Forget the Crystal ball, scenario planning prepares for the unknown.


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The prospect of the end of the year always brings out the crystal ball for New Year predictions. For all people in business and especially for those in business development, crystal ball gazing may be fun and an interesting diversion, but it more often seems to relate to wishful thinking rather than be grounded in reality.

Much of what is predicted in January fails to materialize and can often be simply wrong. Changes in market conditions and trends do not suddenly start on the 1st of January. So is there any value in making New Year predictions? The answer is yes, but it depends on what is being predicted, how the prediction was made, what information was used and what assumptions were made.

Most of the market trends that started in 2021 are likely to continue into the New Year. However there are some events which will make a difference to the economy and therefore to market conditions, such as the level of demand, which may affect the lifeblood of business.

Covid has had a negative effect on trade throughout the world, effecting both demand and supply of goods materials and services. Restrictions on movement both nationally and internationally have also had a negative effect on essential logistics. The result has been a pandemic created recession in the world economy. However, as lock downs ease, so there will be an economic bounce back. Demand does not go away, it is only deferred until the consumer is confident enough to buy, or is forced by necessity to purchase. In the meantime, the commercial manager must use resources wisely to maintain a level of income, and conserve the marketing assets as far as possible. What should the commercial manager do in such circumstances? There are a number of things that should be done or actively considered:

* Maintain close links with existing customers, monitoring their needs and changing requirements.
* Use the knowledge of the changing needs of existing customers to target new potential customers.
* Consider the problems and fears of customers and potential customer and adapt the product or service to meet their changing needs.
* Continue advertising and promotion, even on a reduced budget, because the market needs to know that your product and service is available rather than that of the competition.

Probably the most useful action of a commercial manager during difficult trading times is that of Scenario Planning. Few businesses do scenario planning well, but while it takes time, it can be a very useful insurance policy against the unexpected situation. Not long before the 1974 oil crisis, the Royal Dutch Shell Group had worked through such a process, to identify every situation that they could think of, that the company might encounter as an oil producer. Having identified every possible situation that might occur, Shell then produced action plans to be implemented should any of the identified scenarios actually occur. When the Arab oil embargo took effect after the 1973 Arab Israeli war, most of the world’s oil companies were totally unprepared, except for Shell. Shell had considered such a possibility, (which was considered remote at the time) and had prepared plans accordingly. While other oil companies were struggling to find a way to respond to the embargo, Shell simply applied their pre-prepared plan. As a result, Shell had moved in a short time from a position of 10th largest, to 4th largest oil producing company in the world, a growth largely attributed to the company being fully prepared for any conceivable political or trading situation. How many businesses considered the scenario of a national or international pandemic and how it would affect their trading conditions? The history of the 1918 Spanish Flu and the more recent threat of a dangerous bird flu pandemic showed that such things were possible even if the risk was assessed as remote.

Possible scenarios that the marketer should consider in difficult economic times;
* Prime contracts fail to materialize, or are reduced.
* Key customers seek a price reduction or longer credit.
* Increase in payment defaults.
* Increase in aggressive activity from competitors.
* Forced reduction in the marketing budget and resources.
* Adverse Government legislation.
* Difficulties in maintaining necessary supplies.
* Further national and international pandemics occur, producing economic and social lock-downs.

While some of these possible scenarios may seem unlikely, in difficult economic times, none are impossible. It is the task of the commercial manager to produce and maximize the profitable income on which the future of the business depends. Therefore when considering what lies ahead in 2022, marketers should consider scenario planning as an important management tool.

In short, the commercial manager needs to consider all possibilities in 2022, planning for the worst, while still hoping for best.
© N.C.Watkis, Contract Marketing Service 05 Jan 22

Nicholas Watkis, AE MA DipM CMC FCIM
Nicholas Watkis set up Contract Marketing Service in 1981, providing professional interim marketing management for a wide variety of businesses. Over 30 years practical experience in organizations, large and small, national and international, led to the development of Business Performance Maximized specialist in marketing performance measurement.


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