Risk, Recovery and Relativism

10 key business issues on the horizon and their likely impact on Market Research

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10 for starters

1. The recession – V-shaped, U-shaped, L-shaped or W-shaped?

2. Risk management – Never such innocence again

3. Collaboration – The Age of Co-operation

4. The democratisation of market research

5. Data security – Anxiety in The Age of Surveillance

6. Wireless – The next disruptive technology?

7. The rise of psychotropy

8. Greening – The second wave

9. Demographics – Staying younger older: getting older younger

10.After Empire – A multi-polar world & the diverse cultures of capitalism

1. The recession – V-shaped, U-shaped, L-shaped or W-shaped?

4

How long will the recession last?

§ V-shaped

§ U-shaped

§ L-shaped

§ W-shaped

BAD

WORSE

Recovery underway by

Late 2009

2010

2011 at the earliest

5

L-Shaped – fixing everybody’s balance sheet takes a long time

Banks

Governments

Too undercapitalised to lend + interbank lending hampered by toxic assets

Too big a deficit to provide more stimulus

The three major components of the economy can’t pull together hard

enough for long enough to sustain a recovery.

Japan’s ‘lost decade’, but on a global scale

Consumers

Too much debt from the boom to spend now

Boone, P., Johnson, S., and Kwak, J. Baseline Scenario for 2/9/2009.

6

W-Shaped – Lack of concerted effort regionally

(US, UK, Australia, NZ, SA, S. European)

(China, Japan, Germany, N. Europe, Russia, Middle East)

Invest more than they save

Save more than they invest

Current Account Surplus countries

Current Account Deficit countries

Capital

FX surplusImport more than

they exportExport more than

they import

Spend to bail out banks

Spend to provide fiscal

stimulus

Nothing left to spend to prop up flagging consumer

confidence

Credit CrunchBanking Crisis

Surplus countries

won’t spend enough fast

enoughRecovery

delayed as a result

Export-led growth strategy

fails

Currency appreciates

Buy $ / fix currency to avoid appreciation to fuel

export-led growth

Reading, B. (2009).

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§ Hope for the best; Prepare for the worst

8

The immediate consequences of the recession for MR - Industry redundancies

§ Redundancies will probably fall more equally on clients and agencies than in previous recessions

§ The last two recessions coincided with outsourcing/ reengineering trends – agencies often got more work as a result

§ The recession until now has been far more Keynesian – preserving employment in large companies is a far higher priority

Ø This time agencies and clients will sink or swim together

9

The immediate consequences of the recession for MR – the switch to strategic research

§ Generally in a recession there is a switch in MR project work from tactical to strategic

§ No longer need to try and squeeze MR in as businesses rush to get a share of runaway growth

§ MR projects required to focus on longer-term horizon – i.e. planning for the upturn

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But, is the upturn close enough to sustain demand for strategic research aimed at the upturn?

Ø For growth areas in MR look to:

Ø Cost optimising studies – how can we achieve similar customer benefits for lower price?

Ø Radical innovation studies – how could we move the business into a very new, more profitable space?

Ø Getting a grip on unpredictable consumer behaviour

Ø Evidence from the early 1990’s recession* suggests that businesses which continue with their investment plans fare better in a recession

Ø But even if a business does shelve pre-recession plans, there is still a rapidly changing market out there that you have to keep pace with

* Dobbs, R.F, Karakolev, T and Malige, F. (2002).

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The immediate consequences of the recession for MR –MR as ‘port in the storm’

§ MR is perceived to be more recession-proof than other marketing services

§ Former consultancy and ad agency employees may switch into MR

Ø Opportunity – hire people in consultancy roles

Ø Risk – people dressing their CVs to make themselves look like researchers when they’re not

2. Risk management – Never such innocence again

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Market Risk Management

§ The idea of Market Risk Management systems for businesses emerged as a response to the accelerated speed of change in the business environment in the 80’s and 90’s

