Commentary
It's All Relative
- by Pat LaPointe , Op-Ed Contributor, March 24, 2009
Sophisticated analytics package? Check.
Compelling business case? Check.
Closing that one big hole that could torpedo your career? Uhhhhhhh....... Most new marketing initiatives fail to achieve anything close to their business-case potential. Why? Unilateral analysis, or looking at the world only through your own company's eyes, as if there was no competition.
It sounds stupid, I know, yet most of us perform our analysis of the expected payback on marketing investments without even imagining how competitors might respond and what that response would likely do to our forecast results. Obviously, if we do something that gets traction in the market, they will respond to prevent a loss of share in volume or margin. But how do you factor that into a business case?
Scenario planning helps. Always "flex" your business case under at least three possible scenarios: A) competitors don't react; B) competitors react, but not immediately; C) competitors react immediately. Then work with a group of informed people from your sales, marketing, and finance groups to assess the probability of each of the three possibilities, and weight your business case outcomes accordingly.
If you want to be even more thorough, try adding other dimensions of "magnitude" of competitive response (low/proportionate/high) and "effectiveness" of the response (low/parity/high) relative to your own efforts. You then evaluate eight to 12 possible scenarios and see more clearly the exact circumstances under which your proposed program or initiative has the best and worst probable paybacks. Then if you decide to proceed, you can set in place listening posts to get early warnings of your competitor's reactions and hopefully stay one step ahead.
In the meantime, your CFO will be highly impressed with your comprehensive business case acumen. Check.
I totally agree. When the consumer is in the supermarket looking at which washing powder to buy they cross-check (even if ever so briefly) all the brands on the shelf. Why a brand custodian would have a system that only utilises their own data astounds me.
I am a strong proponent of multivariate time-series modelling of brand success - particularly the 'hard measure' of sales as opposed to the 'soft measure' of awareness. Even better is non-linear multivariate time-series modelling - because you will find that sales do respond evenly across the curve (for example each cent of a price discount does not produce exactly the same return).
One simple way to produce a parsimonious model is to input your data as a "relative measure". For example, instead of using your unit price, use its relativity to the category average (or leading brand or strongest competitor) and you generally cover all bases. A relative price of 95 would say that you are 5% cheaper than the market.
The key thing though is ...do the hard yards ... reap the benefits!