The Market for Alternative Research


New York – We have been on record for a number of years indicating that alternative research is sold, not bought. This is nowhere more apparent than in the broker vote allocations, but also applies to sales of subscription services.  This is a powerful statement, both because it is absolutely true, but also because it is an acceptable sound bite, which speaks to the attention span of the average money manager when confronting research products. The task of understanding how research is sold is vitally dependent upon what creates demand for research.

 In this article we will try to get a grip on the elements of the demand for research function.  Rather than trying to estimate the demand function, though, the goal can be much less ambitious and as simple as assessing the parameters involved in the research choice.

 The main factors in the demand function for research are:

  • Income or profitability of money managers
  • Price of the research
  • Price of competing research
  • Sales and marketing effort
  • Advertising
  • Quality of product
  • Delivery

 Income and Profitability of Money Managers

The first bullet point sets the stage for business cycle and potential demand for research as a whole. In an environment when markets and economies are not doing well, research demand tends to father as well.


Product pricing and the pricing of competitive products are another factor in the demand equation. Here, each research provider has as pricing model to decide upon. Many firms in the research space are less informed about the pricing of their competitors than they would like to be.  When deciding on the pricing of a research product, it tends to be the old goldilocks scenario – too high will drive away business – two low will risk compromising the perceived quality of the product – so just right is a level that is in the range of other similar quality research products. Just what is a product of similar quality, is less clear.

 But in the world of microeconomics, there are different type of goods, including both substitutes and compliments. Most of the discussion tends to revolve around the substitutes, because they are directly in the way of a research sale. However, complimentary goods, that tend to be consumed alongside other goods, mean that the demand for a complimentary research may depend on the demand for other research services. Primary research is widely viewed as a complimentary service in the overall research process. This is one of the reasons that the primary research segment is doing relatively better than many of the other research styles in the current environment. Quantitative services that may act as initial screening devices may also be seen as complimentary to the overall research process.

 Sales, Marketing and Advertisement

This is of course the area where many alternative research providers are underserved.  Under spending on these services is one of those “paradox of thrift” issues that lead to reduced potential for revenue growth in the future. Several options exist for the research providers in this area. First, the ARP can staff up its sales, marketing and advertising staffs. Second, the ARP can utilize research platforms, external research sales organizations and/or public relations firms to get the word out. Third, the firm can sign up with a broker as an independent provider that is paid through the broker (e.g. the Soleil model).

 Product Quality

Quality of research is in the eye of the beholder. Some research is used for trading the market and taking positions, other research is seen as fodder for sales traders to promote trade flow and other research services are used to reassess current positions in the market.  For these reasons, it is often difficult to assess the overall quality of a research providers work, beyond the revealed preferences of its client base.


Research delivery is another element of the demand for research that is experiencing a paradigm shift.  Report-based research is becoming less prevalent. Any push type of process tends to based on a “just the facts Ma’am” style that alerts money managers to the essential news or data that is affecting share prices. As well, research is being aggregated and distributed through research portals and platforms.  Here, we suspect the platform that best particularizes the information into actionable data will be a winner in the delivery space.

 Bottom Line

Given the plethora of demand elements, changing paradigms and delivery preferences, it is clear that the alternative research space will continue to need to adapt product and delivery to match the evolving needs of the client.


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