We predict that in the next five years, traditional research technology incumbents will represent less than 50% of the total market, creating a massive opportunity for smaller, more tech-forward players.

The market research technology (ResTech) industry is not new, but new market pressures and technology advances are having a transformative impact. In a short period of time, the way ResTech companies deliver — and clients ingest — research solutions have started to change fundamentally. That is opening new opportunities for providers capable of delivering real-time data, audiences and insights that meet the evolving needs of today’s brands.

Having supported high-profile growth stories and exits for a number of market research technology companies over the years, LLR has had a front-row seat to the industry’s rapid transformation. The more than $22 billion that is spent on research in the U.S. alone used to be dominated by a few very large, service-driven firms. We predict that in the next five years, traditional research technology incumbents will represent less than 50% of the market, creating a massive opportunity for smaller, more tech-forward players.

Market Research Technology Trends

As LLR continues to seek opportunities to support high-growth companies in the space, we see these four trends as driving some of the biggest opportunities in ResTech.

Appetite for agile insights

There is a growing demand among businesses for real-time data-driven answers to of-the-moment questions that traditional market research agencies are challenged to fill. With a business model that focuses on the production of in-depth, static reports, these incumbents are not equipped to deliver ongoing, dynamic insights that today’s more nimble organizations need.

This trend is being amplified by the impact of agile product development cycles on research needs. Companies such as Google, Apple and Facebook want insights timed to align with and inform those accelerated cycles so that they can gauge customer sentiment in real time, see how their products are resonating and tailor development efforts based on that data.

COVID-19 exposed a much broader segment of the market to the value of active, pre-qualified, online audiences as a viable and cost-effective alternative.

Suspension of focus groups

The reliance on costly, analogue, in person focus groups was in decline before March 2020, but the pandemic almost entirely shut down this research channel within a number of months. COVID-19 dramatically accelerated the reliance on digital qualitative and quantitative research and exposed a much broader segment of the market to the value of active, pre-qualified online audiences as a viable and cost-effective alternative. The success of these online channels in replacing focus groups has accelerated the adoption cycle for digital alternatives considerably.

Regulatory restrictions

The explosion of global privacy laws – including Europe’s GDPR, California’s CCPA, and dozens of others in various other states and countries – have begun to significantly hamper the collection of consumer data through traditional online sources such as website cookies and mobile tracking data. Without access to these valuable data sources, the need for consensual, first-party data sources that can be accessed on demand and at scale has become even more acute.

Broader utility for customer data

Insights are being requested and consumed in a decentralized way across organizations by more constituencies than ever before. With the ability to engage consumers on a more ad hoc basis and ingest that data in real-time, those insights are now relevant to not only brand and marketing functions but strategy, sales, internal consulting, engineering, product management and the C-Suite. This is creating new opportunities for ResTech vendors to cultivate new markets and expand the footprint into the organization.

Market Research Technology Innovation

As game changing as these macro market opportunities are, what’s happening within the ResTech industry is equally exciting. Recent IPOs by firms such as Qualtrics, Medallia, and Cint are clear indicators of a rapidly maturing industry that is reaching an inflection point. Increased funding by institutional investors and a surge of M&A activity—including recent deals between FocusVision and Confirmit and Kantar and Numerator—also signal the industry’s rapid maturation.

ResTech providers are delivering customer insights that are disrupting the static, white glove offerings generated by more traditional consulting agencies.

Here are some of the key developments we see driving the industry’s ability to deliver even greater value through its technologies, relationships and IP.

Technological advancements

New developments in technology are enabling ResTech companies to deliver insights directly to the companies who need it. By automating and digitizing the mobilization and engagement of specific audience segments, ResTech providers are delivering customer insights that are disrupting the static, white glove offerings generated by more traditional consulting agencies. And because this delivery model is built on a foundation of technology rather than service, the product is more cost-effective, dynamic and scalable. This is creating rich opportunities for disintermediation of and partnership with industry incumbents.

Access to audiences

The next generation of market research technology providers is also bringing liquidity in terms of the access to qualitative research. Brands no longer need to leverage agency relationships or expend significant resources to maintain relationships with dozens of different companies that serve up specific audience types. Instead, panel marketplaces such as Lucid and Cint have democratized audience access with platforms that target specific market segments within a vast consumer pool. As a result, ResTech firms can now not only provide consumer engagement tools but broker relationships with the niche audiences themselves.

Unique market perspective

ResTech touches multiple stakeholders, including design firms, research agencies, brands themselves and the audiences they seek to understand. This places them in an extraordinary position in terms of their ability to understand multiple perspectives, find solutions that enhance outcomes for all participants and take a leadership position in the industry’s development.

One of our former portfolio companies is a great example of this. SDI Health — since acquired by IQVIA (NYSE:IQV) — aggregated longitudinal patient data in an anonymized form to understand how different demographics leverage the healthcare system. Being close to patient data as well as pharma and healthcare companies gave them incredible insights into market direction, competitive dynamics and consumer desires.

Here’s the bottom line.

Significant changes in the way brands access customer insights, coupled with a wave of innovation in market research technology, are creating big opportunities for companies of all sizes. As an investor with extensive experience in the space, we see this as a watershed moment for the industry.

We urge every company in this space to recognize the market’s near-term potential, take action and set ambitious plans for growth. The next five years will be a defining moment in the broader research industry, with some of today’s younger companies rising quickly to become tomorrow’s ResTech leaders and visionaries.

LLR’s Software Team is actively working towards defining the future of ResTech: if you are seeking a growth partner, we welcome the opportunity to start the conversation. Email me at [email protected].