Market Research

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MARKET RESEARCH

Market research is a tool used by businesses of all kinds to assist with decisions regarding things like product development, marketing campaigns, expansion efforts, pricing, and even overall strategy. The world's largest market researcher, AC Nielsen Corp., is best known for its Nielsen ratings, which provide information regarding a television show's viewers. Advertisers quite often use this information to target a particular demographic group with a television commercial. In the e-commerce world, online advertisers use market research to determine the efficacy of their online campaigns. Technology firms might use market research when deciding what new features to include in the newest version of a product. Many firms looking to move into e-commerce for the first time rely on market research when developing an online strategy. In fact, the Internet revolution of the late 1990s spawned a new niche for market researchers. As a result, established market researchers found themselves competing with upstarts as they jostled for position in the burgeoning Internet-related market research industries.

NETRATINGS INC.

One market research upstart, NetRatings, was founded in the summer of 1996 by David Toth, a vice president for the software arm of Hitachi. Toth used $3 million in venture capital from Hitachi to get the Internet demographics information provider up and running. The firm gathered its information on how World Wide Web surfers used the Internet by compiling panels of regular Internet users willing to install NetRatings tracking software on their personal computers (PCs).

In 1998, NetRatings and ACNielsen jointly created Nielsen/NetRating, a service that measured Internet usage, including audience demographics and advertising, in the U.S. and Canada. The following year, ACNielsen and NetRating created ACNielsen eRatings.com, which monitored Internet usage in Europe, Latin America, the Middle East, Africa, and Asia. According to an August 2001 Business Wire release, the combined services track "the entire spectrum of Internet user behavior: who's online, where they're going, what ads they're viewing and clicking on and how much time they spend." In October of 2001, NetRatings announced its intent to buy competitor Jupiter Media Metrix for $71.2 million. The purchase was scheduled for completion in early 2002.

GARTNER, INC.

An established market researcher competing against rivals like Jupiter Media Metrix and NetRatings was Gartner Inc., which employed roughly 800 consultants and served a client base of nearly 10,000 businesses, institutions, and other organizations that used outside experts for advice on decisions regarding computer hardware and software, communications devices, and other technology-related topics. The firm was founded in 1979 as Gartner Group by partners Gideon Gartner and David Stein. Its original focus was providing research and analysis of the information technology (IT) industry to buyers and sellers of computers and related devices. Six years later, the firm founded Gartner Group Securities, a unit serving the investment community with IT recommendations and information. Sales reached $40 million in 1988, and earnings exceeded $2 million.

By the early 1990s, operations spanned 20 countries, and sales exceeded $120 million. To generate capital for an acquisition spree, Gartner Group listed its shares publicly for the first time in 1994. Purchases that year included information technology (IT) system evaluator Real Decisions and IT research and analysis provider New Science. In 1995, Gartner Group bought IT market researcher Dataquest, Inc., which made a large portion of its data, including statistics, charts, and analysis, available online. The firm paid $2.5 million for project management software consultant Productivity Management Group Inc. in 1996. Gartner also purchased a 40 percent stake in Web content provider EC Cubed. The following year, the company acquired a 32 percent stake in Jupiter Communications, LLC, an online market researcher that would grow to be one of Gartner's largest competitors.

Growth via acquisition continued in 1998 as the firm worked to strengthen its position as a leading IT consultant both domestically and abroad. The firm's focus on looming Y2K problems proved problematic in 1999 as analysts began pointing to Gartner's lack of attention to the emerging e-business industry. According to an August 2001 article in The Industry Standard, "The technology market researcher had spent so much effort warning the world about the looming Y2K disaster that it seemingly missed the biggest tech story of the decade. Upstart firms Forrester Research and Jupiter Communications grabbed the spotlight—and pots of money—by advising Webstruck managers about the e-business future." As a result, the firm began funneling millions of dollars into e-business market research services. To this end, Gartner acquired INTECO Corp., a research firm focused on Internet and e-commerce technology. The company also bought a 70 percent stake in cPulse, LLC, which developed an e-business application that tracked the satisfaction level of online customers.

Gartner hired 441 new employees, including 24 e-business consultants, in the first half of 2000 as part of a $10 million employee recruitment and retention program. The firm also paid $80 million for TechRepublic, Inc., a Web site for IT professionals. Four months later, the firm launched its eMetrix service, a real-time e-business monitor that cautions IT managers and other executives if a major supply chain problem appears imminent. Despite these efforts, Gartner continued to struggle with its online operations. A Web site overhaul in January 2001 drew criticism from both industry analysts and clients when several glitches remained unresolved for months. In June, Gartner released Gartner G2, a research service designed to assist non-technology executives utilize technology already in place within their company to improve operations. This new service marked the first attempt by Gartner to target non-technology professionals. Ironically, while Gartner continued to expand into new areas, it was the firm's core research and analysis that helped it weather both the dot.com fallout and economic downtown at the turn of the century better than its rivals.

FORRESTER RESEARCH INC.

Forrester Research Inc. is one of the leading market research firms covering the Internet and related technology. Its early focus on Internet technology, which began in 1995, helped bolster the firm's image as an Internet industry expert able to predict future trends in technology, business practices, and customer behavior. Unlike its rivals who base their projections on statistical data analysis, Forrester conducts surveys of major corporations. The firm's market research services—which range in cost from $5,000 to $10,000—target senior managers, marketing and technology executives, and business strategists at major corporations.

