Managing the success of your business in the future significant role
Transcription
Managing the success of your business in the future significant role
Managing the success of your business in the future Why your mom can play such a significant role Procter & Gamble - Thomas Methner Little VF Quiz to start off What will be the total number of coffee drinks consumed by this audience today? Think about it for max. 30 seconds, then raise your hand and let me know Prize for the closest bar ☺! Procter & Gamble - Thomas Methner European chocolate Little VF Quiz – rough solution How many people are in the room? Who had no coffee yesterday? Who had 1 coffee drink / 2 coffee drinks / 3 coffee drinks / more than 4 coffee drinks? What’s the formula for volume? Population Penetration Consumption rate Just out of curiosity: How many insomniacs do we have in this group? ☺ Procter & Gamble - Thomas Methner Agenda Concepts & processes to think about the future Forecasting at the center of business decisions Talk and listen to your mother – it will improve the quality of your forecast significantly Forecasting as an ongoing process of an entire team Key boundary conditions – any way to overcome them The diversity of Europe – France is not Italy is not Germany … Key messages to take away Procter & Gamble - Thomas Methner Potential Volume Forecasting Frameworks Volume = Market Size * Market Share But what if you don’t know the market size? Or even the market? Procter & Gamble - Thomas Methner Potential Volume Forecasting Frameworks Volume = Market Size * Market Share But what if you don’t know the market size? Or even the market? Volume = HH Population * Penetration * Buying (Consumption) Rate Commonly used with Household Panel data For new products, trial and repeat as well as purchase frequency and transaction size are not clearly separated Procter & Gamble - Thomas Methner Potential Volume Forecasting Frameworks Volume = HH Population * Trial * Trial Transaction Size + Trying HHs * Repeat * Repeats per Repeater * Repeat Transaction Size Components are all measurable and to be tracked via Household Panel data Easy to isolate effects of idea / concept and product Foundation of BASES model Procter & Gamble - Thomas Methner Concepts and processes to think about the future Before I try to give you some perspective here, let me ask you a trivial question … Procter & Gamble - Thomas Methner What is Volume Forecasting? ??? Procter & Gamble - Thomas Methner An attempt for a comprehensive answer … Assessing the landscape and culminating all existing knowledge for any new initiative in a structured way leading to the most realistic/achievable ‘size of the prize‘ estimate at any time throughout the initiative management process Procter & Gamble - Thomas Methner Are the following situations familiar to you? Your F&A counterpart has calculated that we need to achieve 1200 MSU for a new Hair Care line extension in the UK in order to deliver the missing $15MM NPV in the respective initiative portfolio for the next 2 years Your business team leader has told the whole team that the new-to-the-world OTC product currently being developed by R&D is going to deliver at least 5000 MSU in the US in its first year in 3-4 years time from now Procter & Gamble - Thomas Methner The Challenge How do you make sure that business teams work against stretched, but still achievable goals? How do you find the appropriate balance between ‘advocacy’ and ‘realism’? Procter & Gamble - Thomas Methner Forecasting at the center of business decisions Who When How What Procter & Gamble - Thomas Methner Key players for Volume Forecasting Market Research / Marketing / R&D / Finance / Product Supply / Demand Planning / Media / Sales … External Experts (BASES / Novacion / AC Nielsen / IRI / Category Experts / Universities …) Determine a leader for this VF process Most importantly: Your Mom ( = real consumer = common sense!!!) Procter & Gamble - Thomas Methner When Discover to do Volume Forecasting Throughout the whole initiative management cycle! Initiative Management Discover Assess & Design Qualify C&U/BASES II Concept Testing / BASES I Ready Launch Launch Manager Volume Forecasting Degree of risk and data available determine tool, process and team selection Procter & Gamble - Thomas Methner How to do Volume Forecasting Start as early as possible by bringing all available knowledge together systematically … Utilize appropriate benchmarks Update continuously with new information becoming available Use more sophisticated tools later in the process Final degree of sophistication depends on risk associated with the initiative But most importantly: Always keep your Mom engaged! Procter & Gamble - Thomas Methner What to do in Volume Forecasting Most important question to ask throughout the process: What if …? Do not provide just a number but several scenarios and make the team prepare for all scenarios Think out of the box (engage ‘strangers’ (in addition to your mom) with your team, go beyond your imagination with regard to