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In virtual boardrooms across the globe, CMOs are attempting to drive sales in a COVID-19-hit world. If only there had been a crystal ball to help predict these unpredictable times. But as humans are hardwired to be unrealistically optimistic and prone to ignoring evidence that doesn’t fit with our world view – our inherent optimism bias – would a glimpse into the future have really made any difference?
Crystal balls may be known for mythical answers, but the ability to plan for and be ready to flex to meet the unthinkable head-on is very real. We can now access data in real-time and use agile-learning tools to adapt and change plans as they happen. Rather than trying to predict the future, smart business leaders use this real-time and historic data to make plausible forecasts about possible futures.
And the smart leader that can rewire their marketing plans from inherent optimism and gut feel to a data-driven accurate vision or visions of the future can expect to see big results.
Indeed, our latest ROI Genome report (Insights to Accelerate Growth: Scenario Plan for Future Success) reveals that companies who ditch unconscious biases and adopt data-driven scenario planning grow at least 5x greater than competitors who do not.
And with every business disrupted by COVID-19 to some extent and that disruption continues to accelerate, scenario planning is more than ever a tactical and strategic necessity. Relying on past tactics or gut instinct is a recipe for failure in situations like these. Understanding what is, and is not, under your control and being ready to pull the right combination of levers to adapt to ever-adapting situations is the difference between struggling to survive and planning to thrive.
With marketing often driving 15-30% of sales and significantly more for some businesses, CMOs need to adopt a data-driven scenario planning framework to inform campaign spend, mix, and allocation. Decisions should be based on accurately identifying relationships between performance and business drivers (including marketing and non-marketing, internal and external, what is in their control and what is not) and using that to map out not a single forecast, but a range of possible futures.
But it’s not just enough to create endless stories about the future, there has to be an action plan: the ‘if this, then this’ guide built on identifying how different scenarios could create risk or opportunity for the business.
To begin scenario planning, CMOs must incorporate multiple KPIs for a full short- and long-term view of the business. They must understand performance drivers, including factors both within and outside of their control and involve cross-functional teams in planning and decision making. Then they must keep monitoring the data and make continuous adjustments through their robust and credible data-driven framework.
Levers to consider that are under CMOs’ control include the amount of investment, creative quality, the ‘halo’ of other products in the portfolio, mix of media, and optimisation within the platform.
Analysing data over 20 years across more than 700 brands operating in 45 countries, we found that action plans built on scenario planning led to real and significant results.
For example, an average brand will lose almost 15% of its business if a similar-sized competitor doubles its advertising and promotional investments. The amount of competitive pressure impacts the effectiveness of the brand’s own marketing efforts – that same scenario of a similar-sized competitor doubling their efforts would dampen the impact of the brand’s own marketing through message clutter, influencing consumer demand as well as cost-efficiency.
So it is certainly important to consider competitive actions when making investment and planning decisions – not to follow in a competitor’s path, as brands shouldn’t simply replicate what their competitors do, but to understand how the amount of pressure they implement in the marketplace is an important factor in achieving sales goals. In one example, a brand needed to increase marketing investment 40-60% when 2 competitors invested 15% more in the same market.
Scenario planning can drive success in both good and bad years, and the need to prepare for potential outcomes has never been more important than in today’s dynamically changing environment.
It is a powerful forward-facing approach to optimising against an uncertain future. Whether facing market disruptions, competitive pressures, consumer behaviour shifts or other forces of change, scenario planning can keep businesses prepared to adapt, evolve, and thrive.
It’s time to ditch the crystal ball.