European Managemenl \ournal Vol. 11, No. 1, pp. 108-113, 1993. 0263-2373193 $6.00 + 0.00. Printed in Great Britain. @J 1993 Pergamon Press Ltd.

The Market Research Industry in Italy PAMELA ADAMS, Director, MBA P~og~amme SDA Bocconi, Milan, Italy; JACQUELINE PELS, Lecturer in Marketing, SDA Bocconi, Milan, Italy

lrhe market research industry in Italy has grown dramatically over the past decade, catching up with the relative dimensions of its European counterparts. The objective of this article by Pamela Adams and Jacqueline Pels is to analyse the changes that have occurred in the Italian industry and to put them into a more international perspective.

This analysis of the Italian market research industry is based on the results of a survey that was conducted in 1990-91. The sample consists of 52 companies that completed an in-depth questionnaire. The results obtained from this survey are compared in this article to those of the ESOMAR study conducted in 1988 on the European research market and the level of client satisfaction.

rhe central part of the paper analyses why the market research industry developed much later in Italy than in most other European countries. This late development is also reflected in the structure 3f the industry in which three strategic groups may be identified: the early entries (large companies representing 50% total market) that draw on an historical client base and image; the client centered :ompanies and the focalized companies (specific sector or specific technology). Most of the :ompanies in these latter two groups entered the industry in the boom of the late 1980s. Finally, this lag in development of the industry is used to explain why the internationalization of the Italian industry is also occurring at a much slower pace than in other European countries.

Cntroduction The market research industry in Italy has grown dramatically over the past decade, catching up with the relative dimensions of its European counterparts. The objective of this article is to analyse the changes that lave occurred in the Italian industry and to place them nto a more international perspective.

The commercially available world market research ndustry in 1990 was estimated to amount to 5.4 billion XU, and Europe accounted for approximately 46% of :his total.’ Yet the world research market today is

characterized by an increasing number of technologies, techniques, systems and databases, as well as a greater integration of activities across country and cultural divisions. These developments require significant investments of resources and managerial talent on the part of companies that wish to compete in the world market. An indication of the extent to which the Italian industry is both ready and willing to make such invest- ments will be provided in this analysis by exploring the market structure, product and client portfolios, methods, and strategies of companies in Italy in com- parison with other European countries.2

This analysis of the Italian market research industry is based on the results of a survey that was conducted in 1990-91. The sample consists of 82 companies that completed an in-depth questionnaire. The results obtained from this survey are compared to those of the ESOMAR study conducted in 1988 on the European research market and the level of client satisfaction.3

The Italian Market Research Industry The Italian market research industry has experienced one of the fastest growth rates in Europe over the past decade. According to one estimate4 in 1980 only thirty- five institutes were operating in the sector, while in 1990 we can count more than 260 research agencies.5 Similarly, according to two separate studies,6 total sales in the Italian market grew from 36 billion lire in 1980 to more than 250 billion lire in 1988. Another parameter of this growth is the number of market research institutes listed for Italy in the official ESOMAR Directory: 33 companies in 1970, 44 in 1980 and 69 in 1990. As a result of this rapid growth, the Italian market research industry is one of the youngest, but largest research industries in Europe. As indicated in Table 1, in fact, the average age of market research organizations in Italy is 12 years compared with 22 years in Denmark and 21 years in Austria. Table 2 indicates that by 1988 the volume of the research market in Italy had grown to place it among the big five of the continent. The same may be said for total employment in the sector (see Table

3).

The market research industry in Italy has grown at a relatively steady pace (see Table 4). This pattern indicates that the industry is still in the growth phase

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THE MARKET RESEARCH INDUSTRY IN ITALY

Table 1 Average years of Market Research Companies in Europe

DK 22 S 17 A 21 B 16 N 21 UK 16 IRL 19 E 15 0-l 18 F 13 D 18 I 12 GR 11 P 10 -~- -

Source: ESOMAR Directory

Average ages are probably overestimated as older companies are more likely to be ESOMAR members. In fact, the Italian study (conducted by the authors) esti- mated the average age of Italian companies to be nine years.

Table 2 Volume of European Market Research Markets

UK 498 S 43 D 315 A 61 F 292 DK 27 I 182 N 21 NL 133 GR 18 E 85 CH 54 B 76 -.