competitive reaction, …) Be honest and upfront within the business team Stop an initiative as early as possible where necessary Procter & Gamble - Thomas Methner A first short summary Volume Forecasting is a multi-functional business team effort managed by a clearly assigned leader It is an ongoing process within your initiative management cycles Sophistication of tools depends on risk to be managed Each initiative is different, the art is to determine which of these differences matter versus the benchmarks from the past and the anticipated trends in the future Always engage your mom your forecast accuracy Procter & Gamble - Thomas Methner this will significantly improve Let’s revisit the VF Framework Volume = HH Population * Trial * Trial Transaction Size + Trying HHs * Repeat * Repeats per Repeater * Repeat Transaction Size How do you estimate trial & repeat volume? Procter & Gamble - Thomas Methner What drives trial Underlying Potential – Consumer Appeal Consumers have to want you to buy you Distribution Consumers have to find you to buy you Awareness Consumers have to know about you to buy you Promotion Unusually strong or weak promotions drive higher or lower trial Procter & Gamble - Thomas Methner What drives repeat / repeats per repeater Product Acceptance Consumers have to like you to buy you again (and again and again …) Trial Timing The earlier the trial, the earlier they can buy you again Category Purchase Frequency Size and Availability of Your Product Range Promotion Procter & Gamble - Thomas Methner What drives transaction size Number of packs bought per purchase Preference by SKU / Distribution by SKU Promotion Procter & Gamble - Thomas Methner • What is the most important overall component in determining the volume potential of an initiative? Category Purchase Frequency Marketing Support Repeat Trial Procter & Gamble - Thomas Methner • What is the most important overall component in determining the volume potential of an initiative? Category Purchase Frequency Marketing Support Repeat Trial Procter & Gamble - Thomas Methner Fewer people purchase in long PC categories within a given time (we mostly measure one year). Household Penetration Sales Dynamics of Long Purchase Cycle Categories 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% <30 This leads to lower trial / penetration rates in long PC categories. Procter & Gamble - Thomas Methner Average Percent Trial Source: BASES 30-49 50-69 70-89 90+ Purchase Cycle (in Days) 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% <30 30-49 50-69 70-89 90+ Sales Dynamics of Long Purchase Cycle Categories All other things being equal, a mediocre Paper Towel concept will lead to a much higher trial in Year 1 than an outstanding Cold Remedy concept. Average Penetration The more often a category user is in the market, the more chances there are to convert her to become a buyer of our product. With longer purchase cycle items, there are fewer chances for conversion. Paper Towel Cold Remedy 0 Procter & Gamble - Thomas Methner 2 4 6 8 10 Annual Category Purchases/Buyer 12 14 By the way … Given that Category Purchase Frequency is so important, do you / your business teams always spend some quality time for your initiatives in determining what the category is? Whitening Toothpaste Crest Whitestrips Vicks Red Energy … Procter & Gamble - Thomas Methner Key Boundary Conditions – how to overcome? In order to increase Category Purchase Frequency (and thus the purchase frequency of all products in the respective market!), you need to invest long-term as in almost in all cases you need to establish some habit changes How likely is this going to happen? Do you have successul examples from the past? Procter & Gamble - Thomas Methner The Diversity of Europe For each category in which P&G is engaged in Europe, the key challenge is to detect the country specific differences in consumer behaviour and attitude in order to make our global brands successful in each market Detailed analyses of BASES show that there is no universal pattern to accurately predict trial, repeat and thus volume from one major European country to another Procter & Gamble - Thomas Methner The Diversity of Europe Thus forecasting in Europe is not just extrapolating from one or two lead countries to the other countries (this also holds true for extrapolating from or to the US) The business team needs to invest rigor and quality time in forecasting for each major country You need to find your mom in each country ☺ Procter & Gamble - Thomas Methner Key messages to take away Volume Forecasting is most powerful and robust as an ongoing multi-functional process with well-educated business partners Sophistication of forecasting tools depends on risk to be managed Category purchase frequency is the most important overall component in determining your volume potential make sure you define the category right! France ≠ Italy ≠ Germany ≠ … Finally : Always listen to your mom! Procter & Gamble - Thomas Methner T H A N K Y O U !!! Procter & Gamble - Thomas Methner