Tuesday, March 24, 2009

It's All Relative

Brilliant strategy? Check.

Sophisticated analytics? 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

1 comment:

Alexei said...

Pat,

You hit the nail. Why do we always analyze marketing campaigns(strategies) as if we run them in a vacuum. It's not like we are taught to do that (there are Markstrat simulations for g-ds sake). We forget other factors that can and do affect marketing strategy. As you said, competitive response is one of them. I would say there are few more, such as government actions (especially now), internal corporate pressures, and few others. (Somewhat like Michael Porter's 5 forces model).

Alexei Milgram.
amilgram@yahoo.com