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How should marketers forecast for the year ahead? Check out this week's blog post,
"Ask Zippy". Zippy the Snail has been in the field of marketing since its inception. His wisdom is unmatched to those other "couriers" out there, and he's about as direct as it gets!
The year just started and already I find myself needing to revise my 2021 sales plan.
I built the plan in October 2020, as I do every year, and just two weeks in, I feel as if it is obsolete. I work for a retailer and we had a stronger than expected Holiday season 2020. While that is great news, we are now seeing under performance from new customers that were acquired throughout the later part of the year.
I know COVID has had an impact but having never built a plan under these circumstances, I find myself at a loss. Zippy…please help!
Forecasting in Fargo
Forecasting demand is never easy. There are so many internal and external factors that need to be considered. Historically, we’ve been able to start with a strong baseline for planning by understanding prior year performance. You remember the old saying “the best predictor of future behavior, is past behavior”.
From there, we’d think about the things that are going to negatively impact the business (competition, economy, attrition, cost of goods, new legislation, etc…) and the things that are going to positively impact the business (product enhancements, new products, performance, economy, new business, repeat business, etc…). We adjust for seasonality, and voila, we have our plan.
And, as hard as that is, with all that historic data, planning for 2021 will be even harder as past behavior may not be the best predictor of behavior in the upcoming 12 months. Consider these questions:
- Is seasonality still a factor or will recency play a bigger role? Is your business more likely to reflect on recent months or same season last year?
- As we deal with supply chain issues, will our costs remain predictable or do we need to plan for increases?
- Are newly acquired customers, acquired during a pandemic, going to perform similarly to new customers of years past or are they less loyal, less predictable?
- Do your customers have disposable income and pent up demand or are they amongst the many, many consumers that are struggling?
We know consumer behavior has changed. Are these temporary changes or permanent changes? In a recent McKinsey study, we learned consumer behavior has shifted to value and essential items, shifted to digital and omnichannel spend, shifted away from brand loyalty, and for many, shifted away from out-of-home activities.
My recommendation is to build out multiple scenarios and get ready to pivot as needed. Build a plan based on 2019. Most of that work may already be done as it might very closely replicate your original 2020 plan. How different would that plan look if the trends we’ve seen for the past 10 months continue throughout 2021? And, how different would it look if we saw a recovery mid-year? What are the likely scenarios for your business? At a minimum, build out a status quo scenario, a worse-case scenario and a best-case scenario. Be ready to revise throughout the year – maybe even as often as monthly.
Please keep in touch and let me know how things pan out.