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Forecasting the future for profit - SCIP presentation
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Transcript of Forecasting the future for profit - SCIP presentation
© Copyright 2016 Milner Strategic Marketing Ltd
Forecasting the Future for Profit
Jonathan Davenport
Milner Strategic Marketing
10th May 2016
2© Copyright 2016 Milner Strategic Marketing Ltd
• Milner Strategic Marketing Ltd is a business
consultancy that specialises in working with
technology companies
• Clients want help with market analysis, strategy
and marketing programmes
• Extensive experience of forecasting markets with
high levels of accuracy
• Acknowledged experts: materials widely published
• I have built over 50 market models over the last 8
years with forecast models containing ~15m cells
Milner Strategic Marketing Ltd
QUESTION:
Forecasting the Future for Profit
Which of your
companies has its
own market model?
WHY A
MARKET
FORECAST
MODEL?
Forecasting the Future for Profit
5© Copyright 2016 Milner Strategic Marketing Ltd
What should Blockbuster’s market forecast have
looked like?
DISCUSSION
POINT:
Forecasting the Future for Profit
Can you think of
other companies that
failed because they
did not understand
how their target
market would
evolve?
7© Copyright 2016 Milner Strategic Marketing Ltd
Consumer adoption of technological innovations
can be predicted
Consumer product S-curves Source: North (2012)
8© Copyright 2016 Milner Strategic Marketing Ltd
A market forecast model provides a detailed understanding
of future consumer and competitive behavior
WHERE TO
GATHER
MARKET
SIZE DATA?
Forecasting the Future for Profit
10© Copyright 2016 Milner Strategic Marketing Ltd
Secondary research collects data on the size of
customer base and competitor position
Customer-focused data Competitor-focused data
Company Website
Company Internal Data
Social Media
Trade Press
Industry Analysts Popular Press
Statistics Authorities
11© Copyright 2016 Milner Strategic Marketing Ltd
Primary research provides insights into customer
behavior and competitor trends
Channel Partners
FOI
Customers
Internal
Experts
Industry
Experts
Internal
Experts
Customers
Customer-focused data Competitor-focused data
Structured Interviews
Surveys and Analysis Suppliers
DISCUSSION
POINT:
Forecasting the Future for Profit
What challenges do
you face in your
company – too much
or too little market
data?
HOW TO
CONSTRUCT
THE MODEL?
Forecasting the Future for Profit
14© Copyright 2016 Milner Strategic Marketing Ltd
Understand your market, which needs to be
precisely defined in the model
Total Available Market, Served Available Market, Target Market
15© Copyright 2016 Milner Strategic Marketing Ltd
Markets are complex. Identify the structural elements
that are relevant and bespoke to your market
GeographyGeography by Sector
by Product Type
2010 2019
Ma
rket S
ize
(G
eo
gra
ph
y,
Se
cto
r, P
rod
uct T
yp
e)
Product Type C
Product Type B
Product Type A
2010 2019
Product A
Ma
rket S
ize
(G
eo
gra
ph
y, S
ecto
r,
Pro
du
ct T
yp
e, P
rod
uct)
Geography by Sector by
Product Type by Product
2019
Country G
Country E
Country A
Ma
rket S
ize
(G
eo
gra
ph
y)
Country C
Country D
Country B
Country F
Geography by Sector
2010 2019
Ma
rket S
ize
(G
eo
gra
ph
y,
Se
cto
r)
Sector E
Sector C
Sector B
Sector D
Sector A
Other Product DRest of World
N=6 N=3
Product B
Product C
2010
N=4N=8
16© Copyright 2016 Milner Strategic Marketing Ltd
The model provides a detailed breakdown of sales
volumes by geography, sector, product type and product
DISCUSSION
POINT:
Forecasting the Future for Profit
Would you describe
your market as
emerging or mature?
WHAT ARE
THE KEY
FORECAST
TECHNIQUES
?
Forecasting the Future for Profit
19© Copyright 2016 Milner Strategic Marketing Ltd
Scenario planning helps you anticipate the
dynamics of different potential futures
The Day After Tomorrow
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Cras dictum enim et condimentum pretium. In commodo id augue nec sagittis. Maecenas
pellentesque metus sit amet ex sagittis sagittis. Ut eros purus, mollis quis sem at, tincidunt
tincidunt nisl.
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diam. Aliquam a massa quis magna tempor fermentum. Ut venenatis turpis id dolor laoreet, et
placerat orci cursus. Sed mi magna, ultricies et rhoncus et, finibus in velit. Quisque sem enim,
egestas consectetur dignissim sed, luctus vel tortor. In hac habitasse platea dictumst. Curabitur
tempus lobortis dapibus. Pellentesque habitant morbi tristique senectus et netus et malesuada
fames ac turpis egestas. Nunc in tortor vestibulum, tincidunt lorem a, feugiat nisi. Maecenas
molestie mattis leo, ut rhoncus orci pellentesque ut. Vestibulum porttitor, dolor eget hendrerit
ultrices, nisl magna porttitor sem, id pretium urna neque vel nisl. Morbi id diam venenatis nulla
vestibulum finibus eu sed diam. Integer hendrerit bibendum libero, sit amet accumsan quam.
Vestibulum egestas molestie velit nec varius. Integer rutrum, arcu vitae posuere finibus, arcu
lacus commodo elit, in posuere eros neque in augue.
