Using forecasts and scenarios in strategic planning

One of the biggest travesties to me in strategic planning – yes, I know I’m being dramatic – is that companies do not incorporate economic forecasts and scenarios into their strategic plans.

I don’t count mentioning the outlook in the background section when you’re setting the tone for the rest of your plans. To me, that’s like when you’re interviewing someone and you ask about their education. It’s an ice-breaker. It is only relevant if they’ve learned something practical and can put it to good use in your organisation. Otherwise, you’re just giving them an opportunity to relax a little. Many companies use economic forecasts in the same way: as introductory material to break the ice and help other people relax in the knowledge that they’ve given this a little thought.

Another common use is as an item to check off a list, which happens frequently in institutions where employees have to compile economic indicators and send to their executive team or board of directors. They couldn’t tell you what the numbers mean or what the implications are for their company, but they’ve ticked the box and can happily move on to something else. What’s worse is that often the executives and board of directors also tick the box that says they’ve seen it, and no one discusses what the numbers mean.

Maybe I should be happy that they’re at least doing this bare minimum, but it’s hard to watch when there’s so much more value that can be tapped.

Here are a few ways that our clients have used economic forecasts and scenarios to help ground their strategies:

  • An insurance company used our forecasts of economic growth, unemployment, insurance claims, insurance premiums and new policyholders to adapt their strategic plan immediately following the 2007 global financial crisis. They were able to brace for the economic slowdown in Barbados before it arrived by implementing revenue-enhancing and cost-control measures as a matter of urgency.
  • Our client in the global consumer goods industry was considering expanding their operations into the Caribbean. They hypothesised that the size of the middle class in the Caribbean was growing and could represent a lucrative market. We estimated the size of the middle class and forecasted its growth, which the company then used to select the best countries for investment.
  • Amidst all of the discussion about potential downgrades to the Barbados dollar and further austerity measures, our client in the financial services industry commissioned an economic scenario building exercise to investigate the impact of various options being debated in the press. The resulting discussion included senior leaders and was designed to ensure that each area within the organisation understood the likelihood and potential impact of each scenario.

There are many other ways that economic forecasts and scenarios can be used in companies. The most important thing to remember is that your organisation does not operate in a bubble; it is part of a wider network of interconnected companies, government institutions, international agencies and consumers. You affect and are affected by the decisions that each player makes. Staying on top of economic trends, and using them to your advantage, is just as important as staying on top of consumer trends.

Defining your target market with precision

Do you find that when you’re asked to identify your target market, you respond with something like ‘millennials’ or ‘people living in this area’ or ‘young families’? That’s specific, right?

But yet when you place your ad – which everyone agrees is fabulous – in the media outlet that your target market is exposed to, the results are less than outstanding. Or when you create that product that is perfect for your target market, there’s such little uptake, even though you know your market is aware of your perfect product.

Maybe you’re only attracting the early adopters … or maybe you haven’t defined your market with sufficient precision.

AE’s approach to target market definition consists of 5 levels of precision. Let’s use the example of targeting millennials.

Level 1: Demographics (male millennials, i.e. persons born between 1980 and 1996)
Level 2: Interests (male millennial sports fans)
Level 3: Lifestyle (male millennial sports fans that watch sports while hanging out at bars with their friends a few times a month)
Level 4: Attitudes (male millennial sports fans that watch sports while hanging out at bars with their friends a few times a month and believe that winning is more important than how you play the game)
Level 5: Values (male millennial sports fans that watch sports while hanging out at bars with their friends a few times a month and believe that winning is more important than how you play the game and highly value their traditions)

The best products, market campaigns and corporate strategies require Level 5 targeting.

How would you get their attention if you defined your target market using only Level 1 criteria versus if your target market was defined up to Level 5? Would you still be considering the same media outlets, the same imagery and the same products?

For more information on how you can use this approach in your business, contact us at 246.253.4442 or .

 

 

A few thoughts about focus groups

It seems to me that marketers love focus groups. In almost every discussion I’ve had on solving a market research problem, marketers have suggested the possibility of focus groups. Maybe they’re attractive because they are relatively inexpensive compared to other research methods, can be organised quickly and are deceptively easy to conduct. And you can’t discount the obvious benefit of being able to interact directly with your desired audience.