Source: ESOMAR, 1988

Figures in millions ECU, calculated by applying relative price adjustment to market value estimates.

Table 3 Total Employment in European Market Research Industry

UK D F NL I E B IRL

6700 CH 760 4900 A 600 3700 DK 600 2200 P 400 2100 GR 400 1200 S 320 900 N 250 200

Source: ESOMAR, 1988

Figures refer to permanent employees only. Many countries rely on freelance operators

Table 4 Companies by Year of Establishment

Year no. of new firms Cumulated no. of firms

% Growth

<71 11 11 13.8% 71-75 14 25 17.5% 76-80 16 41 20.0% 81-85 17 58 21.3% 85-89 22 80 27.5% __~

Source: SDA Bocconi Survey 1990

of its life cycle in which sales continue to rise and new firms continue to enter and exit the market. Rivalry between companies is based less on price than on factors such as quality, clarity in analysis and reporting, and knowledge of the client’s business, and companies are busy trying to extend their product offerings either by enlarging their product portfolio or by supplying consultancy services.

The structure of the industry consists of a small, core group of relatively large companies that represent about 12% of the firms in the industry and control more than 60% of the market, and a fringe group that consists of more than 250 companies. The core group is made up mainly of the companies that entered the market in the early 1970s. Although some of these companies are Italian in origin, most are part of an international group. What differentiates this historical group from the other companies in the industry is its ability to draw on an image of quality and a set of long standing relationships with clients built up over many years of activity. The historical roots of the firms in this group also facilitate their ability to operate in many segments of the market, albeit with different product orientations: qualitative research in the case of GPF, ad-hoc studies in the cases of Market Research International and Burke, and continuous research studies in the cases of Doxa and Nielsen.

The rest of the companies in the industry may be divided into two major categories: the client-centered companies and the focalized companies. Most of the companies in these categories entered the market during the late-198Os, facilitated by the low barriers of entry into the industry (know-how was widely available, and start- up investment requirements were low). Most of these companies are small in size.

The client-centered companies base their strategy on cuddling their clients: these companies normally have a few important clients whose needs they seek to serve. In fact, this group is represented in our sample by the 20% of the companies that declared that their three largest clients accounted for more than 66% of total turnover. Cuddling means that they work with their clients throughout the entire process of defining the research objectives, selecting the research methodology, designing the research project and analysing the results. In cases in which the clients make requests for products or services which they are unable to provide, they simply subcontract the study to other market research institutes. These companies often offer consulting and management training to their clients as well in order to assure the correct application of the research results to company decisions.

The focalized companies may be specialized in one or more research methodologies or in a specific industry. In the first case we find companies for which one research typology accounts for more than 40% of the total turnover, or for which two products account for nearly 80% of sales. Examples of such companies

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include Blue SRL which is specialized in product tests and Dolci which is specialized in advertising tests. In the second case, companies adopt an industry focaliza- tion, benefiting from the knowledge they accumulate in a specific sector. Well-known examples of such companies may be found in the pharmaceutical, pub- lishing, and computer industries.

Although they may have begun by offering ad-hoc research to a selected number of firms, as their client base in a specific industry has grown, they have expanded their product portfolio by offering continuous and/or standardized research for that client base. Therefore, although they do not compete with the large research institutes such as Nielsen or GPF across the board, they do compete with them in particular sectors.

Italy’s Lag The relatively late development of the market research industry in Italy may be explained by several factors. First, the diffusion of modern management techniques was much slower in Italy than in many of its Northern European neighbors. This factor is closely linked with a second factor: Italian industry is relatively more frag- mented among many small and medium sized com- panies that have traditionally lacked the resources, capacity, information, or even need to use market research services effectively in decision making. Third, the fragmentation of the distribution system reduced the need for many types of retail studies in Italy in com- parison with other European countries. The combined market share of the five largest grocery chains in Italy in 1990, in fact, was only 20%, compared with 60%-65% in Britain, 45% in Germany, and 35% in France.7 Finally, the state’s monopoly over television and radio blocked the development of modern advertising and, therefore, the development of research techniques to support such advertising efforts.

It is no accident, in fact, that growth in the industry began to pick up in the 1980s when private television took off in Italy. This was also the time when advertis- ing investments grew (from a level of 445 billion lire in 1977 to 4,473 billion lire in 1987) and many large companies began to externalize their marketing research activities, creating a fertile environment for the birth of many small, spin-off companies in the field.’ Finally, as the use of modern management techniques began to be diffused in Italy, managers began to learn how to integrate market research into decisions and to make research more oriented to problem-solving.

