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Simple Steps To Successful Forecasting

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Retaining loyal customers, generating turnover and responding to global competition are becoming increasingly challenging.  And the current economic climate doesn’t help as financial pillars appear to shake and stumble, draining confidence amongst businesses of all kinds. 

In times like these, it is crucial to remain focused.  Forecasts are a useful foundation for setting goals and KPIs based on predicted future sales and production, and adjustments to both production and marketing can be made in reviewing forecast figures and actual results.

Forecasts are nevertheless tricky to create as it is difficult to obtain reliable data and it is often impossible to predict the future beyond the short to medium terms.  Furthermore, the data gathered can be biased, out of date or flawed.

A recent article in the Wall Street Journal discusses the collaboration of company departments – chiefly the sales, production and marketing departments – in creating forecasts, and suggests seven rules companies can follow to make the most of collaboration in their forecasting efforts.  These can be summarized as follows:

1.  Involve senior executives.  Senior executives need to be on board, not only to achieve buy-in to the forecast, but also to approve and action spend on forecasting technologies that enhance the collection and sharing of data.  The author suggests:
   One way to get the attention of key executives is to calculate what a one-percentage-point improvement in forecast accuracy may mean to the company.  As supplies come closer to demand, customers can buy more, stores return less, and more revenue goes straight to the bottom line instead of paying for excess storage and handling.  For a large company, it could add millions of dollars to the bottom line.
2. Explain the mutual benefits.  Forecasting needs to benefit all those involved in the data sharing process.  The authors argue that whilst salespeople may want to focus on selling and not forecasting, the salespeople would however become interested if they believed that a more efficient supply chain would help make the product available according to customers’ requirements, thereby increasing sales commissions.
3. Clearly define goals and agreements.  Setting clear goals and metrics are paramount to increasing efficiency, especially of supply chains, such as reducing the number of days of inventory on hand.  The authors cite Procter & Gamble as an example: the company uses a scorecard that looks at on-time deliveries and the number of times a store runs out of a product, amongst other things.  The goals should constantly be reviewed to eliminate unrealistic expectations between departments and to determine whether goals are met, thereby enabling the most effective changes to be implemented and improvements made.
4. Use the best technology.  A central database is required to enable different parties to share data, such as sales, inventory and purchasing data (historical and current).  The best technologies should be used to capture, store and share this data.
5. Focus where revenue and profits are greatest.  Since resources are limited, companies should focus forecasts on products that yield more revenue and profits.  A deviation from this could result in staff devoting more time to less important and lower value products, rendering the forecasting a wasteful exercise.
6. Link incentives to companywide goals.  Incentives and rewards should be based on achievements of the company as a whole, as opposed to those of particular departments.  This enables effective and reliable forecasting, as opposed to deliberately low forecasting that is set too low with the aim of bettering predictions and therefore making a certain team look deceptively good.
7. Aim for continuous improvement.  It is crucial to continuously check the data to eliminate any errors that could contaminate the forecast, such as prejudiced assumptions or incorrect benchmarks.

Finally, we would like to add a further tip to successful forecasting.  The seven tips above are based on an inside-out approach, i.e. the view from within the company.  It would be beneficial to test forecasts from an objective standpoint, involving market and competitive intelligence.  For example, market research could be used to create comparable datasets (such as competitor forecasts or market forecasts as a whole), and this can be achieved through desk research, statistical extrapolation, and a select number of interviews with industry experts (such as large customers, trade associations, competitors and distributors). 

B2B International USA’s Business Development & Research Manager Julia Cupman says:

For more information on forecasting and how market research can add value, including different types of forecasts, the role of forecasts and forecasting methods, please take a look at our white paper: Forecasting and Scenario Planning.

Posted in Market Intelligence, Forecasting, Julia Cupman, White Papers, Desk Research, Market Assesment, Market Research |
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Economic storm in a teacup?

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In a week of undoubted economic turmoil across the globe – and in particular for American and European markets – Alaric Fairbanks, General Manager of B2B International’s Beijing office, gives us a timely analysis of how things are shaping up in China.

Over the last few months and particularly days, many of the conversations I’ve had with friends and colleagues in the UK and Europe have, at some point, unsurprisingly centred around the seemingly never-ending series of crises affecting the major economies of the West: credit crunch, fuel prices, Northern Rock, Wall Street Crisis, I could go on.  So how do things seem in China? Is the pessimism that I sense being felt in the business community here?

