• 800-232-LOWE (5693)
  • info@lowe.org
  • 58220 Decatur Road, Cassopolis, MI 49031

Issues to Consider When Outsourcing Market Research

“Issues to Consider When Outsourcing Market Research”

Growing your business will eventually require more information regarding your customers and competitors. Should you do this research in-house? If not, how do you get your money’s worth from the outside firm?


Most experts agree that to succeed in business you need more than the right equipment, financing, talent and experience. You must also have a stream of information that tells you why people buy your product or use your services. Hiring someone else to do your market research can save you time and uncover information you may have overlooked. Professional market research companies have the methods, strategies and staff in place to conduct the research efficiently and effectively, producing results your company can use. Yet, outsourcing market research means you give up an element of control — and a portion of your budget — to an outside party. Such research can cost anywhere from a few thousand to hundreds of thousands of dollars.

In this Quick-Read you will find:

  • Tips to help you decide whether to do market research in-house or to outsource it.
  • Where to find published market studies.
  • Things to consider when selecting an outside market research firm.

You may also want to see Quick-Read "When to Outsource Technology"


Determining whether to outsource your market research comes down to a cost/benefit analysis. Will the rewards of obtaining comprehensive information with limited staff time outweigh the costs of giving up a bit of control and paying an outside firm?

According to Philip Kotler, author of Marketing Management: The Millennium Edition (Prentice Hall, 2000: 105), "Companies normally budget marketing research at 1 percent to 2 percent of company sales." Once you have a clear picture of your own research budget, compare the cost of hiring a professional marketing research firm with the cost of paying one or more of your own employees to do the work. As you construct this estimate, consider the following:

  • To prepare a reliable and valid market study in-house will require at least the equivalent of one full-time person spending half a year.
  • You’ll need to factor in the cost of work not done. That is, take into account the work that will not be accomplished and opportunities that might be lost if your own resources and employees are diverted into doing market research.
  • A third issue is whether the employees to whom you would assign this task have the qualifications necessary to complete it. To gain a better understanding of what the research will require, see the Business Builders "How to Prepare a Market Analysis" and "How to Conduct and Prepare a Competitive Analysis." Be aware that errors made by amateur researchers as they plan and execute a study can make it a waste of time, or worse, lead to misleading results and bad decisions.

If the marketing research is being pursued within a department, be sure to find out if another department already has the results you want, or would like to get the research done in partnership.

How to select a published market research report

Market research reports or multiclient studies normally define:

  • The current size and growth rate of a market by sector and geographic region.
  • The availability of production resources and talent.
  • The market share of the primary competitors.

The report will then predict the future of those same variables. The cost for this kind of report ranges between a few hundred and tens of thousands of dollars, depending on the cost of the research and number of purchasing clients. Normally the research and reports are redone annually, and the researchers will add analysis factors on request. The reports are proprietary, and reproduction is strictly controlled. If your company has a subsidiary, partnering, or joint venture relationship with another company that could use the research results, a second copy often can be purchased for 5% to 10% of the first-copy purchase price.

Where to look

Multiclient studies from companies, such as Arthur D. Little, Freedonia and Frost & Sullivan, can be purchased online through the DIALOG database service. If you are uncomfortable using DIALOG, use an intermediary. Most large public libraries and college libraries and many S.B.A. Small Business Development Centers (SBDCs) provide access to it at cost. Call the library and ask for an appointment with a librarian who is an experienced DIALOG searcher. Find and contact your nearest SBDC using the directory at http://www.sba.gov/SBDC/. Reports from smaller research publishers can be found through the FINDEX directory (Kalorama Information, annual with supplement), also available through DIALOG, and often in paper copy at large libraries.

Whose report is best?

You may want to start by confirming the publication dates of the competing studies and purchasing the most current. Then contact and ask the competing publishers to notify you when they produce a study you can use. When you need an update, get the most current report from a competitor of the publisher whose report you purchased first. Compare them. Which appears to be most accurate? Which provides details that are most important to you?

Once you are satisfied that you have a good perspective on your market, you may want to hire a research firm to determine the reaction of customers and potential customers to specific products.

How to choose a market research firm

The World Wide Web. The phone book. Business directories. These and other publications list thousands of market research companies, but finding the one that is right for your business is a process no different from hiring any other business vendor. Talk to trusted colleagues. Check references. Talk to the firm’s past clients. Ask questions. Consider your own business needs. Once you have narrowed your choices, meet with the firm. Be as specific as possible about the information you need and how it will impact your business.