Describe each scenario
Analyse potential scenarios
Identify critical variables
Variables
Historic sales
Consumer
Adoption Theory
Market
penetration
Seasonality
Country
demographics
Economic factors
Forecast the impact of scenarios
1
2
3
4
20© Copyright 2016 Milner Strategic Marketing Ltd
Forecasting Emerging Markets: Diffusion of Innovation and
Market Churn provides a robust approach for new tech
New
Adopters
Total
Demand
Market
Churn
Innovators
(2.5%)
Early
Majority
(34%)
Late
Majority
(34%)
Early
Adopters
(13.5%)
Laggards
(16%)
Market Churn:
Technology has a predictable life cycle. Milner analyses the
churn (replacement) rate, which is affected by product durability
and technology upgrade, to forecast the long-term sales
demand for replacement products.
Total Demand:
The total demand forecast takes into account both sales of new
and replacement products over time.
New Adopters – Diffusion of Innovation:
According to Diffusion of Innovation, the adoption curve can be
broken into five sections of adopters with different
characteristics and behaviours, affecting the market dynamics.
The curve predicts the proportion of the target population that
will adopt the new technology over time.
Diffusion of Innovation and Market Churn Methodology
21© Copyright 2016 Milner Strategic Marketing Ltd
Forecasting Mature Markets: Anchor Metrics can be
used to calculate sector demand
Anchor
Metric
Sector
Demand
Output
Multiplier
Anchor Metric:
A unit which allows us to scale the size of the sector
and understand the market trends e.g. car
production.
Production Output Multiplier:
The amount of product used in a single anchor
metric point e.g. number of widgets per car.
Total Sector Demand for one time period:
The sector’s anchor metric is multiplied by the
appropriate production output multiplier.
Total Sector Demand over time:
The sector demand is anchored to changes in sector
size, by the sector anchor metric. This allows
changes in demand over time to be calculated.
The Anchor Metrics Methodology
DISCUSSION
POINT:
Forecasting the Future for Profit
What are the key
drivers that influence
customer purchasing
behaviour in your
markets?
HOW TO GET
BUY-IN?
Forecasting the Future for Profit
24© Copyright 2016 Milner Strategic Marketing Ltd
Analysis of the results yields valuable and
sometimes unexpected insights into the marketM
ark
et S
ize
Se
cto
r S
ize
Pro
du
ct T
yp
e
Siz
eP
rod
uct S
ize
Market Units Market Value
25© Copyright 2016 Milner Strategic Marketing Ltd
Building credibility of the model and developing
data-driven recommendations ensures buy-in
Model
results
and
analysis
Conclusions and
recommendationsDiscussion
-20.0%
-10.0%
0.0%
10.0%
20.0%
0
2,000
4,000
6,000
8,000
CountryA
CountryB
CountryC
CountryD
CountryE
CountryF
CountryG
Other
Sale
s V
olu
me (
un
it)
Forecasting Accuracy
Forecast 2013 Actual 2013 Forecast 2014 Actual 2014 Forecast 2015
Actual 2015 Accuracy 2013 Accuracy 2014 Accuracy 2015
0%
5%
10%
15%
20%
25%
30%
35%
Country ACountry BCountry CCountry DCountry ECountry FCountry G Other
Mark
et
Sh
are
of
Un
it S
ale
s
Triangulation of Model against Analyst Market Share Estimates (2015)
Analyst ReportEstimate 2015Milner Model Estimate2015Internal Estimate 2015
Data-driven conclusions and recommendationsTriangulation ensures forecasting accuracy
DISCUSSION
POINT:
Forecasting the Future for Profit
How would this sort
of information help
you in your day job?
WHERE ARE
THE
OUTPUTS
USED?
Forecasting the Future for Profit
28© Copyright 2016 Milner Strategic Marketing Ltd
The forecast output is valuable to all departments. Using
one data source means the whole company is aligned
3 key applications of model output
• Supporting an internal
investment decision1
• Developing the
product roadmap2
• Identifying revenue
growth opportunities3
29© Copyright 2016 Milner Strategic Marketing Ltd
2008Evaluating a Business Unit
- To underpin an internal decision
about whether to invest in or divest
one of its Internet Sector business
units
Practical examples of using a market forecast
model
2014Forecasting the Smart Phone and
Tablet Markets
- To understand the buying behavior
across different price points,
vendors and operating systems
2015Gauging Revenue Growth
Opportunities
- To identify the global market
demand for ceramic fibre used in
high temperature and fire protection
• Growth in demand from
emerging markets, e.g. China
and India
• Change in vendor dynamics –
16 key vendors
• Change in consumer buying
behavior – 11 price points, 11
operating systems
• The rise of Android operating
system was identified
• 27 individual countries across 4
regions were analysed to
identify geo hotspots
• Revenue opportunities in 11
sectors by material type (3) by
product form (8) were examined
• Detailed pricing analysis
revealed market trends and
Morgan’s price premium
• Key market forces were outlined
• The impact of the recession on
sales was quantified
• The market size of the unit was
estimated both in volume and
value terms
• Four commercial options were
provided
DISCUSSION
POINT:
Forecasting the Future for Profit
Where does the
strategic decision
making function sit
within your
company?