Planning in Chaos

One day three statisticians went hunting in Maine. Out overlooking an open meadow, they spotted a deer, and the first one took a careful shot but missed by a yard to the left. Miraculously the deer never moved, allowing the second to take his shot, this time missing by a yard to the right. The third took his turn to aim and – BINGO! “We got it!” exclaimed the third with high fives all around.

The marketing planning process can seem precisely like this, and people remember the misses more than anything. Sales and customer growth forecasting is complicated under the best of circumstances, and when planning for 2021, we’re all in for some difficult challenges. One basic principle of forecasting is to plan for normalcy, but this year was anything but typical, and there is still a great deal of uncertainty ahead.

Several years ago, when we had more human interaction with our peers, I remember my colleague Matt Morton referencing the planning process as being “a bit of alchemy,” which stuck with me. I thought that was a great way to put it. Naturally, we’ll have previous results from which to work, but the real skill involves the ability to make sound assumptions for planning purposes.

My approach always begins with a customer focus, looking at expected transactional behavior and customer counts.

• How many customers do we have this year compared to last?
• How closely does my customer file this year resemble that from the past?
• Did the characteristics and demographics of new customers acquired change during COVID?
• How will these new customers respond to print and digital channels?
• What assumptions from last year should I carry forward? Can I expect this year’s active customer file to act as they have in the past?
  • How many can I count on retaining?
  • What did acquisition look like, and do I expect to duplicate those rates?
  • How many transactions can I count on from my customers?
  • Will they likely spend the same?
  • Did I see any shifts in merchandise assortment purchased this year over last, and how may that impact future results?

Additionally, we always want to consider factors such as:

• Were there issues relating to inventory that may have impacted our sales or customer behavior?
• Were there operational constraints that may have impacted our results?
• What significant outside factors may have impacted consumer behavior?
  • Natural disasters?
  • Disruptive news events?
  • Competitor shifts in strategy?

Most now deal with ALL of these factors because each one will have changed from 2019 in a significant way.

We could go on about this process, but determining these questions’ answers is a great place to start. As a second step, we typically build a “bottom up” plan considering marketing-communication events and the timing of contacts, messaging/promotions, and response/conversion rates. Much of this process is naturally mechanical in nature, based on formulas, response rates, expected average order value, to name a few. The real value and fun come with determining what additional assumptions we should consider once we have our data organized, and for 2021 we are in for a LOT of fun. We get to play the role not only of a statistician but also of a sociologist.

Growing up, I remember people referring to people of a certain age as having a “depression-era mentality,” which generally meant that they were frugal and prone to saving things to an extent some may have considered obsessive. How will we describe the “COVID-Era Mentality” in the future? To what extent has the pandemic shifted consumer behaviors, and how likely are those changes to remain? Do you find yourself watching a movie or show and commenting on how different it seems to see people clustered together en masse at an event? “This was before COVID” is something I find myself thinking all the time. I used to love aimlessly wandering through the large home improvement stores, and still miss the human interaction aspect of making these trips but have fully embraced the safety and unparalleled convenience of making those purchases online. The last time I ventured out to do just this, I found it frustrating and wasteful. Will you ever let the toilet paper supply get low in your house again? Just as online pet suppliers changed the way many of us buy pet food—I expect the changes in consumer behavior are lasting, but the obvious question we’ll be wrestling with is, “to what extent?”

• Will they exhibit more of a hoarding mentality, fearing that there will be shortages of the things they want or need?
• Will they stock up because of those concerns or learn to live with less?
• Should we increase inventory levels to account for new customers acquired or reactivated?
• How will these changes impact our competitors, and how might they react?
• Are our baselines this year high enough? Would our sales stats be even higher if not due to operational or supply chain constraints?
• What other threats do we face this year?
  • Employee retention at critical positions? How is the workforce holding up after such a crazy year? How can we support them differently, given the uncertain and disruptive working environment?
  • Will we have supply chain challenges again this year based on pent up demand or other factors?
  • Did our service levels or operational constraints impact our customer base’s overall satisfaction, and will they be less loyal as a result?

Like our statistician friends, we too are in the hunt, and based on whatever “COVID effect” your organization observed, we are going to have to define our goals based on many factors. The questions we ask and the assumptions we settle upon will guide how we proceed in decision-making.  From customer contact planning, inventory purchasing and fulfillment takes us from what another colleague of mine used to refer to as a “W.A.G.” approach (wild ass guessing) to one where we can agree on a more logical approach. It’s essential to include cross-departmental team members in the assumption process and agree on those assumptions together.

2021 brings a great deal of uncertainty. As we set our plans, we’ll make many W.A.G.s, though sharing in the setting of assumptions relating to factors mentioned here coupled with good communication with key stakeholders will offer us the best chance of success in our hunting endeavors.