Demonstrating the ROI of Market Intelligence
June 19, 2014. Companies invest in market intelligence hoping that it will help them secure current business and help tap new opportunities. But how does one demonstrate that MI contributes to a company’s success when there are many variables at play? This White Paper will help MI professionals to point out tangible indicators of MI actually making a (positive) difference.
This White Paper approaches the value and impact of MI from three perspectives:
- Usage of MI in decision-making
- Calculating the financial worth of MI
- The “˜soft’ contributions of MI to company performance
MI is only impactful when used in decision-making. In the context of the M-Brain (formerly GIA) World Class MI Roadmap, this means that companies should either set the ambition level high in MI program development from the beginning or not start at all. This is because the first steps (from “˜Beginner’ to “˜Coordinator’) will involve financial costs, yet without a parallel investment in adopting MI in the company’s processes, as defined in the World Class Market Intelligence Roadmap as defined by M-Brain (formerly GIA) (see page 5) the company risks that only the costs will materialize while benefits will lag behind.
Traditionally, calculating financial ROI on MI is difficult for three reasons: 1) The revenues or benefits may be dependent on many other variables than MI; 2) MI is either used in decisions or it is not, and once a decision is made one cannot turn back time and see what would have happened the other way; 3) Many of the benefits of MI are typically deferred and qualitative in nature. Therefore, calculating an exact ROI for an MI program or a company is virtually impossible. However, a specific financial figure can sometimes be calculated relatively meaningfully for the value of specific MI projects or initiatives such as large investments or sales opportunities.
A recent finding in the Global MI Survey 2013 by M-Brain (formerly GIA) indicated that on average, companies with world class MI (11% of the surveyed 1,207 respondents) yielded 16.2% share price returns during 2012 while during the same time period, major stock market indices yielded an average of 7%. While these figures do not indicate the performance and ROI on MI for an individual company, it suggests that there is overall a positive relationship between extraordinary MI quality and extraordinary stock market performance.
The “˜soft’ contributions of MI to company performance are varied: Companies with well organized MI are able to make more grounded decisions faster than those without systematic MI. Decision-makers who have good experiences from MI will also help to further spread the culture of backing up decisions with shared insights. Executives and professionals save time from low value-adding data searches, and can rather concentrate on making educated decisions and generating new ideas based on insights.
Some frequently used indicators that can demonstrate the value of MI in companies include:
Decision-making related indicators
- Decision-makers’ perception of the availability of information when it’s needed
- MI’s involvement and contribution to different types of business decisions in the company
- Calculated financial worth of case- or project-specific MI efforts
- Cost savings through coordinated purchases of information and the elimination of redundancies
- Demonstrated time savings through systematically organized market monitoring
Indicators of qualitative nature
- The status of the company’s MI program as measured against the M-Brain (formerly GIA) World Class MI Roadmap
- The number of active users of the company’s MI software tool and/or participants in internal events that MI organizes
- The size of the internal network of people that are involved in MI activities on a regular basis
- The number of requests to the MI team
- The number of deliverables (regular and ad hoc) that the MI team produces
- The development of the internal NPS score of the MI program
- Number of new business ideas generated as a result of MI efforts
- The “coffee machine index”: How much informal buzz MI generates in the organization