But a word of caution: focus groups are not the ideal solution in every instance where you need to learn more about your market. Inherent in the use of focus groups are some risks that, if not accounted for, can lead to incorrect conclusions and costly decisions.

This brief post summarises what we’ve found to be the main drawbacks of focus groups.

Group think

People’s ideas and opinions tend to converge when discussed in a group. You’ve probably observed this yourself in meetings. Prior to a meeting, you may have a fairly strong opinion on the issue to be discussed. During the meeting, a strong personality dominates the conversation and either you do not get an opportunity to add your two cents, you start to change your mind and lean more towards the other person’s opinion or you find it easier to only add your opinions that are in alignment with the majority rather than start an argument by disagreeing. In any case, the moderator leaves the session believing that the strong personality’s position was a consensus across the group. In a perfect world, however, the moderator would have had the benefit of your point of view because odds are there are other people in the market that think like you do.

People lie to themselves, so they will lie to you too

This one is hard for most people to fully appreciate in business settings, but often we do not do what we say we will do. That’s why I do not suggest that people use focus groups to gauge intent to purchase. Let’s face it, we all have good intentions that aren’t realised; we don’t think of them as lies. But in this type of research setting, especially if you’re trying to gauge likely purchase, asking people what they plan to do is often not helpful. Yes, there are ways to minimise this, but when compounded by group think, it’s a tall order.

You only get answers to the questions you ask

To be fair, this is a risk in almost all types of research. But in focus groups there is a real danger because you often get such interesting and potentially useful feedback that you may not realise that you didn’t get a good answer to the most important question. Conversations may get derailed, defused or entirely omitted as you run out of time. Consider the example of a focus group to discuss a new product the company plans to offer. Odds are, the discussion would zoom into product features, price points, potential applications, and so forth. But the most important questions really should be: would anyone actually buy this product and, if so, why? That alone could take up the entire hour/hour and a half of a focus group. This leads to a secondary point, which is that too often focus groups attempt to cover too many topics in one session, which does not give the moderator time to really dig deeply into any one issue.

The results are not statistically representative

Too often people confuse the fact that focus groups provide insight into the needs, thoughts and feelings of a target market with the need for insights that are representative of that market. Let’s clear that up. For any sample – the focus groups participants in our case – to be representative of the underlying population, it has to be matched on all attributes that are expected to be influential on research outcomes. This requires detailed understanding of the underlying population that goes beyond basic demographics. You may also need to know their likes/dislikes, geographical location, level of education, family responsibilities, etc. Then you have to ensure that the proportions of various segments of that underlying population are reflected in the same proportions within your sample. But focus groups tend to have no more than twelve people, which may mean one person per segment. One person’s opinion cannot represent their entire segment. There are some workarounds, like multiple focus groups with different segments, very precise selection criteria, etc. But a word of caution: even if you consider the smallest representative sample size, which is around 300 persons, odds are you’re not talking to anywhere near that many people in your focus groups. Don’t confuse informative with representative. They each have their place.

The bias of compensation and other intangible benefits

There are individuals who simply enjoy participating in research activities and care nothing about the topic you’re investigating. They’re opinionated and revel in opportunities where they can share their points of view. Some people in larger countries even make a living from participating in paid research activities. I remember one participant in one of our focus groups casually debating with me about how much he should be paid, even though he was amongst those that contributed the least and we had to keep pushing him for feedback. Clearly, he wasn’t there because of any deep interest in the topic. It’s like gauging the mood of the population simply from listening to a call-in programme. Not everyone who has a strong opinion will call in, and the loudest people do not always speak for the majority. On the flip side, if you don’t compensate people for taking the time out of their busy schedule to attend your focus group, will anyone come?

