The best companies pull together quantitative, analytical, and social information to gauge the 'market psyche.' They create their own assumptions about the markets they serve: what factors are affecting the overall market and their share; what will drive sales; what items will be hot sellers, which will be dogs, and why.
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Part One of this series on Demand Management introduced our best practice framework for discovering, creating, growing, and fulfilling demand. Here in Part Two, we examine the role of Market Assumptions.
In creating and growing markets, the leaders deeply understand their customers’ needs—both practical and emotional. They comb through demographic data. Many have full-time economists tracking and predicting the next upturn or downturn. They are always on the alert for the next disruption in their industry.
In addition to absorbing quantitative and analytical information, leading companies really try to get into the head of their customer—what we refer to as the market psyche. An example of market psyche is the uncertainty of the economy impacting people’s attitudes towards luxury items, discount stores, and other buying patterns. Understanding the psyche of the market is just as important as all of the statistics in predicting, capturing, and growing market share. Increasingly, marketers are turning to blogs, social networks, and online forums to read the pulse of the market.
The best companies put all of these together to create their own independent assumptions about their markets: what factors are affecting the overall market and their share; what will drive sales; what items will be hot sellers, which will be dogs, and why. These market assumptions form the foundation of the firm’s strategies for predicting and driving growth for the future.
Change is constant in business and life. Market assumptions can get stale fast and need to be continually monitored, updated, and communicated throughout the organization. The companies that successfully anticipate and lead the changes end up on top. They cultivate an environment of exploration, intelligent risk taking, and action—the velocity of decision-making. They use war games played against scenarios encompassing a wide range of potential events such as new product introductions, pricing actions, entrances and exits from markets, law suits, regulatory changes, supply constraints, political events, etc., which keep companies on the alert for the next disruption in their industry. And they develop and monitor ‘Scenario Early Warning Indicators,’ which indicate the likelihood that specific scenarios are indeed occurring.
For example, Motorola’s semiconductor division monitors big deals going to their customer's customers to better understand and anticipate demand.
Hot Topic: a retail store aimed at the fast moving fashions for the ‘tweens’ age group sends their store associates to rock concerts and encourages them to report on what cool new fashion or trend they saw there and on MTV, institutionalizing the monitoring of celebrity media events, rock shows, and magazines to see who is wearing what, and anticipate the next big thing.
There is the now classic example of the fire at a Phillips semiconductor plant that made a key component for both Nokia and Ericsson cell phones. Nokia was aware of the problem within three days, even though Phillips had not notified them, and immediately formed an executive team that negotiated dedicated capacity at other Phillips plants and initiated redesign of the phone to allow second sources. Ericsson was not aware of the problem for weeks, and reacted much more slowly. Nokia gained 3% market share, largely at Ericsson's expense.
These companies institutionalized proactive intelligence gathering and mechanisms for rapid response. Motorola put a lot of effort into building systems, processes, and incentives to gather information about the big end-customer deals and rationalize that demand. Nokia was able to respond rapidly because they already had put a lot of effort into supply chain monitoring and visibility and building a flexible sourcing strategy. Maintaining up-to-date intelligence and timely market assumptions is critical to successful demand management.
Mining the Web
Customer attitudes and opinions are expressed daily on twitter, Facebook, blogs, RSS feeds, and online discussion forums. The online world not only expresses consumer sentiments, it actually creates, magnifies, and accelerates new trends. The ‘latest thing’ can now sweep like wildfire around the world. The challenge for marketers is mining the mind-boggling volume of unstructured data on the internet—billions of megabytes—to discover these trends and changes in sentiment. A number of tools have emerged that can search, organize and structure this information so that companies can stay on top of what’s hot and keep their finger on the pulse of the market.
Having up-to-date and valid assumptions about the market is the foundation for successful demand management. It provides the basis for envisioning and conceiving ‘on-the-money’ products, capturing the latest styles and colors, and quickly terminating products that are going out of style before you’ve amassed piles of inventory that have to be sold at a loss or scrapped. Without good market assumptions and intelligence, companies are always playing catch-up with their customers’ true needs and desires.
Next, in Part Three, we examine some cultural and technological underpinnings essential to make sales and operations planning work effectively.
To view other articles from this issue of the brief, click here.