Proportion of A and C rated stocks – 1985 to 2004

31

23

15 1412

1820

30

0

5

10

15

20

25

30

35

1985 1990 1995 2004

% of total stocks

A-rated stocks C-rated stocks

Source: S&P Quality Rankings White Paper, October 2005

14

The varieties of market risk – this is MR territory

§ Major project risk – e.g. resulting from a product launch

§ Customer risk - due to shifts in customer preferences / needs

§ Transitional risk - due to new technology or business model

§ Competitor risk - new competitors

§ Brand failure risk - due to failures in the relationship with customer

§ Industry risk - erosion of profitability

§ Stagnation risk - due to the inability to find new growth sources

§ Uncertainty/ Risk reduction is a key – perhaps the key – role of MR

After Slywotzky, A.J. (2007)

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Risk management – the new impetus

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Risk management – the new impetus

§ The credit crunch will very probably give renewed impetus to risk management§ Certainly in the area of the type of risk that caused problems in the

financial services sector

§ But could also give rise to a more risk-aware business approach in general, including market risk§ Corporate Governance might be strengthened in this area

Ø MR needs to reassert its risk management credentials

Ø We have been downplaying these during the boom as ‘irrational exuberance’ took hold

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An Integrated Market Risk Assessment system

§ Major project risk

§ Customer risk

§ Transitional risk

§ Competitor risk

§ Brand failure risk

§ Industry risk

§ Stagnation risk

After Slywotzky, A.J. (2007)

Types of risk Listening posts

§ Continuous surveys

§ Ad hoc surveys

§ Database analytics

§ Competitor intelligence

3. Collaboration – The Age of Co-operation

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Collaboration – The Age of Co-operation

§ Horizontal business structures and reduced communication costs put collaboration within and between businesses at a premium

§ Research is a naturally collaborative function, both in terms of its role in the company and the personalities it attracts

Ø This represents a major opportunity for researchers

Grattan, L. (2007).Ancona, D. (2002)

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When, where and how to start your ‘Hotspot’

Ø Collaboration is most effective when exploring a completely new business opportunity

Ø Companies benefit more than in situations which seek to reproduce existing knowledge in a different part of the company

Ø Personal learning is motivational for team members

Ø Types of boundaries to seek to span

Ø International – analogous learnings

Ø Functional – e.g. with R&D, Engineering, Retail networks, Call centres etc.

Ø Cross-company

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Kickstart co-operation using ‘Synchronisation’ studies

Ø Integration studiesØ to show the interrelationship between aspects of the consumer-facing

activities of different groups

Ø Arbitration studies Ø to resolve clashes of opinion about the consumer or customer

Ø Igniting studiesØ to set the agenda for collaborative activity by identifying challenging

questions for the business to address

4. The democratisation of market research

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The democratisation of research

§ In many highly customer-centric organisations research is not just something done by researchers

§ All customer-focused functions will get involved

§ Customer immersion§ Consumer-client workshops§ Frontline staff insights

§ This democratisation of research extends beyond the business

§ Co-creation§ Co-opting consumers to research their own sub-cultures

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Democratisation: the opportunity and threat for professional researchers

§ Opportunity

§ Direct involvement of end-clients can be very powerful§ Research more central to what the business does§ MR function can be a ‘fulcrum of co-operation’

§ Threat§ "When you democratize something, you cheapen it."

(De Tocqueville)

§ Businesses view it as a way of cutting costs§ Methodological free-for-all – unreliable and invalid results

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Positioning the research function for democratisation

Ø Seek to adopt a more co-ordinating/ consultative role for MRØ Internal training in MR principles/ techniquesØ Teach respect for basic disciplines

Ø Be proactive not just reactive Ø Suggest strategic and tactical research projects that would benefit the

businessØ See the bigger picture and win support for studies that help to bring it

into focus

Ø Retain the internal brand positioning as customer championØ Not in a proprietorial or parochial wayØ Nor as the person who knows everything there is to know about the

consumerØ But as the person best able to integrate and interpret what is known

about the consumer

5. Data security – Anxiety in The Age of Surveillance

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Data security – Privacy in the Age of Surveillance

§ Recent personal data loss scandals have focussed attention on this issue

§ In some countries, such as Germany, it is becoming a very hot topic

§ Individual companies – client and agency side- will have to take responsibility for this issue

§ Especially as integration of customer database and survey data gathers pace

§ ISO 27001 Information Security accreditation may become MR industry standard

§ Encryption of all data devices which hold or could give access to customer data – laptops, mobiles, PC’s, memory sticks, email attachments, CD-Roms

6. Wireless – The next disruptive technology?

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Wireless – another disruptive technology?

