When to Resume your Slashed and Burned Market Research Budget

Worldwide market research budgets have been slashed.  Much of this is my own primary research in Asia, North America and Europe in the past 3 weeks speaking among colleagues and clients on-the-ground.  In the US, management has decimated their budgets often to zero; or US marketers have not released funds, even if they have been allocated budgets.  In Europe, budgets have been dramatically reduced, but not eliminated as in the US.  Asia and the Middle East have also reduced their market research budgets.  Clearly, corporate management has focused on survival in this horrific global recession.  But research shows that management should very closely look at when to resume their currently slashed and burned budgets.

The conventional wisdom taught in business schools is to wait 6-9 months after the trough and at the beginning of recovery to begin spending in research and development.  However, a member of the SIS International global team conducted statistical research on when companies (particularly manufacturing companies) conducted research and development in the business cycle after a recession.  The research shows that companies consistently begin spending 9 months after the trough.  The reasoning is that management seeks to stabilize profits and thereafter gain insights on customers, opportunities and competitors.  The only problem–a major problem–is by that time, the chance for strengthening competitive advantage is eroded by every other competitor that resumes research at this same time.

Yesterday, the IHS Global Insight predicted -1% growth in the third quarter of 2009.  This is a dramatic slowdown in the rate of economic collapse.  Yet, many including President Obama caution excessive optimism and suggest that the economy is not in full recovery.  The Economist Intelligence Unit also hints that a W-recession might occur, with a minor slow down in 2010.  Clearly, timing and predicting economic recovery will certainly be difficult.

I am certainly not in an ivory tower oblivious to the dire management realities during this recession.  I lead corporate divisions in the 1970s and 1980s in corporate America and had to slash my budget and staff.  I also survived several bleak recessions while running SIS International.  My message is that companies need to be ahead of the pack in researching opportunities before their competitors.  It will be the companies that conduct the right amount of research at the most prudent time on market opportunity, competitor analysis and customer value analysis before the rest of the pack that will have the best opportunity to outmaneuver the competition and define the competitive landscape for years to come.

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Ruth Stanat is president and founder of SIS International Research, a global market research and business intelligence agency founded in 1984 and based in New York City.  Stanat is the author of 3 books on global management, market research and competitive intelligence.