Question

Topic: Research/Metrics

Benchmarks/guidelines For Market Research Budgeting?

Posted by Anonymous on 1/22/2004 at 5:41 PM ET 125 Points
I'm wondering if there are any benchmarks or models to help determine/validate how much of the total marketing budget should be allocated to market research.

Viewing research as a risk-reduction strategy suggests that we could calculate the "optimal" research investment for a given situation based on current uncertainty and intended marketing investment.

For example, if an existing company wanted to introduce a entirely new product into a market they've never served there would be a high degreee of uncertainty. Versus, a product extension to a curretly-served market. In the first case, it's clear they would want to take some (10%? 50%?) of their marketing budget an invest in research to reduce this uncertainty and improve their changes that the strategy and marketing programs are on target. In the second case, much less would be warranted.

Any suggestions or resources? Alternative strategies? Gone down this path before and hit a brick wall? Thanks for your help!
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RESPONSES

  • Posted by ReadCopy on 1/23/2004 at 2:54 AM Member
    Ask 100 different people that question and you will get 100 different answers .... heres mine :-)

    As a "rule of thumb" I always put down 2% (believe me 2% of my budget this year will do v ery little MR!).

    Thats thats all it is a "rule of thumb" to get you started, all Allens comments above are valid:

    1. Define your objectives
    2. Get some quotes
    3. Put the highest figure as your requirement and work from there

    If you can''t get the budget you need, since you have stated your goals in step 1 above, you can tell you senior management what you can/cannot achieve in the year.
  • Posted on 1/23/2004 at 2:18 PM Accepted
    I don''t know of a model that works across the board, but here is what we tell our clients. Rather than focusing on a % of sales or marketing budget we tell them to determine what kind of research they need to do to achieve an acceptable level of risk. Then obtain bids from several respectable providers for that envisioned research project or projects. Once you know what the research will cost, you should evaluate the cost based on what you might risk if you don’t do the research. What is the potential loss if you launch a new project and it fails? What will it cost you in lost customer satisfaction?
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