§ Mobile data use has exploded in the last 18 months§ In May 2008 Mobile USB sales were up 1624% on the same month in 2007

3g license sale

I-generation coming of age

I-Phone

Discounted flat rate pricing

Factors and milestones in mobile data use explosion

30

Greater mobility of comms opens door to more real-time, light touch surveys

§ The iPhone has shown that a small mobile device can support complex data processing and transfer functions

§ Mobile, web-based surveys will build on initial SMS-based survey methodologies

§ And in time will converge with other technologies and trends

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Convergence of trends and technologies on the next generation of data collection methods

Technically proficient respondents. Continuous

Partial Processing

Multi-media recording, Eye-tracking

GPS tracking, bar-code reading

Next generation data collection

Real-time

Context-specific

Continuous

Light-touch

Rapid outputs

§ If done right, this could yield far fresher and more realistic results

7. The rise of psychotropy

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The rise of psychotropy

§ Modern era can be seen as the period when methods of controlling moods (i.e. brain chemistry) were diversified and democratised§ Psychoactive substances – caffeine, cocaine, chocolate§ Psychoactive behaviours – TV, exercise, shopping

§ Traditional research methods are being challenged by new technologies which promise more direct access to our neurophysiological responses§ fMRI scanning§ Eye-scanning

Ø How should research position itself amongst the scanners and neurotransmitters?

34

Aligning research to the age of psychotropy

§ Don’t ladder down to the underlying emotion, ladder down to the underlying instinct

Researcher’s advantage

Meaning

Context

Narrative

Scanner’s advantage

Reflex

Motive

Capturing the instinctual response

Laddering and interpretation

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Laddering down to instincts

The 4 F’s

Feed

Fight

Flight

Reproduce

Reciprocal altruism

Kith and Kin

Kin altruism

T&B

Tend

Befriend

The consumer need To achieve status

To identify with group/ win approval

Demand for fair treatment

Ø Products and services can seek either to address these needs directly OR seek to minimise the stress that results from not having the need met

36

Fight or flight – the need for status in the automotive category

§ Not everybody can afford to buy a car which matches his/ her need for status

§ Unable to ‘Fight’ and win they have to resort to ‘Flight’ – not competing for status in this respect

§ This results in stress

§ If you are selling the type of car that does not win this status fight you need to help the purchaser manage their status anxiety

§ You need to help them retreat from the fight with dignity

Ø Redefine status – In comms provide purchaser with a role model who is not concerned with status in the traditional sense

Ø Appeal to the beta-type personality by emphasising safety for the family, fun, comfort etc.

8. Greening – The second wave

38

58

45

28

47

37

20

Prepared tomake changes

to lifestyle

Prepared tospend extra

time

Prepared tospend extra

money

Apr-07 Sep-08

% top 2 boxes

(on 7-point scale)

Greening – The Second Wave

§ Polls suggest that green issues have slipped down consumers’ list of priorities during the downturn

Base: 12,000 (12 countries)HSBC Climate Confidence Monitor, 2008

-40 -20 0 20 40

Governments

Individuals

Companies

NGOs

Not doing enough Doing too much

To help reduce climate change . . .

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The current crisis could speed up environmental regulation

§ The depth of the economic crisis may provide an opportunity for governments to kickstart anti-global-warming policies

§ It takes a serious crisis to make the population’s behaviour more green

§ The Oil Crisis in the mid-70’s gave rise to a major change in consumer behaviour with regards to energy consumption

Fuel economy standards were enacted by US

Congress in 1975

Double glazing and loft insulation fitted in millions

of homes in N. Europe

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The recession as environmental metaphor

§ Greening will be given a boost by people’s reaction to boom and bust in the economy

The state of the economy calls for action . . . . not only to create new jobs, but to lay a

new foundation for growth. . . . We will harness the sun and the winds and the soil

to fuel our cars and run our factories.(Obama’s inauguration speech)

Marketing will follow the Zeitgeist

Economy

Environment

Living beyond our means

‘Credit crunch’

‘Global warming’

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Implications of Greening for MR

Ø Look for the green angle but try to determine whether for any given audience it is:

Ø A hygiene factor?Ø A determining feature?Ø A selling feature?Ø A nice-to-have?Ø A turn-off?