A Comparative View Direct comparisons between the Italian survey and the ESOMAR annual surveys were impossible due to dif- ferences in the questions that were asked to the companies. In this section, however, we attempt, with all of the necessary reservations based on the variations in the data available, to place the Italian industry in the wider European context.

When Italian companies were asked who their major clients were in terms of sales, their responses were similar to those obtained from the ESOMAR study concerning the source of revenue for market research organizations across Europe (see Table 5). Italy is only slightly more oriented towards the manufacturing industry and slightly less oriented towards service companies and advertising agencies than the average for Europe. This difference probably reflects both the youth of the research industry in Italy and the structure of the Italian economy in general.

Yet if the client portfolio of Italian research organizations is similar to those of other Europeans, the product port- folios and data collection methods present some differences. As far as the product portfolio is concerned, the only data available for Europe consist of clients’ responses about their expenditures on specific types of research.’ If we compare these responses with those of the Italian survey in which research companies were asked to identify and rank the importance of these research typologies in their portfolio of products, some interesting contrasts appear (Table 6). Italian companies

Table 5 Client Portfolio

Italy l

Manufacturing Services Advertising Agencies

Government

Retail Wholesalers

(Other) Research Org.

Other

60% 53% 11% 15%

6% 8% 5% 6% 6% 4% 6% 4% 6% 10%

European average * *

l Suppliers’ response to questions concerning their major clients in terms of sales. Source: SDA Bocconi survey, 1990

l + Major clients in terms of revenue. Source: ESOMAR, 1988

Table 6 Market Research Product Types

O/o Italian M.R. o/o Products on firms offering which European

these clients spend products * * most *

Usage & Attitude 64 59

Product Test 71 56

Advertising 62 49

Retail Audit 29 48

Consumer Panel 31 45

Corporate Image 68 41

Concept Test 59 37

Trade Test 63 14

Media Test 56 13

Opinion/Social 57 13

Marketing Mix Test 64 9

l European clients asked to indicate the 6 types on which their companies spent most in 1987. Source: ESOMAR, 1988

** Source: SDA Bocconi Study, 1990

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give relatively less attention to retail audits and consumer panels than do companies in the rest of Europe. By contrast, relatively more attention is granted to research related to corporate image, concept, trade, media and marketing mix tests and opinion/social/ employee studies. This is particularly true if we consider the ranking of these products according to the amount of sales they generate; in this case, it is this latter category (opinion/social/employee studies) that ranks highest. Unfortunately, no specific data on the expenditures of Italian client companies by category exist. Therefore we may only infer from this informa- tion that the market demand for research in Italy is dif- ferthnt from the European average by category.

Sharp differences also appear in the usage of quantitative data collection methods across countries (Table 7). The most striking difference arises between the United States and Europe: while American com- panies rely most heavily on mail surveys, European organizations are most inclined to contact their targets in the home or at work. The Italian case stands out for the low score assigned to mail survey methods com- pared to the other European countries. Italian companies were asked further in the survey which method they predicted would predominate in the future. It is interesting to note that the most frequent response by far was telephone and that only very few companies mentioned the use of mail surveys in the years to come. This difference is obviously related to the inefficiencies of the Italian postal system and the low rate of return of mail questionnaires. These structural problems, however, may present obstacles to the inter- nationalization of the Italian industry when standardized methods across countries are required and mail surveys are the method selected. Given that mail surveys are generally less expensive than other survey methods, the inability to use them may also result in higher research costs in Italy.

New Pressure for Change As the growth of demand for market research services in 1 taly begins to mature, we may expect several changes in the industry. First, price competition between companies will increase. In turn, companies will be forced to seek greater economies of scale by expanding their client base or by offering more standardized products. Second, we may expect more segmentation

Table 7 Quantitative Data Collecting Methods

USA F D UK I

Mail 40% 19% 22% 17% 13% Telephone 37% 18% 14% 25% 27% Personal:

Central 17% 19% 7% 26% location/street 63% in home/work 6% 45% 51% 34%

Source: ESOMAR, 1988 for USA, F, D, UK figures. ltahan survey, 1990 for Italian figures only

of the market. This also means greater investments in acquiring advanced know-how on the part of companies that seek to differentiate their products, in order to meet the specialized needs of their target segments.

