By Pat LaPointe:
Quick… what’s the most common mistake in marketing measurement?
Give up?
Unilateral analysis. Looking at the world only through your own company’s eyes as if there was no competition.
It sounds stupid, I know, but yet most of us perform our analysis of the expected payback on marketing investments without even imagining how competitors might respond and what that response would likely do to our forecast results. Obviously, if we do something that gets traction in the market, they will try to respond to prevent a loss of share in volume or margin. But how do you factor that into a business case?
Scenario planning helps. Always “flex” your business case under at least three possible scenarios – A) competitors don’t react; B) competitors react, but not immediately; C) competitors react immediately. Then work with a group of informed people from your sales, marketing, and finance groups to assess the probability of each of the three possibilities and weight your business case outcomes accordingly.
If you want to be even more thorough, try adding other dimensions of “magnitude” of competitive response (low/proportionate/high) and “effectiveness” of the response (low/parity/high) relative to your own efforts. You then evaluate 8 to 12 possible scenarios and see more clearly the exact circumstances under which your proposed program or initiative has the best and worst probable paybacks. Then if you decide to proceed you can set in place listening posts to get early warnings of your competitor’s reactions and hopefully stay one step ahead.
In the meantime, your CFO will be highly impressed with your comprehensive business case acumen.
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Pat LaPointe is Managing Partner at MarketingNPV – specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal.
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