Paralyzed by indecision? Terrified of making the wrong choice? Making the right business decisions can mean the difference between soaring profits or significant losses. Luckily, in this issue of Insider’s Corner, Peter gives us a few helpful tips to make decision-making easier.
For driving trends in the auto industry, read Peter’s previous post here.
Decisions, Decisions, Decisions!
No doubt you have heard about the poor gastronome who starved to death equidistant between two three-star restaurants with a platinum credit card in his pocket. He just couldn’t make up his mind which one would be best.
Decisions, decisions, decisions! Sometimes they are painfully difficult to make when the options appear to be equally delicious. But letting them freeze us into inaction is never the best solution even if we are tempted by the old adage – when in doubt, don’t.
Our current pandemic malaise and whether, how, and/or when to actively reengage with the commercial world demands a bundle of complex decisions. Planning for the likely impact of these decisions on our businesses is critical, especially when resources are in short supply. One thing we need is some process for evaluation, some primary tools to help us address the big issues.
Risk Vs. Reward
I had a colleague, the CEO of a very large publishing firm, to whom outsiders and underlings would bring elaborate presentations of whatever they were pitching. Courteous to a fault, he would apologize for changing the plan of the meeting, push the offered presentation materials to the side and ask the presenter to “tell me a story.” He had found from long experience that however compelling the supporting data, success or failure would likely depend on the “story” – the often data-unquantifiable but essential essence of the proposition.
He would always probe for two key elements – the likely reward if successful and the accompanying risk, not solely in financial terms but also in ways that would impact company culture.
Probing the risk/reward ratios of proposed actions is standard procedure for investors whose prime metric is monetary profit or loss. It is less prevalent in planning initiatives which have more layered and nuanced potential outcomes and where the risk appetite framework is less developed. It is admittedly made more difficult given the unsettled conditions which hang over the current marketplace.
That doesn’t mean we shouldn’t accept the challenge. It could provide major benefits and minimize disastrous dangers. A wise friend who liked to go off to the casino from time to time had a simple rule: never wager more than you can afford to lose. Determining the reality of what we can afford to lose is never simple. Probably the best low-cost, high-impact planning investment marketers can make today is to gather the maximum amount of data on their business areas and determine how Covid-19 has already changed them in the short term and is likely to change them further in the long term.
A Tale of Two Industries
Take E-Learning and the Health and Fitness industries for examples. Any of us with kids at home and schools closed have probably had more than enough E-Learning than they might have wished. According to the World Economic Forum, “Even before COVID-19, there was already high growth and adoption in education technology, with global edtech investments reaching US$18.66 billion in 2019 and the overall market for online education projected to reach $350 billion by 2025. Whether it is language apps, virtual tutoring, video conferencing tools, or online learning software, there has been a significant surge in usage since COVID-19.”1
Except for already large players who will likely be concentrating on their existing market sectors, those with the greatest growth potential, taking advantage of this expanding market is likely to demand searching for all the niches that have a high profit dynamic and a low-risk cost of entry and where potential customers can be carefully defined.
Much the same could be said for the highly fragmented Health and Fitness markets. The pandemic has certainly raised awareness of the need for activities which can be done at home including everything from exercise and meditation to medical consultation. Many consumers, especially older cohorts who used to go regularly to gyms, Pilates, Yoga or exercise classes and visit their doctors’ offices are increasingly tempted to have these services safely at home. Finding who they are and what now appeals to them should inform all planning.
If you can define and tell your “story”, perhaps the best tool for your future marketing planning will be to isolate its key elements into simple statements and then develop a risk and a reward profile for each. If, for example, one of the risks is a cultural change in the previous distribution chain, then which alternatives offer the optimum reward at a risk you can live with? Your choice may mean lower sales but permit higher margins or that you’re joining a consortium rather than going it alone.
Don’t Forget Your Swimsuit
Many years ago I was given the enviable assignment of developing and launching a negative option* music club in Brazil. With the major competitive advantage of a very low-cost access to market made possible by the club’s owner, a large media company, potential rewards looked amazing against what appeared to be a negligible risk. As planned, memberships surged at very economical costs per member. Blinded by the likely profit and imagined bonuses, we pushed the pedal to the floor and promoted very aggressively.
*Negative option businesses send consumers unsolicited goods and services that they then must pay for unless they expressly cancel the subscription. If consumers do not cancel, then they must pay what they are billed.
Warren Buffet has said famously, “Only when the tide goes out do you discover who’s been swimming naked.” Not having given sufficient planning attention to the risk of poor payment at the back end, when this tide went out, the substantial bad debt write-off showed us to be very naked indeed. Had we done better risk/reward planning in less of a euphoric hurry, this could and should have been avoided.
While most marketers have an optimistic tendency to focus on the rewards and give the lion’s share of their creative energy to thinking about the specifics of their splendid promotions, a more disciplined planning tool is to transform your “story” into a low-cost, no bells and whistles series of tests to a tightly defined marketplace of existing customers and prospects.
The decisions driven by the results should guide you into an expanded and profitable program.