Firstly, let’s have a very brief look at overall economic forecasts: this week the Asian Development Bank adjusted its forecast for economic growth in China in 2009 downwards, by 0.3%. There are a number of factors behind this, including, of course, decreased demand in export markets resulting in a reduced trade surplus, increased production costs, an increase in the value of the renminbi and rising commodity prices. Bear in mind, however, that this reduced growth forecast for next year still stands at 9.5%. A slowdown, maybe, but the economy is still developing at a rapid rate.

Taking into account this backdrop, how are things on the ground? Recently we conducted the first British Business Climate Survey for China with the British Chamber of Commerce. 17% of members were represented, ranging from large multi-nationals with years of experience in this market to newly established branches of SMEs. Whilst there were some issues, such as a lack of transparency, regulation and availability of appropriately skilled staff, the overall outlook was extremely positive, with over 80% being somewhat or very positive about both the business environment and their own companies’ performance in both the short and medium term. Possibly the strongest indication of this is that 54% of respondents stated that they will definitely invest further in China within the next three years.

It could be that those running Western businesses in China are all natural optimists: how else could you cope with the ambiguities, constant change and minor frustrations that confront us every day? I don’t think this is the case, however. You may say, come on then, can you come up with any other evidence that this apparent optimism is justified?

Well, yes I think I can: exports from the UK in the first eight months of this year stood at over £1.6 billion, which is a 50% increase on the same period last year (UK Office of National Statistics). All this in a market that has been the UK’s fastest growing export market since 2002. For us in the service industry, we can point to the fact that services exports to China are in the UK’s favour, at around £1.5 billion last year. The confidence is also borne out by the amount of British investment in China, which stands at over £7 billion, making the UK the largest single investor from the EU in China.

It is worth pointing out, however, that not all business shares the confidence, with those involved in export and sourcing already feeling the pinch. This also applies to domestic, particularly in lower value-added industries such as textiles, which are already operating on wafer thin margins, and certainly feeling the downturn in their existing markets, and there are reports of factory closures, especially in Guangdong and Zhejiang. And I am not saying that no other companies here will face problems; some undoubtedly will.

In general, however, I think – as I hope I have shown – the economy, although not without its pitfalls, is worthy of the confidence shown. And B2B International? – Well put us with the 54% of UK companies I pointed to earlier, as we are moving to bigger and better premises before the year end.

Posted in Credit Crunch, China, Recession, Market Intelligence, Thursday Night Insight, Alaric Fairbanks, Market Research China |
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Online Business Networking

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In his most recent Thursday Night Insight post, Matthew Harrison ponders how advancements in technology have impacted on – and continue to affect – the way we live our lives and conduct our business.

My colleagues may laugh, but I’ve always considered myself relatively in-touch with the latest technological developments.  I’ve never been the sort of person to buy Stuff Magazine, prance around the living room with a Nintendo Wii or stay up all night in my anorak cyber-scuffling with a student from Malaysia, but nor am I a technophobe.  In fact I like to think that I use technology as and when it enhances my life, but within the realms of social acceptability.

Indeed, deep within the bowels of the B2B International website, you may find that I ‘pioneered’ our online focus groups.  I was also the first person in our organization to own a Blackberry, much to the derision of my colleagues, many of whom are now putting their marriages at risk by becoming full-time Crackberry addicts themselves.  I must admit to a complete inability to attach a projector to a lap-top and make it work first-time, but from what I’ve observed this is true of most market researchers.

A technology we all now regard as a basic tool of the workplace and our social lives is, of course, email.  How would we market researchers cope if we still had to print and bind reports, and courier them through to our clients?  How would we or our clients feel if every update had to be by phone or face-to-face, with fieldwork updates out-of-date as soon as they were produced and questionnaires faxed back and forth until they were finalized?  There is no doubt that email has improved not only the speed and ease of communication, but also – as a general rule – the quality of communication.

As with my professional life, my social life and personal interactions used to rely heavily on email communications.  Weekends away, news on the latest engagements and pregnancies, photographs of friends on exotic holidays – every communication of any substance was performed through email, with short-term arrangements and snippets of information communicated through cell-phone.

