market research ROI has been a subjective calculation based on perceptions and projections that are hard to quantify. While the above tips are a great starting point for assessing your own research projects, there are additional resources you can use to make your calculations even more accurate. Advancing technologies not only facilitate better consumer reach, they allow more measurable consumer insight. Contact our team at Communications for Research (CFR) to learn more! We can pair you with the right tools to help you better estimate the value of possible insight before you begin a project, as well as point you to realized benefits after the process, making your research ROI well worth your expense.