New Delhi: Ipsos has been providing market research to global clients since 1975. Headquartered in France, the company acquired Synovate from Aegis Group Plc. for €525 million in October, making it the No.3 in the global market research in the world after Nielsen Holdings NV and Kantar Group Plc. Ipsos, listed on the Paris Stock Exchange since 1999, had a revenue of €1.14 billion in 2010.
Ipsos (Latin for “it is what it is”), which entered India in 2007, has limited operations in the country, according to David Richardson, managing director (Asia-Pacific).
It has provided research to brands including Procter and Gamble, Hindustan Unilever Ltd, Samsung Electronics Co. Ltd and LG Electronics Inc. The company specializes in bespoke research specifically designed for individual clients. This is unlike syndicated research, where audience data is collected and later sold to buyers or media.
The company plans to scale up operations in India and invest aggressively in strengthening digital research. The next phase of “explosive growth” will come from developing markets such as India, Richardson said. He spoke in an interview about the challenges facing the research industry, shrinking margins and continuing investments. Edited excerpts:
Growth projection: Richardson says he will be disappointed if the company didn’t grow by 50% in India by the next year.Satish Kaushik/Mint
How does the acquisition of Synovate help Ipsos, especially in developing markets such as India?
Synovate is a very big acquisition in the history of Ipsos. Ipsos has been buying companies and making acquisitions for the last 25-30 years. It has made over 100 acquisitions and Synovate’s acquisition is as big as all previous acquisitions combined in one acquisition. It’s roughly 50% the size of Ipsos globally so it’s been a very big decision, which required some amount of funding.
Fortunately, Ipsos was in a strong position after the last economic crisis. We were able to perform better than our peers. At the same time, Synovate was looking for someone who could buy it out because Aegis at some point decided that it didn’t make sense for it to have a research company.
Post the acquisition of Synovate, we have become the world’s second largest custom research company and we have a footprint across the world. Ipsos is strong in other places but Synovate is particularly strong in Asia and that’s complementary to our footprint. The acquisition doubles our size in Asia (and in India); in South-east Asia it triples our size.
Going forward, which areas will Ipsos invest in?
A bulk of our challenge lies in investing in technology. A lot of technology companies are offering data collection in an efficient way that we need to embrace. I’m not proud of Ipsos’ effort in digital research and I’m not that respectful of what Synovate has done in digital, so neither Synovate nor Ipsos have done a particularly great job in digital research. We have an obligation to innovate and to embrace technology that we have today. The exploding growth is in digital areas because so many decisions are shifting to digital distribution with people buying things online.
How consumers make decisions to buy products is an important area of research today. So, there’s a shift towards recognising sharper consumer behaviour and a sharper process from mass marketing towards targeted communication. Our business is shifting from peer, people-only business to one where technology needs to be leveraged.
Also, we need to deliver results faster. Earlier, it was normal for us to present the research result to clients three-five months after it was commissioned. Now, we cannot afford to take months, clients want results in weeks. It’s important for us to embrace technology to make faster decisions. Think of a product like the mobile phone, its average life cycle is just nine months. So the research programme to support this product has to be very fast.
Given the emphasis on investing in technology, can we expect Ipsos to make more acquisitions.
Yes. Our bankers understand the requirements of having further investments and our business plans allow us to make more such investments even though we’ve just acquired Synovate. The business plan as I’ve understood will be through acquisitions and also organically. So, to continue investing in technology, we’ll look at both organic investments as well as acquisitions.
We are a publicly listed company, our founders have a significant share of the voting rights of the company at 45%. This means we have a control over our destiny both in short terms and mid term. We aren’t so quarterly focused. Being publicly listed allows us to make investment decisions that are good for our businesses.
Given that you are a pure research company, do you think respondents are always honest with their answers?
Sometimes, we have to include an element of bias in the responses. Some countries are overly positive in their answers. But there could be other countries which are far more critical. That doesn’t mean that people are less happy; it’s just that on a 10-point scale these people give a 9 and others give just a 7. So we have to calibrate the differences, which are culture- and age-specific. Even for forecasting of products sales, we do have to calibrate. Sometimes, when people tell us that they like a product and that 75% of their future demand will be for that product, we don’t actually believe that. After all, there’s a possibility that they might not even find the product at stores later on. So, we obviously factor that down as an “overstatement”. But people don’t always disguise their opinions. If that had been true then election forecasts would always be wrong. The reality is that all around the world election forecasts are surprisingly good. So research does work even for something as sensitive or controversial as an individual’s choice for government candidate.
Public affairs research is an area of strength for you in some markets. Wouldn’t it succeed in India too?
It is an area of strength for us in some countries. In India, it would work but we haven’t yet ventured into that area because I don’t think we have resources or the scale yet to focus on that.
We are very strong on this side in the UK, Canada. In Australia, we are the market leaders. Research on public affairs is very different from, say, shampoos or cars. It is also very different and depends on the many ways in which society is run in different countries. In some places, it’s a very good business but in others could be a jailable offence. So, we can’t really offer it across the globe.
Just like in advertising, have the profit margins in research come down too?
In India, the margins have come down. Earlier, the research industry in India saw obscene profit levels. But because there wasn’t investment in good data collection, the clients were not happy. The industry has paid a price because the data quality hasn’t been as strong as it should’ve been, and margins have come down in the last few years.
Also, many researchers found jobs overseas and so we lost a lot of people. Now we have to change the game, bring those people back and invest more in data collection. We won’t have the sort of profit margins that we had in the past but frankly, we only need reasonable profit levels. Even some of our clients have voluntarily increased the prices they’re paying us because they know they’ll have to pay for good research.
Has the global slowdown affected the business?
Business overall has been affected. The research industry will be affected too. But we are continuing to invest. On the whole, we’ve increased our researcher pool by 40% so that indicates we’ll increase our turnover next year too. I’ll be disappointed if we didn’t grow by 50% in India by the next year. Ipsos is budgeting next year for growth. We need to build a strong base, we’re not budgeting for profit. We are investing for growth.