Ø For early adopters/ innovators in environmental issues it may be a determining factor or even a hygiene factor

Ø For most other people it will at best be a selling feature or nice-to-have

Ø For ‘conservative dissenters’ it will be a turn-off

9. Demographics – Staying younger older: getting older younger

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Demographics – Staying younger older

19

71

4

39

% transitioned by aged 20 % transitioned by aged 30

1960 2000

%

Percent US 20 and 30 year olds completing transition to adulthood in 1960 and 2000 using traditional benchmarks

Source: US Census data

44

Demographics – Staying younger older

24.424.7

26.1

27.1

27.728.2 28.3

23.9

24.625.1

27.3

28.3

29.129.5 29.7

22.6 22.5 22.4 22.6 22.623

23.6

24.224.5

24.3

25.4

25.9

20

21

22

23

24

25

26

27

28

29

30

1970 1975 1980 1985 1990 1995 2000 2003 2004

EU-25

United Kingdom

Romania

Age (yrs

Year

Mean age of women at first birth, 1960-2004, All EU, UK and Romania

Source: Eurostat

45

‘Boomerang kids’, ‘nest-squatters’ and ‘adultescents’

In Italy 46% of Italian men between the ages of 30 and 34 live with their parents, compared with only 26% in 1987!

(Bell et al, 2007)

In the US the percentage of 26-year-olds still living with their parents nearly doubled from 11 percent to 20 percent between 1970 and 2004,

(Schoeni, 2004)

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Younger, wiser heads

§ When change in society becomes sufficiently rapid, only the young can keep up and the old have to learn from the young

§ The young lead change, shape the present and turn teacher

Post-figurative culture

§Traditional societies§Slow pace of change

§Young learn from the old

Co-figurative culture

§Modern societies§Rapid pace of change§Young learn from peers

Pre-figurative culture

§Post-modern societies§Very rapid pace of change§Old learn from the young

§ Areas of change where the young have been decisive in recent years

§ Communications technology§ Working practices§ Language§ The arts

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Implications of demographic changes for MR

Ø Families have become more dynamic and more important as a focus for researchØ Young people leave home later in life

Ø Parents learn more from children

Ø New lifestages will emerge/ existing ones will mutateØ E.g. ‘Young singles’ a longer and more significant stage for MR

Ø Starts in teens and ends in late 20’s/ early 30’s

Ø They have spending power and are a key entry-point for new products

Ø ‘Youthful’ traits are becoming the most important for determining the success of a new product or service launchØ Curiosity, Flexibility, Experimentation, Peer influence

Ø Marketers must make use of Co-figurative and Pre-figurative influence to move along adoption curve

10. After Empire – A multi-polar world & the diverse cultures of capitalism

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After Empire – A multi-polar world & the diverse cultures of capitalism

§ We operate increasingly in a multi-polar world§ US power declining?§ EU power/ economic bloc§ Brazil, Russia, India, China ‘s liberalising and developing economically

§ Post-WWII attempts by the West to impose a Western model of development have proved very costly on many levels§ E.g. free-market, liberal democracy experiment in post-Soviet Russia§ E.g. Iraq, Afghanistan

§ Self-determined development is generally more robust and cheaper§ Vietnam, Central and South America, Iran, China.

§ Paths of development in other cultures will increasingly differ from the Western model

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The rules of engagement in a multi-polar world

§ Seek global opportunities in genuinely new ways§ New products and services, new business models, new channels§ New customers – e.g. ‘base of the pyramid’

§ Be genuinely local§ Local talent, local R&D§ Facilitated by – standardised systems and processes

§ Work with, rather than against, the grain of local cultures§ Customers§ Local business units, subsidiaries etc§ Local suppliers

(‘Global choices for global challenges’, Accenture)

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Implications of multi-polarity for MR

Ø Multi-polarity represents a major opportunity for MR§ The best performers in global markets are more than twice as likely

than the worst performers to consult customers in local markets to inform their innovation (Accenture, 2009)

