In-house vs. Third Party
Market research can take a number of shapes and forms, from general market studies to employee or customer satisfaction surveys to feasibility studies and business plans, etc. Once the initial decision to conduct market research has been made, another key decision relates to whether the research should be conducted in-house or whether a third-party provider should step in.
Entrepreneurs are often considered experts in their fields while mid to large firms typically have access to an internal insights team capable of generating a great deal of in-depth knowledge regarding the company’s values and goals, market performance, etc.
However, if major organizations such as P&G or LVMH all have access to their own in-house insights team, why do they still hire external consultants or market research companies?
The answer to this primarily lies in the fact that external agencies are better able to formulate comprehensive research designs that effectively meet the objectives of the study. They can draw on similar experiences, offer impartial insights as well as out-of-the-box solutions. To illustrate this, let us consider three scenarios.
Scenario 1: Your firm is interested in understanding its employees’ satisfaction levels through internally administered surveys or interviews. Although all assurances have been made pertaining to the confidentiality and anonymity of the respondents, the fact is, someone still has to analyze the raw data. As such, the results are less likely to be objective and honest, leading to inaccurate or skewed results.
Opting for a third-party when seeking to measure things such as employee or customer satisfaction increases the chances of receiving honest and objective feedback. The assurance of anonymity and confidentiality is key to receiving candid and thus actionable feedback.
Scenario 2: Your firm has already taken the initiative to conduct its own research, and now possesses considerable information and knowledge pertaining to its business. However, it is unable to benchmark itself against its competitors as similar data is not publically available.
A third-party provider is typically able to circumnavigate this issue by providing industry benchmarks for each data point (either building on experience in similar circumstances or through leveraging contacts in key positions). This will help provide a clearer indication of where the firm stands in terms of industry rankings.
Scenario 3: Your firm is interested in proceeding with a new venture and has decided to conduct a feasibility study and business plan. Although the findings are positive, it is unable to secure external funding.
Most lending institutions, whether venture capitalists or banks, typically prefer receiving feasibility studies or business plans that are prepared by third-parties. This increases their assurance that the findings are reliable and credible and that any assumptions made are not too optimistic.
Ultimately, decisions regarding whether research should be conducted internally or through external parties will also depend on budgets, timelines, capabilities and expertise of the respective parties. Nevertheless, it is important to always consider the value in having an objective and impartial view, and thus weigh the benefits and costs accordingly.