How is the MR industry different from the Airline industry?

The fact is that the MR industry is very similar to the troubled airline industry. It is a difficult comparison to swallow. We have a high Fixed cost component like the airline industry - basically trained people whose salaries have to be paid, investments in systems, communication equipment etc. These Fixed cost component cannot be easily changed/reduced to reflect changes in business situation.

How about a comparison with the hotel industry? After all the hotel industry too has a high Fixed cost structure - but has been reasonably successful in consistently maintaining high margins.

I think the difference between the hotel industry and the airline industry is that the airline industry relies only on ticket fares for its revenue source i.e. it has only a single source of revenue. The hotel industry - in addition to its basic room tariff - also provides Value added service (such as food, laundry, business desk etc) and actually charge the clients for it. In other words it has multiple sources of revenue, and uses every opportunity to provide VAS and actually charge clients for it. That is the reason why the hotel industry has remained relatively profitable.

The MR industry too should start genuinely providing value added services on each project - and charge clients for that service (in addition to the usual project fee). Until the MR industry starts actually DOING this (rather than just talking about it), we are destined to go the same way as the airline industry.

Incidentally, the airline industry is now trying to emulate the hotel industry - witness the fact that on most airlines passengers now need to purchase food on the aircraft. But I wonder whether this model will work for airlines when they have tampered with the basic bread and butter revenue source i.e. the ticket fares. How can the airline make up for the lost revenue when it is selling seats at Rs 1 on certain sectors?

Why the Market Research industry is into the volume game

Currently I am reading an interesting book on Financial Management - sort of brushing up my basics in Finance.

One of the chapters that caught my attention was on Cost Structures of an organisation/industry.

What it basically states is that industries that have a high Fixed cost structure need to play the volume game to survive i.e. constantly push up volumes. Industries that have a high Variable cost structure can play the margin game i.e. chose to turn down business if the margins are not attractive enough.

Examining the cost structures of the MR industry, it is obvious that the MR industry has a high Fixed cost structure - anywhere from 60 - 75%. Which explains why despite so much talk about pushing up margins, the MR industry has always been pursuing a volume game - constantly under-cutting each other, picking up any business that comes in - so long as it covers the direct cost and contributes to the fixed cost.

For me reading the book was an eye-opener - and helped explain why despite the noble talk of raising margins, the industry still plays the volume game.