Driver-Based Forecasting Solution Increased Accuracy Of Product Sales Forecast
STRATEGIC BUSINESS PLANNING PROCESS WAS NOT NIMBLE ENOUGH TO ADJUST TO REAL-WORLD CHANGES
A global brand for men’s and women’s safety razors and other personal care products needed to understand their product demand. Due to population changes (westernization in the Middle East resulted in young men now shaving their beards as opposed to traditionally growing them out), it was becoming increasingly more difficult for the client to predict how many people were going to buy razors on a global scale.
Moreover, the client (at the time) owned 80% of the shaving market. As they created newer, more expensive products, they knew they had to cannibalize their own customers, as well as convert competitors’ customers. In order to convert their consumers to a higher price point, the client needed to understand how much marketing to spend in order to drive adoption.
Problem
The client created three-to-five-year models to predict how each product should perform. However, the client was building these models in Excel and each of these models took about three months to create. As a result, they kept falling short in the following areas:
The client was unable to adjust to assumptions. As leadership and stakeholders requested changes, the team could not keep up with their requests and respond accordingly.
The current process was single-threaded, meaning there was one designated person to manage it. As a result, no one could work in parallel and change their respective category assumptions. The entire team had to go through a single gatekeeper.
Not only the did client need to plan for razors, the company also produced personal care products. Those products also needed a model with their own respective marketing spends
Solution
Archetype designed and implemented a driver-based forecast solution linking marketing assumptions, historical performance, and market research data to user share illuminating increased visibility to cannibalization of users across all products, including competitors. Our solution enabled managers to conduct strategic scenarios to identify marketing targets.
Rather than continue to focus the client’s efforts in a relationship database like Excel, Archetype built the model using Oracle Hyperion Essbase. The OLAP’s multi-dimensional database gave the client team the ability to iterate the assumptions daily – and run them again as assumptions changed.
Archetype also incorporated sophisticated math around the marketing spend. By understanding the bottom threshold (the least amount of spending to drive impact) and the top threshold (after this spend, there are no significant gains), Archetype helped the client understand the impact of marketing dollars on cannibalization and growth.
These two databases allowed the team to try out both demand plan and strategic plan assumptions accordingly.
Result
By using driver-based forecasting that brought marketing assumptions to the forefront of forecasting process, Archetype helped the client put an end to “term paper” forecasting.
The client further benefited from the following results:
Increased accuracy
Dramatically reduced cycle times for updating assumptions and forecasting
Any companies can build a budget, but if you turn it in like a term paper, those static assumptions will become irrelevant quickly. By creating models that are more dynamic and accurate, it allows companies to be nimble and adjust to the real world as needed.
