More companies are investing in insight to become customer centric, but are they getting the right return on investment (ROI) for their research efforts?
It’s possible to get ROI, but measurement doesn’t happen by accident. Just like the research itself, you need to be precise and strategic if you want to measure your team’s financial impact on the business. That said, even market researchers who realize the value of demonstrating the ROI of what they do may struggle with where to start.
A new Global Research Business Network (GRBN) initiative aims to provide a starting point. Its new handbook, Invest in Insights, tackles the pressing issue of ROI measurement.
The birth of the handbook stems from today’s business realities: research leaders are facing decreased budgets and increased demands for insight. Unfortunately, according to GRBN, many research teams today aren’t equipped yet to meaningfully measure their efforts.
“Today, relatively few insights functions measure their ROI in a systematic way,” said Andrew Cannon, GRBN’s Executive Director, who led the creation of the handbook.
Why measure research ROI?
According to a 2017 study by the Boston Consulting Group (BCG), research teams that demonstrate ROI have found a seat at the table. These teams are seen as a strategic corporate asset, often being asked for input when important business decisions need to be made.
“Today, relatively few insights functions measure their ROI in a systematic way.”
According to BCG, insight departments that have demonstrated ROI also have control on how they spend their budget, which means they can set aside money for things such as experimentation and meeting unexpected needs.
The inability to show business value comes with a significant risk. Insight teams that are unable to demonstrate their impact “have seen decreasing budget and headcount over the last few years, and also expect this downward trend to continue,” according to BCG’s study.
3 tips on how to measure research ROI effectively
GRBN’s handbook offers tips on ROI measurement from insight leaders. We’ve highlighted some key takeaways below.
1. Adopt the right mindset
Measuring ROI is more than a process—it’s a mentality that starts with asking the right questions.
“Think about each research project in terms of what its impact on the business will be,” said Simon Chadwick, managing partner of Cambiar. “What is the business issue at hand? What sort of impact do we believe we can have on that issue? What are the parameters and metrics by which we will measure this? How do we build these into the project? And then how do we assess the overall impact of the project over time?”
Ultimately, you don’t just measure ROI, you build it. If want to make the case for a substantial research budget, you must prove it supports growth and profitability. Doing so starts from an understanding of corporate objectives.
2. Incentivize impact, not activity
Invest in Insights recommends rethinking one key part of traditional market research: data collection. Instead of measuring how much data they’ve collected, researchers need to uncover how their efforts ladder up to organizational KPIs.
“The acquisition of data has taken on a smaller role as primary research studies have become more focused, designed to address the ‘why’ of underlying patterns observed in data,” wrote Lisa R. Courtade, department head of global customer and brand insights at Merck. “Rather than capture behavior, many seek instead to explicate the emotional drivers and unspoken motivations of behaviors observed in existing data sources. In this new world, if our only measure of success is research spend, then we incentivize activity rather than impact.”
Ultimately, research needs to drive business results and deliver better outcomes to customers, according to Courtade, and the impact of the insight team should be measured against that objective.
3. Follow frameworks
The good news is you don’t have to start from scratch when you set up a process to measure your ROI.
Invest in Insights provides a framework developed by GRBN, which has three dimensions that all should be taken into account when building an ROI measurement mechanism. The first dimension encompasses four levels of granularity—project, business decision, business decision area and overall strategic areas.
The second dimension is perspective, which the handbook recommends should span three years, and ideally focus on actual ROI rather than forecast. The final dimension is the different shades of ROI, which recognizes that not everything can be measured in financial terms. There are other soft measures that create a compelling story for impact.
GRBN’s framework is not the only one, either. Forrester’s Total Economic Impact (TEI) methodology measures the ROI of software, including tools and platforms research teams use today. The TEI provides a rigorous cost and benefit analysis framework that explicitly incorporates an evaluation of future technology and business flexibility and associated risk. Download The Total Economic Impact of Vision Critical to see an application of this methodology.
Make ROI part of the process
While sometimes tricky, quantifying research ROI is possible. In fact, many major brands, including Keurig Canada, PBS, Aurora Heath Care and Sun Life Financial, have linked their research efforts to tangible business benefits, including reduced costs, accelerated product timelines, boosted revenue and improved customer experience. In the end, the key to ROI measurement is to use frameworks that link research metrics with KPIs the organization and business leaders actually care about.