But some time around last Spring, something strange started to happen.  I was living in China at the time, and I noticed the steady stream of social emails start to diminish.  This left me perplexed and a little worried.  Had someone decided to firewall the endless news of weddings, births and christenings on the grounds that it was too tedious for human consumption?  Had I offended somebody?  Had everyone forgotten about me?  As the weeks passed and the stream of emails became a trickle, I genuinely started to fear that the word had got out – that it was Matthew Harrison who spoiled that wedding in 2003 by insisting the DJ play The Locomotion.

But one night, as I lay awake plagued with self-doubt, it struck me.  Was it a mistake to ignore all of the invitations?  Was I wrong to dismiss this phenomenon as a silly fad indulged in by teenagers in low-slung trousers and nosey twentysomethings who should know better?

“THAT’S IT!” I yelled, leaping out of my depressed slumber and cart-wheeling across the bedroom.

“IT’S FACEBOOK!!  I knew I wasn’t a social pariah!  I knew Dave and Liz wouldn’t forget to send me the pictures from their long weekend in Budapest!  Where’s my laptop?”

That very night I joined the masses and became a Facebook User.

Fourteen months later, I have a grand total of 57 friends, ranging from my nearest and dearest through to childhood friends that I haven’t laid eyes on for two decades.  There is something about the public dissemination of ‘personal’ information that I feel uncomfortable with, and something not quite right about a 31-year old having what is effectively a homepage.  But the truth is that this is how my peer-group (even my parents) – my ‘audience’ – is now communicating, and that, therefore, is how I have to communicate.  To reject this means of communication would be social suicide.

In the market research industry and more generally across business markets, the latest consumer technologies tend to be watched with a mixture of interest and wariness, before they become adapted for business use and then accepted by the wider business community.  Just as B2B International looked at online discussion forums being used mainly by teenagers and turned them into a market research technique, so Facebook and similar social networking tools are now evolving into business applications.  I now work at B2B International in the USA and yesterday subscribed to LinkedIn, the business networking tool allowing businesspeople to make contact, recommend and communicate with each other.  Four clients within a month had asked me for my LinkedIn details, and I wasn’t going to risk my communication from clients and potential clients drying up.

How far this type of application will replace existing means of communication for businesses, or even evolve into a technique that can be used for market research purposes, is unclear.  However, doing business depends on communicating with those whose needs we can profitably fulfil, and those who shut out messages that are being transmitted through new and innovative means risk more than a few sleepless nights.

Matthew Harrison is a Director of B2B International, based in New York.  He can be contacted at matthewh@b2binternational.com, on +1 914-761-1909, or on LinkedIn.

Posted in Market Intelligence, LinkedIn, Matt Harrison, Thursday Night Insight, Online Research, Online Focus Groups |
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More money allocated to global marketing

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A recent online survey conducted by BtoB found that more than half of business-to-business marketers are increasing their overseas marketing budgets.  This is in the face of global economic tightening, which is being felt in the United States as much as – if not more than – anywhere. 

Although the survey only questioned a relatively modest 274 marketers, it should come as no surprise that organizations are increasingly turning to non-US markets for business opportunities.  Indeed, over the past 12 months, US companies have commissioned B2B International to conduct competitive intelligence studies and to research market assessment opportunities in more than 60 different countries worldwide.

Of those respondents to the BtoB survey who indicated that they expect to be increasing their non-U.S. marketing spend:

• 60.0% plan increases of between 1% and 10% this year over last
• Around a quarter plan increases of between 11% and 20%
• 8.8% plan to up spend between 21% and 30%
• 6.4% plan increases of more than 30%.

Of those companies who are not expecting to see any increase in their international marketing budgets, the vast majority (87.8%) plan relatively minor negative adjustments of between just 1% and 10%.  12.2% are decreasing non-U.S. budgets by more than 10%.

Of all the b-to-b marketers responding to the survey:

• 25.9% said non-U.S. business makes up between 1% and 10% of total company revenue
• 9.1% said non-U.S. business makes up between 11% and 20% of total revenue
• A further 11.7% stated that non-U.S. business makes up 21% to 30% of their total revenue
• Approximately one-quarter confirmed that more than 30% of total revenue comes from outside the U.S.
• By contrast, approximately a quarter of respondents indicated that none of their revenue comes from outside the USA.

In spite of looking to increase international marketing budgets, many companies highlight the difficulties associated with this, including the challenges of entering new markets, handling different languages, and coordinating global efforts.  To read about BtoB’s survey in full, please click here.

