Some industries seem structurally designed never to make much money. Airlines is a classic example - whilst the odd airline makes a profit for a few years here and there, the industry as a whole loses money year after year after year.
I’m beginning to think access panels and online sample has some strong similarities.
Like air tickets, online sample is a high priced item - a very obvious component of the overall project costs - and so buyers work hard to find the best offer.
Like air tickets, online sample is pretty hard to differentiate. You have first class and economy in travel but most people just want to get from A to B and the airline brand is not so significant. Similarly in online sample, it’s proven very hard to develop a position based on quality - no matter how much suppliers offer wonderfully recruited, digitally finger printed respondents, most research agencies find that price is the most rational thing to buy on. This lack of differentiation puts massive price pressure on Toluna, ResearchNow, GMI Ciao et al.
Like airlines, capacity seems to be too high in online access panels…there always seems to be at least one of the major providers in a struggle to get revenue and the easiest way is to cut prices. This then infects the whole industry and we’ve in turn had sub £2 interviews offered by Ciao, Toluna, SSI and now ResearchNow.
CATI costs have come down a fair bit as well but nowhere near as much. We used to expect to pay £6+ for a 10 min online interview about 3 years ago and about £15 for the equivalent CATI interview. Now you can easily buy a 20 minute online interview for under £3, whilst the CATI equivalent would be not so different to before.
The funny thing is I don’t think end clients actually appreciate how cheap online data collection has become - I certainly don’t think (big) agencies are routinely passing on the cost savings…I think they are just shoring up their profit margins.
Also if end clients actually found out just how cheap online interviews have become, I’m not sure they would be pleased…I think they’d be appalled. Because whilst it’s obviously nice to get something cheaper, at a certain point you have to wonder about the quality. How much quality recruitment, how much data cleaning and panel management can you afford if you are selling interviews for £1.50?
If end clients found out the current costs I think they’d think they’d realise they were getting economy seats but paying first class prices.
So what does the future hold for the online sample providers? Well, I think they have to sell 30-40% more interviews every year just to hold revenue. If they want to grow they have to be pretty aggressive beyond this. Which of course makes things more competitive. Which of course puts pressure on price (plus it does not help [them] that they all have the same financial year and so regular buyers know they can just hold out until the end of the quarter and pick up a very competitive deal…).
There’s a good chance that they can grow that fast of course, but it looks like the economic value created is mostly accruing to the customers of online panels rather than the online panels themselves. And it’s disheartening to see how panels burn out…we’ve seen GMI and then Ciao both shoot up and then seemingly hit the wall. But an injured panel can still have a horrible effect on the pricing strategy of a healthy panel and so the infection stays in the system.
Is there a way out? I think at least one of the panels needs to start competing on quality (and actually turning down sub £3 work) and combine this with an Intel inside style marketing campaign to end clients. Quite a gutsy move to do this though and you’d probably lose all your big tracker contracts…so for now I see more price cuts and whilst I worry about quality control in the short term, at £2 an interview I can afford to buy in an extra 20% of interviews and then just throw away the worst ones.
This will work for a bit. After a while though one suspects that we will end up with a fair haggard bunch of respondents as panel after panel burns out on quality and switches to price competition..