The search for new clients to obtain greater economies of scale and the need to acquire advanced know-how also creates pressure for greater internationalization within the industry.

Pressure for a greater internationalization of the Italian market research industry, however, will also come from the demand of foreign companies seeking to enter the Italian market or seeking to reap economies of scale across Europe. As economic interdependence has risen and the political and cultural barriers between nations have lowered, both the form and the extent of the international activities of companies have increased. These activities may range from simple unilateral movements in which one company exports its products to another country, to complex transactions of multi- national companies that must design international sourcing and production strategies as well as market- ing mix policies in a global context. These activities have created new sets of demands for market research services.

In the early phases of the internationalization process, firms may seek easy contacts with research companies in their target markets through their home supplier, or with companies that are able to use methods that are familiar and acceptable to them in the new environment. As their presence in international markets expands, companies begin to seek economies of scale as well as ways to avoid unimportant differences between markets that lead to unnecessary divergences in marketing mix. This objective presents companies with choices concern- ing the extent to which they are responsive to local market needs and the extent to which they seek to stan- dardize their marketing operations. In fact, the well- known directive to ‘think global and act local’ actually offers many different alternatives.

Recent studies indicate that efforts to coordinate market- ing mix decisions across Europe are still limited to product, brand, positioning, and advertising art decisions, while pricing, media selection, promotion, distribution and even advertising copy policies remain within the realm of local managers. The important point here is not that decisions are made in favor of standard- ization or not, but that the search for economies of scale must be based on research that attempts to locate and describe consistent consumer groups across countries and that provides a solid understanding of local market conditions and marketing effectiveness.

Finally, as the pace of the spread of new ideas around the world accelerates, the old pattern of regional test market, followed by national product launch, followed by a gradual dispersion in international markets is no longer effective. Competitors, who are also more global in reach, are quickly able to copy products and pre-empt

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launches in new markets. Market research clients will therefore need more and more to be able to conduct cost effective, standardized studies simultaneously in dif- ferent countries. Similarly, market research suppliers will be faced with the task of using new techniques and small, fast studies in a plurality of cultural contexts.

These changes will have several effects on the manage- ment of market research. First, the coordination and control of research will become more international; many projects will be defined and monitored from outside the actual market being tested. This may also mean that research organizations in the target market may no longer be working directly with research teams in companies, but with the commercial management. Therefore extensive care must be taken in defining the research objectives. Second, a delicate balance must be maintained between the needs of local markets and the need for some form of standardization of research tech- niques and procedures. This will prove difficult given differences in cultural norms, language and data col- lection standards.

According to one recent study, ‘it is still the case that about 90% of European market research is conducted by research organizations for local (i.e. national) clients. Sub-contracting to foreign research organizations when coordinating international (single or multi-country) studies accounts for around 4% for research companies’ expenditure.” Yet in a long term perspective we must begin to ask how research organizations in each country are positioned to benefit from this changing environment.

The historical core group of the Italian industry is in the best position to benefit from these pressures to inter- nationalize; most are already part of international networks from which they may access new clients, techniques and know-how.

The focalized companies, on the other hand, have strong incentives to increase their international contacts abroad. For those seeking to specialize in selected product areas, links with professionals in other countries will be vital for learning with regard to both specific technologies and client requests that may be transfered to the Italian market. For those seeking to specialize in selected industries, as these industries become more European, or global, in reach, the ability to integrate market research results across borders will increase in importance. International clients may also offer these companies needed economies of scale as the growth rate of demand in Italy slows down.

The client-centered companies will be least affected by these changes due to the relatively small size of their plients. In those cases in which these clients become more sophisticated in their research needs, however, the companies in this group will be forced into choices, as to how far to follow their clients by providing more specialized services.

One striking result of the Italian survey, however, was that the market research industry has not yet recognized these pressures for change. When asked explicitly if international competition in their industry will increase over the next few years, not a single Italian company responded in the affirmative. By contrast, the companies in the ESOMAR study that responded to the request to predict important changes which might affect their use of, or attitudes towards, market research over the next five years, 32% identified internationalization as a factor. For the client-centered companies, this lack of vision for future strategies based on internationalization probably represents a certain level of myopia linked to their size.

