Companies are not feeling optimistic about their future performance. The OECD’s Business Confidence Index, which tracks this emotive but important indicator on a monthly basis, has been in negative (or pessimistic) territory since August 2022. That’s perhaps unsurprising given war in Europe and the Middle East, historically high inflation and interest rates, and technology-driven changes in consumer behavior. However, businesses can mitigate the effects of this uncertainty if they bake foresight into their planning.
What do I mean by foresight? In simple terms, I mean converting uncertainty into measurable risk. Take consumer price inflation, which is continuing to fall around the world. Will it continue to fall? If so, how quickly? These questions – to which no one has definitive answers – have significant implications for marketers. To give just a few examples, they will impact new product or service development, pricing and promotion strategies, and media campaigns.
The good news is that data-driven foresight techniques enable you to establish a probability for a range of different eventualities. For example, war-gaming might reveal a 35% probability that CPI will be between 2-5% next year, a 45% probability that it will be between 5-10%, a 10% probability that it will be lower than 2%, and a 10% probability that it will be higher than 10%.
Use foresight to plan proactively with confidence
Armed with these probabilities, businesses can plan proactively and with more certainty for what might happen. Scenario planning – another important foresight technique – can help marketers to determine what will happen to sales if you increase your prices by 5%, decrease your TV spend by 10%, or change creative, for example.
The bad news is that marketers are not employing foresight in sufficient numbers. Just 44% are using techniques such as scenario planning and war-gaming as part of their future planning process, according to a new white paper, Accelerating growth with marketing effectiveness: A playbook, from WARC and Gain Theory.
Linda Bethea, Head of Marketing at Danone North America, is someone who believes in the power of foresight. She is quoted in the white paper as saying: “We’re trying hard to move from data to insights to foresight because we can’t wait for an annual marketing mix analysis to make decisions, particularly in new categories that are evolving extremely rapidly.”
The white paper includes recommendations that will enable marketers to leverage foresight. For example, it outlines the things you need to consider in order to embed foresight capabilities into your marketing organisation.
A new framework for marketing effectiveness
Foresight is increasingly important in a volatile world, but it is just one of four building blocks that make up a new framework for best-in-class marketing effectiveness that we highlight in the white paper. The other three building blocks are:
- Defining success: ensuring the business and the marketing department are united behind a clear vision of growth.
- Data excellence: having the best possible data to enable data-driven decision-making.
- Advanced measurement: employing a systematic approach that uses joined-up metrics to measure the full impact of marketing in the short and long term.
To excel in each of these four areas, you need strong foundations and a strong culture. We call these the two accelerators of marketing effectiveness. Foundations refer to strategies, capabilities, and processes, while culture refers to values, beliefs, and behaviours. Both are important, but I think developing a strong culture is harder to achieve.
One of the biggest barriers to developing a strong culture in my view is a lack of trust – if decision makers do not trust the insights that they are presented with then recommendations do not get actioned, the morale of analysts declines, and the business suffers. This is highlighted by an important stat in the white paper: 40% do not agree that the majority of their company’s marketing investment decisions are supported by data or insights.
Gain trust and increase data-driven decision-making
Let’s return to foresight, as I think it can really help here. Using foresight techniques not only improves the accuracy of forecasts, but it also demonstrates that marketing has an understanding of business drivers and the impact that pulling different levers can have on business KPIs. This can really help marketers to gain trust and cement their position as the engine of growth. More widely, it should increase the likelihood of more decisions being informed by data.
Given that we know that data-driven companies are more likely to drive profitable growth, that is something to feel optimistic about.
Download Accelerating growth with marketing effectiveness: A playbook
A version of this article first appeared in The Drum.