 

In short, focus groups remain one of our favourite research tools, but they’re not ideal for every situation. Interested in learning more about how to organise your own focus groups, email us at

AE Impact Story: Understanding Payment Trends

Aim of the Project

In Barbados, consumers can pay for goods and services using cash, debit cards, credit cards, cheques, or direct debits (automated payments) from their bank account or online services that link to their credit/debit cards. Our client wanted to understand why the use of certain payment methods was declining while others were increasing, as some of the popular payment methods were more time consuming and posed security challenges, and it, therefore, was not intuitive why they were so popular.

What we did

The payment market has four major players:

  1. Consumers – they determine which payment methods they prefer to use to conduct their business
  2. Merchants – they determine which payment methods they are going to accept within their companies
  3. Financial institutions – provide the various methods of payments to both consumers and merchants, and therefore partially influence what is available in the market
  4. Payment processing companies – provide and operate the platforms on which the payments are transacted; in Barbados these include both private companies and Government-operated clearinghouses.

Each of these players could be making strategic decisions that influence the use (or non-use) of the available payment methods. Background analysis ruled out the payment processing companies as potential influencers, as they had not changed any of their fees, rules or processes in the time period under investigation. To determine how the other three players could be contributing to the observed trends, we conducted a survey with consumers, a survey with merchants, and stakeholder interviews with financial institutions. The findings of all three exercises were analysed and collated into a summary report that highlighted the main factors that explained the changing use of payment methods. The results were then presented to both our client and some of their key external stakeholders.

Impact of Project

In light of the findings, our client revised their corporate strategy to better encourage the use of the payment methods they preferred, and developed a supporting marketing campaign. Their approach therefore spanned both marketing and product design, and early indicators suggest that their efforts have started to result in the market changes that they desire.

Do you map your customers?

A map of customers on a real-world map, created from data, reveals things as they are and takes some of the guess work out of reaching customers. Industries from healthcare to retail to finance to utilities are using location information about their customers and assets to drive superior customer experience, improve process efficiency and lower risk level. Advancements and innovations in geo-spatial technology are driving a new wave of interest in location solutions. Not only does geo-spatial analysis allow companies to use location data to derive unprecedented levels of understanding of customer’s habits and behavior, they also provide the platforms to deliver beneficial information, direction and other support directly to customers.

The ability to visualize your customer base using geography opens up a level of knowledge and understanding not available through any other method. Some of the most important insights that marketing, development and delivery professionals are trying to capture from the value of location data are:

  • Where are your customers located in relation to your stores, warehouses and other points of contact? Or, alternatively, where should your distribution centres be located to ensure proximity to your ideal customers?
  • Which areas have a greater level of penetration?
  • Are your lapsed customers coming from certain areas?
  • Which areas have a similar profile to your current base (or your best customers)?
  • What’s the fastest, cheapest or safest route to take to deliver your goods to end-users?
  • How are your assets – such as poles, meters, towers and stores – distributed across a geographical area? Is this distribution optimal given your intended target market?
  • Is store performance linked to geographical location?

Managers in a wide variety of fields are coming to understand the competitive advantages that come with the savvy use of location data, and a few examples are noted below.

Identify Opportunities with Radius Maps

Radius maps, also known as buffer maps, are useful when you need to understand your data in relation to its proximity to other features. They are often used as coverage maps to see where you may have gaps or overlap of coverage of your shops, services, and operations. For instance, you may need to be able to visualize how many customers you have within a 10-mile radius of your office locations, or how many customers you could serve in a particular region if you build a new outlet.

Save Time and Costs with Route Maps

Geo-spatial software can take your chosen stops and optimize a route to reach them all. With options for a round trip, different start and end points and all the intermediate points, you can plan your route in minutes. By optimizing your route, you make sure your sales team’s time is spent in the most efficient manner, saving time and money.

 

 

 

Manage Your Sales Territories

Enhance your maps by combining it with additional visualization tools, such as charts. Charts can give viewers an immediate summary of the data on the map. Geo-spatial software can produce various types of charts which can be added to a map, including bar, line, pie, area, and scatter charts.

Competitive advantage analysis

By overlaying certain location information, such as population density, the road network and store location, organizations can analyze and understand their competitive advantages and disadvantages in the market. Geo-spatial software, together with the appropriate data, can help managers visualize the relationship between the location of your competitors, customers (current and potential) and sales.