Posted in Marketing, Global Research, Recession, Market Intelligence, Market Assesment, International Market Research |
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Supplier Selection Out In The Sticks

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A recent house move has given Chrissie Hague, IT Support Manager, the ammunition to put pen to paper to write her first Thursday Night Insight post to highlight the complexity of service provider evaluation and selection.

I moved from the heart of bohemia to the extremes of suburbia.  From Didsbury, in inner city Manchester, to Mellor, on the edge of the Peak District. 

In Didsbury I had all my shopping needs on my doorstep.  24-hour Tesco, M&S Food and the Co-op, all within strolling distance.  Day-to-day needs were satisfied by all and I switched between the three without any thought.  Running out of the staples - milk, bread and queen green olives stuffed with guacamole and feta was never a problem.

Then a culture shock – I moved to Mellor.  In Mellor, I struggled for the basics.   You can’t even get a paper on a Saturday morning, never mind trying to satisfy my olive fetish!  The quality of what was on offer fared no better.  The only milk I could find was sour.  And before unwrapping my 3-year-old’s weekly toy treat, I had to shovel the dust off the wrapper like snow from the car! (The shops here don’t cater for a demographic under 60, never mind 3 year old children!).  The weekly shop did not lift the gloom.  The only option was the Co-op - teaming with blue rinse, poorly stocked shelves and checkout queues the length of airport security.

It was getting me down to say the least but I adapted.  I got a milk man and invested in a bread machine.  But there was still no alternative to the dreaded Co-op.  If I could just find a replacement for the weekly shop I could enjoy my new idyllic rural life.  Then it happened.  My daughter Lily shouted “there’s the egg van!”  The egg van turned out to be Sainsbury’s internet home delivery service which was soon followed up the lane by Tesco and Ocado equivalents.  I (or rather Lily) had discovered online grocery shopping.

Ocado was the first store I signed up to and it was brilliant.  The website was fast, responsive and intuitive. There were no annoying pop-up windows, it was well thought out and the navigation clear and uncluttered.  There were lots of nice touches, like receiving discounts for delivery by selecting a slot when the van was in the local area.  A courtesy call ten minutes before arrival to say they are on their way.  Arrival on time – I’m used to waiting all day for a gas man/fridge delivery, etc. that never comes!  A helpful, friendly, polite driver who was informed enough to recognise it was my first time (I instantly felt valued).  And, to top it all, the goods were sorted into colour-coded bags indicating freezer, fridge or cupboard.  This was shopping heaven – I swore undying loyalty to Ocado.

A week passed by and it was time for another order.  But to my frustration Ocado didn’t deliver on a Sunday and our fridge was bare.  I almost felt a slight twinge of guilt for considering another provider but “needs must” and Ocado didn’t satisfy them.    It was time to try another store.  First I tried Tesco.  Again the interface was fine and I was drawn to the gimmicky ‘quick shop’ feature.  Great I thought…Ocado but quicker.  I went to crisps first but this generated a huge text list with no images.  I scrolled through the pages desperately trying to find Seabrook’s but gave up on page 5 with a headache (I had never realised pictures were so important in shopping)!  At this point I gave up and made a conscious decision never to use Tesco online again (now I was getting fussy). 

It was time to try another.  I signed up to Sainsbury’s.  An instant perk was the loyalty scheme (being able to collect loyalty points was a bonus not offered at Ocado).  The site followed a similar format to Ocado’s.  It was easy to navigate and included bright and enticing images of the products.   The product range was excellent (better than Ocado) and even offered fresh bread (not available at Ocado).  The delivery arrived on time and it made Lily’s day when she saw the “apple van” on the drive!  I was a happy customer.

The moral of this story is that this experience has made me recognise the complexities of the service provider selection process.   Even a simple shopping task triggered several evaluation criteria, which on reflection were unique to me (and many of which I was previously unaware of).  On the face of it all providers seemed the same, but in reality it was those subtle differences (e.g. delivery days, loyalty points, fresh bread, etc.) that proved decisive. 

The difficulty for any business is to recognise and understand these differences, though understand them they must in order to survive. The difficulty for us as a market research company is to provide this understanding to serve our clients.  It’s at times like this that I am thankful to be part of the IT team at B2B and not one of the researchers who have to deal with these complexities on a daily basis.

Posted in Chrissie Hague, Market Intelligence, Thursday Night Insight, Customer Satisfaction |
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