Ø Local culture vs. universal MR best practice§ Many cultures lack the social science tradition found in the West§ Local researchers required for immersion in the consumer/ business

culture§ But hard to find the necessary high level MR skills/ talents locally to

deliver top quality research

Ø Cultural resistance to a product often subtle and hard to predict

Ø People respond to questions in fundamentally different ways

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Responses of cultures to products, services & practices from abroad

Rendition

Received and accepted entirely

on their own terms, without alteration or resistance

Assimilation

Absorbed but in a modified form,

being alloyed with elements of the domestic culture

Accommodation-isolation

Allowed entry in their original

form, but quarantined from the wider culture

Rejection

Outright resistance and

refusal

Sushi in the UKMcDonalds in Paris Cadillac in EuropeJapanese ‘cult’ of miniaturisation

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§ People from Far Eastern cultures see a far closer relationship between:

§ Object and Context

§ Individual and Setting/ Circumstances

§ The idea that a person remains the same through all the different situations and settings of their lives is very counter-intuitive to them

§ They are more comfortable than Western respondents are when answering questions about themselves in specific situations/ contexts

§ They are less comfortable than Western respondents generalising about themselves without reference to a specific context

Respondents from different cultures respond differently to the form in which a question is asked

• Disclaimer

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Any resemblance between these ‘forecasts’ and actual eventual outcomes is entirely coincidental!

§ The depth and duration of the recession is uncertain – but it doesn’t look good

§ Recessions . . .

§ accelerate and amplify some pre-existing trends

§ kill off others . . . and

§ start some completely new ones all of their own

§ The one (almost) certainty is diversification§ Of risk§ Of methods§ Of markets§ Of categories§ Of consumers

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References

§ ACCA Policy Paper. Climbing Out of the Credit Crunch. September 2008.§ Accenture, (2008). Global choices for global challenges. Strategies for achieving high performance in a

multi-polar world.§ Ancona, D., Bresman, H. & Kaeufer, K. (2002). The Comparative Advantage of X-Teams. MIT Sloan

Management Review. Spring 2002.§ Bell, L. Burtless, G. Gornick, J. and Smeeding, T.M. (2007). A Cross-National Survey of Trends in the

Transition to Economic Independence. In The Price of Independence: The Economics of Early Adulthood, eds. S. Danziger and C.Rouse (New York: Russell Sage Foundation, 2007).

§ Bonney, N. and Fletcher, J. (2008). Client 2.0: the clientside researcher in ‘flat world’. MRS Conference Papers, 2008.

§ Boone, P., Johnson, S., and Kwak, J. Baseline Scenario for 2/9/2009.§ CIA World fact book/ NationMaster§ Dobbs, R.F, Karakolev, T and Malige, F. (2002). Learning to love recessions. June 2002.§ Grattan, L. (2007). Hot Spots. Why Some Companies Buzz With Energy and Innovation and Others Don’t.

Pearson Education Ltd.§ Hansen, M. T., (2009). When Internal Collaboration Is Bad for Your Company. Harvard Business Review,

April 2009.§ HSBC Climate Partnership, (2008). Climate Confidence Monitor, 2008.§ Mead, M. (1972). Culture and Commitment –A Study of the Generation Gap, Granada Publishing Ltd.§ Nisbett, R.E. (2003). The Geography of Thought. How Asians and Westerners Think Differently and Why.

Nicholas Brearley Publishing.§ Pisano, G. P. and Verganti, R. (2008). Which Kind of Collaboration Is Right For You? Harvard Business

Review, December 2008.§ Reading, B. (2009). Beware The False Dawn. In Research World. No 5 January 2009.§ Schoeni, R. and Ross, K. (2004). Material Assistance Received from Families during the Transition to

Adulthood. In On the Frontier of Adulthood: Theory, Research, and Public Policy, eds. Richard Settersten, Jr., Frank Furstenberg, Jr., and Rubén Rumbaut. University of Chicago Press.

§ Slywotzky, A.J. (2007). The Upside: From Risk Taking to Risk Shaping How to Turn Your Greatest Threat into Your Biggest Growth Opportunity. Capstone.

§ Smail, D.L. (2008). On Deep History And The Brain. University of California Press.