Things to consider when choosing a market research firm

  1. How does the firm work with clients? If you are a hands-on manager, will the firm provide interim reports and weekly updates? Consider the style of the firm and how well it matches your business approach.
  2. Does the firm appear to have a good understanding of your objectives? Does it know what you want and understand the significance of these aims to your business?
  3. What methods will it use in its research? Focus groups, journal research, interviews, surveys? The strategy the firm takes in gathering the data will determine how reliable and applicable it will be to your business. Soliciting feedback directly from your potential customers by using focus groups can pinpoint the likes and dislikes of potential buyers. Alternatively, studying published industry reports may be enough to predict general trends.
  4. What will it cost? Ask up front about money matters. Most market research firms charge per hour. Researching published material is generally a lot easier than conducting surveys and focus groups. Know what you are buying.

When talking to a market research firm, be prepared

What are your objectives? The kind of information you need determines the type of research to be conducted. Be specific about the information you’re looking for. Determine how you will use the data. Will the product information you gain from market research determine the launch of a new product line? Will the information help you find a niche among competitors for your service? Having the information is not enough. You must know how you’ll apply it.


When Oregon Chai, the producer of tea-latte beverages, considered launching a new product, it first hired an out-of-state market research firm to conduct focus groups. Based on the response from those groups and other factors, Oregon Chai decided to postpone the launch of the new drink. That was a "smart decision," according to co-founder and vice president of marketing Lori Woolfrey.

Woolfrey has outsourced to large market research firms and conducted some in-house research on her own. Often she’ll coordinate the research, recruit the consumer panel and then hire a facilitator to come on-site to conduct the study.

Oregon Chai has used market research both to perform taste tests and as a way to gauge the public’s response to proposed advertising. "Market research is critical to business development," Woolfrey said. With no one on staff dedicated primarily to the task, she has outsourced the service extensively.

Woolfrey recommends that business owners have a specific objective in mind before calling on a market research firm. They should also consider the firm’s past experience and industry-specific knowledge to ensure the information they receive from the firm is pertinent.

DO IT [top]

  1. Decide which areas of your business could benefit from additional information. Do you need to know more about your competitors? What do your clients want? Does your proposed new product line meet their needs? Are you seeing the growth you expected? Don’t worry about the answers yet; just list the questions.
  2. Now prioritize. Which questions, if analyzed and answered through additional data, could improve the bottom line?
  3. Then decide the best way to find these answers. Does your staff have the data? Are there multiclient reports or industry publications with the information? Can an outside research firm conduct a survey to produce the material?
  4. Is there a college in your area with an M.B.A. program? Contact marketing professors to ask if they will assign students to do the research you need for class credit, or offer to hire a professor to do the research with student assistants.
  5. Talk to three colleagues who have outsourced market research. What were the costs and benefits they associated with the practice? Gather information about the process.
  6. If you decide additional market research can help your business, contact one of the firms referred to you and set up a meeting. Describe your objectives as clearly as possible, and find out what it can do to help you. Request references, and contact the firm’s previous clients to ask for criticism of the research firm and its reports. Take thorough notes both in the meeting with the research firm and in conversations with its clients. Use these notes as you prepare a request for a proposal, and submit such requests to two or three firms.
  7. Evaluate the quality and timeliness of the proposals you receive in response to your requests. They are an indication of the quality and timeliness you can expect from each firm when it comes to its final report on the proposed study.



Look Before You Leap: Market Research Made Easy by Don Doman, Dell Dennison and Margaret Doman (Self-Counsel Press, 1993). A do-it-yourself primer except for the brief Chapter 10: “When You Need to Hire a Professional.”

International Marketing Research, second edition, by C. Samuel Craig and Susan P. Douglas (Wiley, 2000). See especially "Choosing a Research Supplier" in Chapter 2: "Designing International Market Research" and Chapter 3: "Secondary Data Sources."

State of the Art Marketing Research, second edition, by A. B. Blankenship, George Edward Breen and Alan Dutka (NTC Business Books, 1998). See especially Chapter 6: "Using Outside Assistance."

Internet Sites

Marketing Environment. CCH Business Owner’s Toolkit. Be sure to take the links to the next pages.


Marketing Charts



Market Research, Rutgers University Libraries

Article Contributors

Writer: Polly Campbell