Forget Crystal balls, senario planning is what you need.

The prospect of the end of the year always brings out the crystal ball for New Year predictions. For all people in business and especially for those in marketing, crystal ball gazing may be fun and an interesting diversion, but it more often seems to relate to wishful thinking rather than be grounded in reality.

Much of what is predicted in January fails to materialize and can often be simply wrong. Changes in market conditions and trends do no suddenly start on the 1st of January. So is there any value in making New Year predictions? The answer is yes, but it depends on what is being predicted, how the prediction was made, what information was used and what assumptions were made.

Most of the market trends that started in 2009 are likely to continue into the New Year. However there are some events which will make a difference to the economy and therefore to market conditions, such as the level of demand, which may affect the lifeblood of business.

While it is expected that the British economy should be out of recession, hopefully in the first quarter of the year, there is no guarantee that it will be. Short of a miracle, it is unlikely that there will be any appreciable increase in demand in the first half of the year in most market sectors. Consumer confidence will take many months to restore to a level where demand can be seen to be growing to any appreciable extent. The coming General Election, which has to be held by the end of May, will help economic confidence by providing a degree of certainty for at least the next few years, in which both business and consumers can operate. However the extent to which the General Election affects the level of confidence and demand, will depend on the political outcome.

What is certain, is that there is little that can be done to affect the level of demand. In a recession, demand does not go away, it is only deferred until the consumer is confident enough to buy, or is forced by necessity to purchase. In the meantime, the marketer must use resources wisely to maintain a level of income, and conserve the marketing assets as far as possible. What should the marketer do in such circumstances? There are a number of things that should be done or actively considered:

* Maintain close links with existing customers, monitoring their needs and changing requirements.
* Use the knowledge of the changing needs of existing customers to target new potential customers.
* Consider the problems and fears of customers and potential customer and adapt the product or service to meet their changing needs.
* Continue advertising and promotion, even on a reduced budget, because the market needs to know that your product and service is available rather than that of the competition.

Probably the most useful action of a marketer during difficult trading times is that of Scenario Planning. Few businesses do scenario planning well, but while it takes time, it can be a very useful insurance policy against the unexpected situation. Not long before the 1974 oil crisis, the Royal Dutch Shell Group had worked through such a process, to identify every situation that they could think of, that the company might encounter as an oil producer. Having identified every possible situation that might occur, Shell then produced action plans to be implemented should any of the identified scenarios actually occur. When the Arab oil embargo took effect after the 1973 Arab Israeli war, most of the world’s oil companies were totally unprepared, except for Shell. Shell had considered such a possibility, (which was considered remote at the time) and had prepared plans accordingly. While other oil companies were struggling to find a way to respond to the embargo, Shell simply applied their pre-prepared plan. As a result, Shell had moved in a short time from a position of 10th largest, to 4th largest oil producing company in the world, a growth largely attributed to the company being fully prepared for any conceivable political or trading situation.

Possible scenarios that the marketer should consider in difficult economic times;

* Prime contracts fail to materialize, or are reduced.
* Key customers seek to price reduction or longer credit.
* Increase in payment defaults.
* Increase in aggressive activity from competitors.
* Forced reduction in the marketing budget and resources.
* Adverse Government legislation.
* Difficulties in maintaining necessary supplies.

While some of these possible scenarios may seem unlikely, in difficult economic times, none are impossible. It is the task of the CMO to produce and maximize the profitable income on which the future of the business depends. Therefore when considering what lies ahead in 2010, marketers should consider scenario planning as an important management tool.

In short, the wise marketer needs to consider all possibilities in 2010, planning for the worst, while still hoping for best.

© N.C.Watkis, Contract Marketing Service 05 Jan 10
Contract Marketing Service, (Marketing Performance Consultants)

January 11, 2010   Posted in: marketing management

One Response

  1. Mr Maximized - July 2, 2014

    Thanks for your ideas. The articles are syndicated into publications in 12 countries, so they do get some coverage, but I appreciate your helpful comments.

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