Forrester's products and services include two types of strategy research: Market Focus and Core Skills. Market Focus reports and briefs analyze the trends and industries related to a particular topic and make forecasts based on that information. Core Skills reports and briefs cover the issues involved in operating an e-business. Forrester also gathers Consumer Technographics data by querying over 400,000 households in North America and Europe regarding their use of technology for entertainment, shopping, and money management. Business Technographics data is pulled from interviews, regarding technology procurement, with executives of more than 2,500 corporations with annual sales exceeding $1 billion. The Advisory Services component of Forrester's offerings includes four programs: Web & Commerce Site Review, Web Site Review Boot Camp, Research Inquiry, and the Partners Program, which assigns a team of analysts to work with a business to develop and monitor some aspect of its corporate strategy. One final product, Forrester's eBusiness TechRankings assessment tool, evaluates emerging technologies for clients.

Forrester was founded in 1983 by George Forrester Colony, who spent five years at rival Yankee Group conducting telecommunications and office automation market research. After initially focusing on telecommunications market research, Forrester eventually moved into the PC and networking markets. As stated in the October 1996 issue of Marketing Computers, "Colony, credited with coining the term 'client/server,' practically defined the course of network technology in the late '80s and '90s, and led many through its dark alleyways as the technology developed." New technology continued to emerge, fueling the need for market research. Forrester continued working to stay abreast of major technological developments, eventually becoming a "leading prognosticator on Internet computing, having recognized early the effects that the Internet would have on business." Integral to Forrester's Internet expertise was its New Media Research Group, created in 1995 to focus on World Wide Web site analysis, new Internet-based technologies, and the demographics of Web surfers.

In 1999, Forrester launched its PowerRankings service, which listed the best e-commerce sites among different categories of online retailers. To compile its list, Forrester surveyed nearly 20,000 online customers and also conducted its own anonymous shopping tests at a variety of leading sites selling product ranging from airline tickets, apparel, books, and music to computer hardware and software. The e-tailers were evaluated for six different criteria: cost, customer service, delivery, features, transacting, and usability. Also that year, to boost its international operations, Forrester acquired London, England-based Fletcher Research, a two-year-old market analysis firm covering Internet usage in the United Kingdom.

Forrester teamed up with Information Resources Inc. in June of 2000 to create Netquity, a brand marketing research service targeting brand managers selling products on the Internet. A few months later, BuyerZone.com and Forrester began offering market analysis reports to small and medium-sized businesses. In November, the firm began working with the National Association of Purchasing Management to monitor the utilization of Internet-based procurement by various businesses. The dot.com meltdown in 2000 began to undermine the e-business market research industry by 2001. When Forrester's sales slowed, it laid off 111 employees, roughly 15 percent of its workforce.

YANKEE GROUP

Yankee Group is a leading market researcher focused on Internet-related industries, such as e-commerce, telecommunications, and wireless. The communication industry's first research and advisory services firm, Yankee Group was founded by Harvard Business School graduate Howard Anderson in 1970. Eventually, the firm's focus shifted to networking technology, particularly enterprise applications and data communications networks. In 1986, Yankee Group began using the Technologically Advanced Family Survey to query U.S. households with regard to their use and perception of new technology products and services. Four years later, the firm launched its Mobile User Survey, seeking data regarding mobile technology use across North America.

Annual growth during the early 1990s exceeded 20 percent. During that time, the firm expanded into Canada, establishing a research and consulting unit in Ontario named Canadian Market Strategies. The Global Network Strategies Survey was first utilized in 1992, to gather information from corporate network administrators regarding network usage. In August of 1996, Primark Corp. acquired Yankee Group from Anderson for roughly $65 million. The company expanded into Brazil by opening an office in Sao Paulo in 1999; the number of World Wide Web users there, approximately 3.5 million, was expected to nearly double over the next two years. This growth prompted firms like MCI Communications Corp., Sprint Corp., and Bell Canada to move into the country, and Yankee Group believed a market for its services would exist there as well. As a result, the firm also launched its Internet Strategies Latin America Planning Service, which analyzed the regional Internet Service Provider (ISP) strategies, broadband Internet access development, business-to-business (B2) e-commerce initiatives, and Web hosting services among Latin American businesses.

It was during 1999 that Yankee Group also began to retool itself as an Internet industry expert. Not only did the Internet become a key focus of Yankee Group's research—along with wireless and communications industries—but the firm also began working to offer its Internet industry analysis on a global scale, reaching Europe, the Pacific Rim, and Latin America. YankeeTek was created to invest in small dot.com startups, which would receive strategic planning services from Yankee Group, as well as access to Yankee's research.

Yankee Group launched two new programs—Online Financial Strategies (OFS) Planning Service and Online Retail Strategies (ORS) Planning Service—in 2000. The OFS service analyzed the Internet's influence on the financial services industry in terms of consumer behavior, new products, market-place requirements, and business issues. The ORS service analyzed the behavior and attitudes of online shoppers, the business models used by online retailers, online shopping services, and fulfillment. Yankee Group also assisted clients within either industry to develop appropriate business strategies. Reuters plc, one of the world's leading information firms with $35 billion in market capitalization, bought for Yankee Group from Primark for $72.5 million in June. Yankee Group remained an autonomous entity, operating out of its parent's newly created global information business arm, known as Reuters Enterprise. The firm released its "Yankee Group Stars" list of the best online retailers in early 2001. That year, Yankee created a new Global Regulatory Strategies service to cover the regulatory issues surrounding international e-business.