The research world has seen significant leaps in recent years thanks to the introduction of innovative technologies and new methodologies that combine statistical and process advances, providing researchers with new ways to understand their markets and consumers. One of the most promising proposals is the Synthetic Panels methodology.
In this blog, we will discover how Synthetic Panels are changing the market research landscape, allowing you to understand in ways you couldn’t before.
What are Synthetic Panels?
Synthetic Panels refer to a methodology that enables researchers to simulate panel data from cross-sectional data and other sources. This approach becomes valuable when traditional panel data tracking the same individuals or entities over time is either unavailable or impractical due to attrition and small sample sizes.
In essence, the synthetic panel method uses repeated cross-sectional surveys to replicate the insights typically obtained from panel data.
Despite being a relatively new methodology, more case studies and applications for this powerful research tool are emerging. One clear example is found in the study “Constructing synthetic panels for the purpose of studying poverty dynamics: A primer,” created and written by David Garcés-Urzainqui, Peter Lanjouw, Gerton Rongen, first published on September 22, 2021.
Understanding Synthetic Panels in Market Research
Market research is important for your business’s success. It helps you understand what customers like, how they behave, and what’s happening in the market. To get this information, researchers often use surveys with real people. However, because of privacy worries and the need for other data, synthetic panels are becoming more popular in market research.
To make smart choices in market research, you need to know how people act and what’s popular. One way to do that is by studying a group of customers for a long time, but it can be expensive and have problems like people dropping out or gathering data. That’s when the synthetic panel methods can help.
Why Use Synthetic Panels in Market Research?
Using synthetic panels in market research has several advantages for you, making them a valuable tool. Here are some reasons why you might consider using synthetic panels:
- Privacy Protection: Synthetic panels help you protect the privacy of survey participants. By using synthetic data, you avoid handling sensitive personal information, which lowers the risk of data breaches and privacy violations.
- Data Availability: Sometimes, getting access to real survey panels can be hard or expensive. Synthetic panels provide an alternative data source that’s easy to get for your research needs.
- Experimentation: With synthetic panel data, you can try out different scenarios, marketing ideas, or product designs without affecting real participants. This lets you do controlled experiments and test your hypotheses.
- Cost Efficiency: Creating and managing an actual survey panel can cost a lot of money and time. Synthetic panels can be made at a lower cost, making market research more affordable for businesses like yours. This is especially useful for significant studies or ongoing projects.
- Frequent Analysis: Synthetic panels can provide insights into changes in consumer behavior or market dynamics more frequently than traditional panels.
- Wider Applicability: This method is adaptable to various research settings, including those with limited data availability.
- Vulnerability Analysis: This can be used to identify vulnerable groups or entities at risk of certain outcomes, such as falling into poverty mobility or changing consumer preferences.
- Overcoming Data Limitations: Sometimes, you might not have enough historical or real data. Synthetic panels can fill in these gaps. You can simulate missing data or historical trends to create more complete datasets for your analysis.
Creating Synthetic Panels
To create synthetic panels, you need to make Synthetic datasets that look like real panel data. These fake panels are helpful when you don’t have enough real data, can’t access it, or need to protect your privacy.
When replicating actual panel data, you should understand the variables, data patterns, trends over time, and specific details related to the study. Always respect privacy and ethics by avoiding sensitive or personal information in synthetic data.
Make sure your synthetic panels have statistical traits, temporal connections, and other qualities that resemble real data. Realistic data is crucial for getting meaningful insights and results.
Creating synthetic panels involves using advanced techniques, such as:
- Machine Learning models: You can use generative models like GANs (Generative Adversarial Networks) to make fake survey participants with realistic features.
- Statistical Simulations: Simulate survey responses based on known statistical patterns seen in real data.
- Data Augmentation: Combine and adjust existing datasets to create new synthetic panels.
- Probabilistic Models: Use probabilistic models like Bayesian networks to generate data with similar dependencies and conditional probabilities as real panel data.
- Rule-Based Generation: Define rules and logic to produce synthetic data that follows specific patterns or rules.
How Synthetic Panels Work?
In market research, you can use the synthetic panel method to understand changes from one time period to another without following the same people over different periods. Instead, you analyze data from various surveys conducted at different times. Here’s how it works:
01. Data Collection
Begin your journey by collecting cross-sectional data from surveys conducted at different times. These surveys offer you glimpses of the target population at specific moments in history.
2. Matching Samples
The heart of the synthetic panel method beats with the matching of samples across these cross-sectional surveys. Your mission is to uncover households, individuals, or entities that exhibit likeness or comparability across the survey epochs.
Engage your detective skills, employing identifiers like demographics or geographic locations to connect similar entities across the sands of time. The art of matching is paramount in constructing a coherent synthetic panel.
3. Estimating Changes
Once your matched samples stand before you, you can estimate changes in various variables of interest. These variables may encompass poverty rates, consumer preferences, market behaviors, or other pertinent metrics.
For example, you can use the synthetic panel method to gauge the likelihood of a household’s ascent from poverty in one epoch to the next, guided by shifts in income, employment status, and other relevant market research factors.
4. Validity and Robustness
As your journey unfolds, don’t forget to scrutinize the synthetic panel method’s underpinnings. Assess its assumptions and put its validity and robustness to the test.
While synthetic panels offer a pragmatic path to approximating longitudinal data, they may not attain the same accuracy as true panel data, where individuals are faithfully tracked over time. Concede the method’s limitations and acknowledge the potential biases that lurk within.
Equip yourself with robustness checks, sensitivity analyses, and comparisons with existing panel data to fortify your confidence in the insights that the synthetic panel method yields, even in the face of its inherent challenges.
Conclusion
In market research, synthetic panels are an innovative tool that enables researchers to glean valuable insights into consumer behavior and market trends. These synthetic panels are constructed through a meticulous manufacturing process that leverages data from repeated cross-sections of surveys conducted at various time intervals.
Synthetic panels are helpful in market research when regular panel data isn’t possible. It can help you make smart choices, understand poverty changes, follow how consumers act, and learn about market trends. It is not a complete replacement for regular panels, but it is a budget-friendly and useful option for researchers who want to study changes over time.
At QuestionPro, we always strive to stay at the forefront of tools, methodologies, and features that enable our users to conduct research more effectively and effortlessly.
If you want to be one of the first people to learn about our new developments and features, you can reach out to us and be a pioneer in using synthetic research methods.