 

 

 

 

 

 

For more information on how customer maps can provide valuable marketing and strategy insights, contact us at

Sources: Antilles Economics and www.espatial.com

Determining the Optimum Cost Structure for a Development Programme

Aim of the Project

A Caribbean development programme, designed to support community development through the provision of grants for community projects, was labelled as high cost due to its relatively high Country Administration Cost to Grant Making Ratio. In other words, the administrative cost of providing the grants far exceeded the total value of the grants that were actually provided. One possible explanation could be that the structure of the programme was either not cost effective or it did not allow for the generation of sufficient grants. Antilles Economics undertook a study to assess the root cause of the high costs and determine the most efficient, effective, results-generating, sustainable and cost-mitigating structure to manage the programme. One unique characteristic of the programme was that it was designed to ensure that support was provided on a country-by-country basis and it was important that this decentralized approach was maintained in any solution.

What we did

We began by reviewing a number of documents on the programme to ascertain background information as well as to lay the foundation for the other approaches to be used. We also gathered information on the management and cost structure of similar programmes internationally to identify best practice.

We then conducted interviews with key stakeholders to establish an initial assessment of the pros and cons of the current system as well as to gather details on the process for approving and providing grants. We also solicited ideas from the volunteers that drove the execution of the programme on the ideal management and cost structure as well as where cost-cutting measures could best be applied. This ensured that any recommendations reflected the experience of those working within the programme, were framed within a set of feasibility parameters and allowed volunteers to maintain the flexibility necessary when utilizing a decentralized framework.

Finally, information was gathered on cost-effective technology solutions that could supplement the existing systems and allow for further cost savings. Wherever possible, these solutions were incorporated as complements to the existing system.

Impact of Project

Four reorganization options were identified and compared in four main areas: ability to maintain the spirit, practice and objectives of the programme; flexibility in the business environment; organisational structure and processes; and, ability to effectively manage staff and volunteers. Criteria were established for each key area and each option was scored based on its ability to achieve the criteria. The best-performing option was recommended to the client. Since adopting the new structure, the client reported improved motivation of staff and increased grant requests.

Introducing AE Quarterly

I’m pleased to introduce AE Quarterly, our email newsletter that will feature articles written by the AE team on business topics relevant to our Caribbean audience.

I would have mentioned our plan to introduce AE Quarterly in our first post of the year, and I’m happy to announce that the inaugural edition has been released. The main goal of the newsletter is to promote discussion on topics that affect doing business here in the region. We all know that there is not enough independent thought on Caribbean business, and we at Antilles Economics are doing our part to close the gap.

The March 2017 edition includes the following articles:

  • From the Minds of Marketers with Greg Hoyos
  • Exploring the Green Economy in Barbados
  • The Barbados Mortgage Market After 9 Years of Economic Strain

Subscribing to the newsletter is free, and if you haven’t already signed up to receive yours, you can do so now by clicking here.

I’d love to hear what you think and any suggestions on the types of articles you’d like to have us feature, so feel free to email us your feedback and suggestions at

Want to improve your customer’s experience? First you have to understand it.

What is customer experience?

Customer experience can be thought of as all of the ways that customers engage with your company and brand throughout the entire lifecycle of their time as your customer. Through this lens, it includes everything from customer care to advertising, packaging and public relations to product and service features to reliability and ease of use. It is therefore a broader concept than solely what a customer experiences when they enter your store, as it involves both direct and indirect contact with your company, as well as emotional and subjective responses to it.

Many companies focus on the direct contact a person has with their company, during the purchase transaction, when using the product or service, or during any after-sales service interactions. Indirect contact is often overlooked, but could potentially be just as, or sometimes even more, important. Indirect contact typically takes the form of unintentional contact with your company’s products, services, brands or personnel; for example, word of mouth recommendations or criticisms, news reports, advertising, impressions of brand representatives outside of the store, and the list goes on.

As such, the experience a customer has with your brand starts before you are even aware that they are a potential customer.

