We are often asked, “How much would it cost for us to get a study of the XYZ market?”
A quick answer is that an RSR market study may range from as little as $10,000 to as much as $100,000 or more. To narrow this range requires a detailed discussion of what the client is hoping to accomplish by purchasing a market study.
For perspective, consider how a realtor might answer the question, “How much does a house cost?” The answer depends on many factors, such as location, size, materials of construction, and numerous other details. A newly-constructed house generally costs more than an existing house. A custom-built home generally costs more than a cookie-cutter house. There may be rules of thumb about cost per square foot, but still prices vary considerably based on lot size, topography and other external factors.
To generate a budgetary estimate for a market study, we go through a three-step process with the client, working backwards from the desired business result to the required study outputs to the research methodology that will best serve the client’s needs.
Step 1: Specify desired business result
Every market study should begin with a discovery process that elicits a concise statement of what business result is desired from the study. Too often, clients and/or study providers skip this step and jump too quickly to the “deliverables” they expect from the study. Documents and presentations are not results, they are outputs. Business results are action-oriented, such as:
- For a client considering a merger or acquisition, a market study can screen and identify potential acquisition prospects that meet specific criteria, or to support the commercial due diligence stage of the acquisition process, confirming the investment thesis relative to market size and growth, target company market position, etc.
- For a client considering entering a new market or introducing a new product, a market study provides a fact-based assessment of the risks and opportunities involved, enabling confident “go / no-go” decision-making, as well as offering insights into the valuation and post-acquisition integration processes. As an added benefit, market studies provide ongoing measurement of business results, which in turn drive resource allocation decisions.
- For a client looking to improve its performance in particular market segments (vertical, geographic or among specific customers), an RSR study will confirm current and projected customer needs, how well they are being served, and where unmet needs can be exploited. This enables the client to prioritize market opportunities and allocate resources on that basis.
Many clients rely on market studies for strategic planning support as well. These clients recognize the importance of developing a foundation of facts relative to the market and competitive environment that enables confident strategic planning and decision making. Market studies challenge strategic assumptions, sometimes confirming them and sometimes providing new directions. Market studies can address gaps of knowledge or understanding that can inhibit effective strategic planning.
The price of a market study will depend in great part on what business results are desired.
Step 2: Determine required study outputs (scope and deliverables)
Once the business objective of the market study is clearly established, the next step is to work backward and identify the specific study outputs (often referred to as deliverables) that will be required to assure that the client’s business objectives are met.
Specifying a market study’s scope and deliverables is an iterative, collaborative process between the client and the study provider. Considerations to be addressed at this step include:
- Definition of the market to be studied – what specific products, services, geographies and vertical markets are to be included in the project scope?
- Segmentation and growth drivers impacting the market
- Should size and growth rates be segmented by geographic and/or vertical market?
- Would a detailed examination of macroeconomic, demographic, or other market demand drivers be of value?
- What political / regulatory forces might have meaningful impact on the business decision to be made?
- Competitive environment, and how it might impact the business objective
- Who are the market share leaders, how concentrated is the market, what is changing?
- What are the competitive opportunities, threats, etc.?
- What trends or dynamics are driving competitive intensity, and what changes can be expected in the future?
- How well are customer needs being served?
- Are there underserved customers or groups of customers?
- How are customer needs, technical requirements, or buying behavior changing?
- What other specific questions or issues need focused examination for the study to meet its objectives?
The breadth and depth of scope is the key driver of how much a market study will cost.
Step 3: Design / develop research methodology
Once the underlying business objective of the market study is established and the required study outputs are defined, the next step is to design and develop the research methodology. Depending on what the specific requirements of your study are, the research methodology may include some or all of the following:
- Search of published information and/or databases – a literature search, generally conducted early in the study process, can sometimes offer useful reference points at little or no cost. However, internet research comes with serious caveats about accuracy, reliability and context.
- Formal surveys, written or electronic – mostly useful for gathering customer input regarding fairly straightforward, binary or digital inputs. Surveys can offer quick answers to certain questions, but they do not offer the open-ended, interactive feedback that can be generated from personal interviews.
- Syndicated market studies – in contrast with a customized market study produced for a specific client need, a syndicated market study is produced in advance and sold to multiple buyers. Generally priced anywhere from $3K to $10K or more, syndicated studies are off-the-shelf reports that are often used by clients who desire a cursory review of a market.
- Customized market studies, such as those RSR produces, rely heavily on primary source information gathered through interviews with industry insiders. Though a variety of research techniques are also employed, the primary source interviews are the key differentiator in a customized market study.
So, how much does a customized market study cost?
The cost of a customized study is rarely below $5-10K, and can sometimes reach the hundreds of thousands of dollars. Returning to the house analogy, buying an existing house “as is” may suit your needs and budget, as may purchasing an off-the-shelf study. However, if you are looking for specific features and benefits, you will want to confer with a knowledgeable builder / market study firm to discuss your specific must-haves, needs, and wants before you can price and purchase a custom home or a customized market study.
Customized RSR market studies generally have budgets in the low to mid five figures. Budgets are driven by the following variables:
- Size and complexity of the market being studied, amount of quantitative modeling needed
- Degree of segmentation required – e.g., product, market, geography, technology
- Number and size of companies to be interviewed, as well as number of interviews per company and specifics of who needs to be interviewed (a Marketing VP or C-level officer is much more difficult to reach and interview than a Customer Service Rep).
- Level of customer input required – how specific, how sensitive, how complex, etc.
- Degree of difficulty, other intangibles
To discuss your own customized RSR market study, please contact Chris Wilsey at 919-676-4900 or via email at CWilsey@RSRMarketing.com.