As Senior Director at commercial analytics company, Analytic Partners, Maren Seitz heads up thought leadership for EMEA and leads key accounts across the region.
While marketers may not have a crystal ball, business success often hinges on the ability to anticipate and plan for future events. Traditionally, marketers forecast the business impact of their marketing by relying largely on past data and experiences. But with change everywhere, from new generative AI technologies to macroeconomic uncertainty, this approach may no longer be fit for purpose.
According to the Chartered Institute of Marketing, 59% of U.K. marketers find it increasingly difficult to anticipate consumer priorities. Meanwhile, a recent survey revealed that 75% of CMOs are under pressure to cut spend and deliver better return on investment (ROI).
Scenario planning offers a proactive response to this increased complexity. It allows CMOs and their teams to not just plan for one but several possible futures, considering factors in and outside of their control. The result: business strategies designed for agility and readiness in the face of constant change.
Scenario planning: How it works
While traditional marketing forecasting can help predict specific outcomes based on (largely) historical data, such as sales growth and ROI of different marketing activities, it tends to focus on one specific plan and target. As it lacks the ability to adapt to any kind of sudden change, marketers can find themselves struggling to adjust in real-time when the unforeseen occurs.
In contrast, scenario planning uses marketing mix modelling (MMM) and econometrics to provide a strategic framework based on a variety of marketing factors (media mix, media cost inflation, media response, new channels, pricing, product strategy), and non-marketing and external factors (supply chain issues, inflation, consumer response, competitor behaviour).
Rather than relying solely on past data, it involves a broader consideration of possible external influences and typically requires collaboration between different departments, including finance and operations, for more robust analysis and planning. By taking both controllable and uncontrollable factors into consideration, and updating them as trends are shifting, it can also anticipate how different scenarios might affect the impact and ROI of the marketing mix and ensure budgets are optimised accordingly.
Embrace the “what ifs”
Marketers who are already using data-driven scenario planning are reaping the benefits. Our in-house research has shown that it can help companies achieve a 25-70% higher return for the same investment.
Take this year’s British summer, for example. After June's record heat, the U.K. faced its wettest July in some regions. Add in the rising cost of living, and it created a “perfect storm” of unpredictable consumer behaviour in the travel sector. Marketers using scenario planning were better prepared to swiftly act on any resulting shifts in demand. When Britons rushed to book last-minute breaks in August, they already had a range of cross-functional business plans to choose from, enabling them to unlock media budgets, adapt creatives, and launch promotions accordingly.
Scenario planning empowers marketing teams to be future-ready, even when the improbable but planned for occurs.
Considering various scenarios that could impact your business objectives or marketing goals not only sets a foundation to help future-proof your business but also, when paired with effective change management and internal communication, instils a culture of confidence across teams. This allows them to view change, no matter how sudden or unlikely, as an opportunity for growth.
CMOs are having to contend with a lot more “what ifs” in their daily work these days. But they’ve never had so many tools at their disposal to help turn change into a competitive advantage. Scenario planning empowers marketing teams to be future-ready, even when the improbable but planned for occurs.
7 steps for effective scenario planning
If you’re looking to implement scenario planning in your business, try these seven steps to help you get off to a flying start.
- Set up the right MMM.
Scenario planning isn’t possible with any MMM, so make sure you and your provider have the relevant category and industry experience, as well as the technical capability in place to identify and source the right data and provide sufficient data granularity and variety. This needs to be set up the right way from the start. - Know your destination and set your KPIs accordingly.
The key is to be clear on what the business wants to achieve. Far too often businesses start with the plan, rather than with the end goal. - Identify every factor affecting your success.
What could impact your business in the coming weeks and months? Work with your teams to explore different factors, including macroeconomic (drop in interest rates, rising inflation), competitive (new entrant, huge promotion), and supply (supply chain disruption), as well as consumer trends and emerging technologies. - Focus on the scenarios you think are most likely to occur.
Now that you have a comprehensive overview, it’s time to focus on probability. Consider all the possible changes, and define a small number of key scenarios based on those that have the biggest likelihood of occurring and would have the biggest impact. - Make sure you get accurate and granular data.
Unprecedented events should not slow you down. To be prepared for the unexpected, businesses must anticipate and adapt to change by setting up experiments, using suitable substitute data, or simply making assumptions based on past data. - Simulate your scenarios and optimise plans accordingly.
Now it’s time to simulate your 2024 plan — if you changed nothing else, would your plan achieve your target? Model for the identified scenarios by updating your MMM, and flesh out concrete action plans with responses for all your key scenarios accordingly. - Get your teams on board early.
Remember, scenario planning doesn’t stop at the marketing function — it’s linked to multiple departments, including finance, product, and customer service. Make sure to engage those teams early, align on business KPIs, and report results or shifting scenarios back to them. Marketing is not acting in a silo, so it must reflect the wider business goals.