Most companies only track customer satisfaction, which implies that they are gauging their success at wowing customers only at the time of purchase or when they have a problem to be resolved. But, what if you were never given the opportunity to wow them because they had a negative experience with your brand before one of your sales representatives even knew they existed? How disappointed would you feel if your sales team delivered exceptional service, but the product arrived defective or late because your outsourced transportation provider dropped the ball? Or, what if through some hiccup in the administrative process the customer decided not to do business with you after all?

Understanding customer experience

Understanding your organisation’s customer experience first requires an understanding of how customers interact with your organisation before they become a customer, during all direct transactions and interactions with your organization, right up to the end when they are no longer a customer. This is known as the customer journey. During this journey, customers will interact with your organisation both directly and indirectly through various touchpoints, such as customer service, product and service delivery, websites, advertising, after-sales service, and so on. And these touchpoints exist within an ecosystem or network of your organisation’s customers, employees, suppliers, vendors and overall operating environment. The quality of your organisation’s customer experience, therefore, often involves more than just your organisation.

Measuring Customer Experience

The key to enabling positive and memorable customer experiences that turn customers into brand ambassadors lies in understanding the journeys that they take, the touchpoints that provide direct contact and the overall ecosystem within which they are engaging with your company. You cannot manage customer experience if you cannot measure it. Through a range of techniques – such as surveys, focus groups, ethnographic and other observational studies (‘shop alongs’), customer diaries, product co-design activities and internal analytics – we suggest measuring three broad areas:

  1. how well your company met your customers’ needs;
  2. how easy it was to do business with your organisation; and,
  3. how enjoyable it was when doing business with your organization.

When identifying the metrics that will form your customer experience monitoring system, think about the entire customer journey, your various touchpoints and the overall ecosystem. Successful management hinges on a comprehensive view of the entire customer experience and determining which levers to pull to foster as positive and as memorable an experience with your company as possible.

Want to learn more about improving customer experience in your organisation? Contact us here.

Inviting Customers Into the Product Design Process

Customers buy in the modern world where expectations have changed, where patience is short, where exceptional service and delivery are expected, and where they expect things to be either value for money, incredibly simple or very fun. Satisfying the customers’ needs and expectations should be the driving force behind any product creation. Customers like being engaged, listened to and taken seriously. They like to provide feedback and solutions to help products become more user friendly. So why not take advantage of customers’ willingness to share ideas and experiences?

The process of design involving two or more people sharing ideas, is known as co-design. Customer co-design enlists the services, knowledge and ideas of current and future customers to design, develop and maintain a product, process, system and/or experience. Co-designing with customers is mutually beneficial. Customers will feel valued and understood. You will be able to design solutions that really work well for them, resulting in faster acceptance of new offerings and greater customer loyalty. By working side by side with customers, the people in your organization gain valuable insights into customers’ needs. By acting on those insights, your team gains faster adoption of new products, services, or processes. Customer service, an integral part of most organizations, is the first place to look for customer requirements and for customer co-design opportunities.

It is suggested that you proactively engage with customers and develop a customer co-design atmosphere. Here are a few opportunities to achieve that.

  • Form a Customer Advisory Board (CAB), where you recruit your most insightful customers to help identify and assess their and other customers’ unfulfilled requirements;
  • Incorporate the Voice of the Customer (VOC) into your organization’s culture. This entails encouraging customers to talk among themselves in focus groups, forums, social media etc. and observing how they offer solutions to each other’s problems;
  • Design the processes that impact customers to be more efficient and effective by understanding how customers perceive the processes and incorporating their suggestions for improvement;
  • Take advantage of the business network that supports your customers’ other needs. Your organization cannot provide everything that your customers need. Partner and collaborate with other organizations and your customers to provide all-round satisfying products and services.

The future of business competition and prosperity is based on the successful processes of co-design and co-creation, where customers play an integral part. The key to designing a successful product is to use customer co-design early and often. Give your employees, at all levels, the authority to interact with customers to obtain firsthand knowledge of what they would like from your products and how they would use it. The intelligence that you will gather from customer interactions will be priceless.