M/A/R/C's Amy Barrentine-EVP General Manager, Randy Wahl-EVP Advanced Analytics, and Scott Waller-VP Business Development, co-presented at Quirk's event in March 2011.
4. Objectives
Today we will discuss…
…the range of volumetric forecasting approaches that marketers use
…key requirements in a custom, buyer‐based system
…things to avoid in forecasting
…big opportunities to fine tune through optimization
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5. Today’s Agenda
Frequently Asked Questions
Range of Methods
Key Requirements
Big Opportunities to Optimize
Things to Avoid
Forecasting Fiction
Q&A
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8. Forecasting Approaches
Primary
Examples Pros Cons
Methods
Assessment is fast No road map
Qualitative Anecdotal
Easy buy in
Easily understood Adjustment for offering
Analog discrepancies
Observable
Historical
Can encompasses large Backward looking
Econometric/Time # of variables Unexplained variables
Series disregarded
Provides Marketing
Mix Direction
Estimate across many Predictive within test range
Choice
launch scenarios Calibration required
Survey Response Norm Comparison Easy to understand Static context (inflexible)
Based Collective history Limited to experience/
category availability
Decision‐Driver, Adaptable Hurdles provided, but
Self Calibrating Innovative offerings/ norms don’t apply
emerging categories
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12. Key Requirements
Ability to Integrate Cross‐Channel Purchasing
~ Ability to account for purchasing through alternative channels within one
respondent – avoiding double counting volume and keeping costs down
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13. Key Requirements
Ability to integrate multiple layers of influence
and decision making
~ Kids impact moms…insurance decisions made jointly…office managers,
patients influence physicians and vice‐versa
Inputs % Lives Reimbursed
Formulary
Decisions Copay
Price
Prior Authorization
Reimbursed Physicians
Physician's Share of
Share of
20% mark-up Prescriptions
Prescriptions
Copay Scripts
Scripts
Retail price Patient
Patient Complex
DTC Marketing Awareness Decisions
Decisions Interaction
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14. Key Requirements
Ability to identify offer acceptors at the individual
level for targeting and offer optimization
(penalty analysis).
Sample Trier
Profile Profile Index
Age % %
18-24 11 11 106
25-34 20 15 74
35-49 41 47 114
50-64 28 27 96
Outside Franchise 17 11 66
Light Users 24 36 153
Heavy Users 39 45 115
Super‐Heavy Users 21 8 39
Too Hot Just Right Too Cold
Temperature 23 50 27
Repeat Index 96 120 72
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15. Key Requirements
Adaptable to Accommodate Complex Launches
~ Methodology should be flexible enough to address alternative launch
scenarios: staged introduction? discounting? potential for added features?
UNITS
78.9
73.8
62.2 65.8 17.6
28.8 Product Y
22.2 21.5
Product X
62.22 Current
47.25 43.62 39.81
Current Current & Current & Current,
Product X Product Y Product X & Y
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16. Key Requirements: Flexibility
~ BACKGROUND: Multiple generations of an offering were
under consideration – each one delivering more than the
previous one and the client had a desire to price each
commensurately with the added benefit.
~ OBJECTIVE: Forecast each new offering and determine
the opportunity for price escalation and coexistence.
~ OUTCOME: Able to identify price thresholds for each
generation, when to phase out previous offerings and
where opportunities for enhanced margins resided.
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18. Alternative Strategy Assessment
Variations of:
Pricing
Volume Branding
Forecast Features
Portfolio
Choice Set 1
Respondent
evaluates Choice Set 2
alternatives in
competitive Choice Set 3
context Choice Set 4
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19. Product Optimization – Best Product Offerings
Retail Factory
Legitimizing Competitive Sales Retail Sales Sales
# Bundle Claim Claim Price Form (MM) Index to Base (MM)
1 A M A Low X $194.2 139 $119.5
2 A M B Lower X $187.3 134 $115.2
3 A N A Lower X $183.1 131 $112.7
4 A O C Lower X $178.9 128 $110.1
5 A N C Lower X $177.5 127 $109.9
6 C M A Low X $174.7 125 $107.5
7 E M D Low X $171.9 123 $105.8
8 D N B Lower Y $167.7 120 $103.2
9 B M A Low Y $167.3 120 $102.9
10 E M B Lower X $166.3 119 $102.3
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23. Forecasting Pitfalls
Relying solely on one measure Purchase Interest
to predict in‐market outcomes
Likeability/Benefit
~ Decision making is complex
Value
Failing to incorporate a measure Uniqueness
of differentiation Competitive Context
~ The offering must provide a meaningful
unfulfilled benefit
~ This benefit can’t be ignored Trial
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24. Forecasting Pitfalls: Ignoring Differentiation
~ TESTED: New line of cookies that were co‐branded
with current brands of candy bars.
~ OUTCOME: Utilizing a forecasting methodology
that utilized differentiation only as a diagnostic
measure, the lift in volume a truly differentiated
offering could deliver was lost; hence, revenue
projections were way‐underestimated.
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25. Forecasting Pitfalls
Sampling: Too broad/Too narrow
~ Too broad = Waste
Target (F 21-36) Non-Target
80
70
60
50
~ Too narrow = Missed Volume 40
30
71
53
20 47
29
10
0
% of Sample % of Volume
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27. Forecasting Pitfalls: Ignoring Cannibalization
~ PLAN: NEW PIZZA offering was
going to be successful because it
would just capture new occasions –
parties, get‐togethers
~ OUTCOME: Traded current buyers
down from “2 for 1” which generated
higher margins and revenues
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30. Forecasting Fiction
X “A restage can drive 25% growth”
~ 10% is the most yr1 growth expected
~ Primary objective should be to hold SOM or re‐capture lost share
Restaging
SOM Assessor: An Overview
“Real” Gain
2009 2010 2011
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32. Forecasting Fiction
X “This product will be everywhere!”
~ Maximizing distribution is critical to success
~ Impact has an almost linear impact on volume
~ Rate of distribution build is also important
~ Disappointed potential buyers
~ Less time for repeat
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33. So, what is important in choosing a
Forecasting Methodology?
Competitive Context and Differentiation incorporated
Marketing spend fairly represented
Source of volume considered
Flexible enough to accommodate complex launches
Account for multiple layers of influence, cross‐channel buying
Ability to profile identified triers (targeting, penalty analysis)
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34. Scott Waller
Vice President
1660 North Westridge Circle
Irving, TX 75038-2424
M/A/R/C® Research
Strong brands start with tel: 972-983-0412 fax:972-983-0444
strong research
Scott.Waller@MARCresearch.com
www.MARCresearch.com
Amy Barrentine
Executive Vice President,
General Manager
Randy Wahl
1660 North Westridge Circle
Irving, TX 75038-2424 Executive Vice President
M/A/R/C® Research
Strong brands start with
strong research
tel: 972-983-0476 fax:972-983-0444 1660 North Westridge Circle
Amy.Barrentine@MARCresearch.com Irving, TX 75038-2424
www.MARCresearch.com M/A/R/C® Research
Strong brands start with tel: 972-983-0469 fax:972-983-0444
strong research
Randy.Wahl@MARCresearch.com
www.MARCresearch.com
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