This lack of vision is surprising, however, in the case of the historical core of the firms in the survey, many of which are part of international groups. Although this gap may reflect more general managerial attitudes toward internationalization or strong cultural and struc- tural differences between Italy and Europe, it may also be a warning signal of weakness.

Notes 1.

2.

3.

4.

5.

6.

7.

Oostveen, J. and Wouters, J., ‘The ESOMAR annual market study: The state of the art of marketing research’, Mnrketing and Research Today, November, 1991: 214-218.

See Oostveen, Jan C.J., ‘Industry Study: The State of Marketing Research in Europe’, European Research, Vol. 14, N.3, 1986: 100-119. See also Goodyear, J., ‘The UK Market Research Industry: Past, Present and Future’, in European Research, Vol. 13, N. 3, 1985: 116-123.

The research survey of SDA Bocconi was sponsored by the Research Division of SDA and was conducted by Jacqueline Pels. Additional papers produced from this research include: 1. Pels and L. Molteni, L.e ricerche di Mercafo: un’ am& dell’ offerta in Italia, Working paper, Research Division, SDA Bocconi, 1992; C. Mauir, Concorrenza dinamica nei periodi di sviluppo de1 mercato. 11 settore delle Ricerche di Mercato in Italia nel decenio 1980-1990, Working paper, Research Division, SDA Bocconi, 1992; J. Pels and L. Molteni, L’evoluzione dell’ offertu nel settore delle Ricerche di Mercato, Working paper, Research Division, SDA Bocconi, 1992. See ESOMAR Annual Market Study, Report ESOMAR Working Party on 1988 Market Statistics and Client Study, prepared by Philip Barnard, Research International, UK, 1989.

See Gallo, P.C., ‘Richerche di Mercato: quali sono e quanto costano?’ in Marketing Espansione, No. 1, 1980.

This estimate was the result of a screening questionnaire conducted on a casual sample group of 500 companies from the Annuario SEAT. The target firms were interviewed and, according to the answers, divided into ‘market research companies’, ‘firms that offer market research and other complementary studies’, ‘others’ (for example: telemarketing), and ‘non existent’ (after 5 phone calls in different days and hours). 20% of the sample group belonged to one of the first two groups. Consequently we concluded that of the total number of companies listed in the Annuario SEAT (1133), no more than 260 of these operated as market research firms.

See Gallo op. cit. also see Erminero, C., Orgunizmzioni e Professionisti: La struttura dell’ offerta di fronte a move esigenze, paper presented at Convegno AISM, 1989.

CESCOM.

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5. MediakeylJWT ‘77-‘88. Current Values. expenditures. Details were collected on the market 9. The client responses in the ESOMAR study were drawn research expenditures of these clients as well as on how

from a universe of the top advertisers in each of sixteen they use research organizations and the types of research European markets since these figures were fairly easily they commission. obtainable and correlated highly with market research 10. Oostveen, J. and Wouters, J., op. cit. p. 216.

Pamela Adams has a Ph.D. from Yale University (USA). She is a Lecturer in the Marketing Department of the Graduate School of Business of Bocconi University (SDA Bocconi) where she teaches in the MBA program and in the Economics and Management Master in lntematior

program. She also teaches a course on lntemationalization Strategies at the undergraduate level.

PAMELA ADAMS, SDA Bocconi, via Bocconi 8, 20136 Milano, ltaly

Pamela Adams is currently the Director of the MBA program at SDA Bocconi and has written several articles on industrial policy and on the European chemical industry. Her current research interests concern Euromarketing and the coordination of marketing activities across Europe in multinational consumer goods companies.

JACQUELINE PELS, SDA Bocconi, Via Bocconi 8, 20136 Milano, ltaly

Jacqueline Pels is at present a Lecturer of Marketing at the SDA Bocconi, Bocconi University, Italy. She studied Business Management at the University of Buenos Aires, Argentina.

She is currently both lecturing and conducting research in the field of Business to Business Marketing and Service Marketing. In particular she is interested in Key Client Management problems.

Her recent publications include identification and Management of Key Clients in European Journal of Marketing, ‘Standardizzare per Crescere nei Professional Services’ and ‘Le Ricerche di Mercato: il Profilo dell’ Offerta in ltalia’, both in Economia & Management, as well as several chapters in various books.

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