Forecast models can be used to better understand your market and outperform the competition.
Developing a hypothesis about how customers and competitors will behave in markets is essential for business leaders that are looking to build a profitable company. However this is no easy task, because markets are complex and multidimensional.
In this presentation, we explain how you can combine all your available insights into a market forecast model. This creates a single picture of market behaviour that will help you invest in the right markets and target the right segments at the right time.
As a result your company can benefit from increased sales volumes, reduced costs, time efficiencies and better company-wide strategic alignment.
Who had one of these
Blockbuster was a household name – surely too big to fail?
Filed for bankruptcy in September 2010
Innovation Martlesham
What we do …
Clients’ models are sensitive, so I have used Blockbuster as a case study
Large successful company – surely this company could never fail!
Blockbuster’s biggest strength (Customers) was also its biggest weakness
The market was changing, but Blockbuster refused to acknowledge the changing competitive landscape – had they had a market model, the scale of their folly would have become apparent
Surely it was just bad luck – you can’t really accurately forecast the future can you?
16 products over the last 100 years that show a logistic adoption curve – this can be used to understand adoption
But not all the lines are perfectly smooth – Auto … Art and Science to forecasting
So Blockbuster should have been able to see the rise of DVD Mail Order and Streaming
But, it is very difficult to break out from our constrained views of what the world looks like today – this is where scenario planning becomes a very useful tool
You create a hypothesis and write a narrative about what you think the most probable market will look like at the end of the forecast period
Once we have a hypothesis we can test it out by modelling the data to show consumer and competitor behaviour over time
This is built at a country level over different time periods (length of forecast and granularity of time periods)
Need to decide on the units that we will measure and also a means of constraining the forecast so that it doesn’t grow too quickly
Market share can be calculated. This is important to setting sales targets so that we aim to grow faster than the market, and increase share, rather than last year +x%
Sitting beneath this top level forecast are further forecasts about market dynamics such as … each layer drills down on the previous one – this ensures the outputs are realistic
For example Blockbuster total market share is linked to its share of the media mix, which in turn is constrained by the size of the price points relative to the total market size
Countries aggregate to regions and region to global
Checks are carried out – forecasting accuracy is important
Excel based models – pivot tables
Report written in PP summarising main findings
The level of granularity of the model means that very sophisticated findings can be revealed by looking at the data from a number of different angles
Geography
Market share
Market size
Price
Tech trends … Blockbuster failed here because they relied on what worked historically and failed to evolve to a changing competitive landscape
The reason we built market forecast models is to help companies develop market winning strategies
Profit is created by increasing sales volumes by having the write product at the right price targeting the right segments at the right time, whilst reducing costs by creating decision making efficiencies (deciding what we’re going to do rather than what is happening in the market
The model can be used right across the company … this leads to better company-wide strategic alignment which means that the company is working towards one joined up goal rather than pulling in slightly different directions
