Technological Substitution in

Market/Marketing Research
Paul Schumann

Introduction
Substitution analysis is a well accepted method of technological forecasting in use for 36 years.
In these analyses, the Fisher-Pry model was used. The Fisher-Pry model predicts characteristics
loosely analogous to those of biological system growth. It results in an S-curve (more formally,
sigmoidal curve) familiar to many because the curve is in the shape of an S. These natural
growth processes share the properties of relatively slow early change, followed by steep growth,
then a turnover as size asymptotically approaches a limit. The relationship between the fraction
of total market taken by the new technology, f, is often given as:

f = 1 /(1 + c exp(-bt))

where t is time, and c and b are empirically determined coefficients.

Data
CASRO annually conducts a survey of revenues generated in quantitative, qualitative research
and another category that contains three elements as seen below. The revenue was normalized to
2006 dollars.
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Data is collected in several subcategories:

Quantitative

 Telephone (inbound or outbound)

 Mail
 Central Location/Mall
 Personal Interviewing
 Diary
 Internet-Based In-House and Outside
 IVR (Interactive Voice Response

Qualitative

 Focus Group and In-Depth Interviewing

 On-Line Focus Groups

Other

 Store Audits/Scanner/Distribution Check

 Other Marketing Research & Consulting
 Non-Marketing Research Services

There is no guarantee that the revenue represents the total amount of revenue expended for
research, and it does not capture integrated processes or new techniques not listed in the
subcategories mentioned above.

Substitution analysis depends upon the identification of a utility factor that is a measure of the
usefulness of a technology or method. A classic example exists for integrated circuits that
became known as Moore’s law. The utility factor was the number of transistors on a chip. That
measurement has great utility in cost and performance of an IC.

For research we have no equivalent utility factor and the best we can do is revenue. Revenue can
be a useful surrogate for a utility factor, especially if the substitution has the same value. As this
is not the case with the substitution of the Internet for other methods of conducting research, the
following substitution analysis can be suspect.

However, it must be remembered that the goal of technology forecasting is not to be precisely
wrong, but to be approximately correct. I think that using revenue substitution for research falls
into the category of approximately correct.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com

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Overall
There doesn’t appear to be any substitution going on at the level of quantitative, qualitative and
other level as shown below.

Quantitative
There is a very clear substitution going on within the quantitative revenue – the Internet is
replacing all the other techniques.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com

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By analyzing the quantitative revenue using two categories – Internet and other – the substitution
is obvious.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com

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If this substitution continues at its current rate, Internet quantitative will reach 90% of the
quantitative revenue in 5 – 6 years.

The conversion of the fractional data to revenue dollars is difficult because of the high variability
of the CASRO revenue data. Whether this is due to sampling error, or true variability in the
revenue is unknown. However, it is instructional to make this transformation for the quantitative
data.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com

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Note that the correlation is much lower for the revenue than for the fractions.

A linear regression analysis was used to project the total quantitative revenue.

Qualitative
There appears to be a substation in process – Internet for in person – in the qualitative revenue.
The rate of substitution is quite low and the Internet will only achieve 10% of the qualitative
revenue by 2015. However, it is very early in the substitution and the variability in the data is
high with a correlation of only 0.59 vs. 0.97 for quantitative. In addition, the Fisher-Pry
substitution analysis has in many cases historically not been a good predictor of
future substitution when the current level is less than 5%.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com

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Other
The other revenue category indicates that other non research services are disappearing. However,
the data variability is high.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com

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Different Aggregation of the Data

If we aggregate the data slightly differently eliminating the non research revenue, a provocative
but speculative insight is reached – other forms of research may be substituting for the
combination of quantitative and qualitative revenue. In this case I’ve analyzed the data two
different ways – one using all the data and one using only the last six years of data. This method
is quite often used in substitution analysis when the substitution has not progressed very far. It’s
obvious when you look at the data why I chose the last six years – the data is much more
consistent. The difference in correlation is significant.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com

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This research was conducted in 2006.

Paul Schumann, PO Box 161475, Austin, TX 78716, 512.632.6586, paschumann2009@gmail.com