Taking the guesswork out of strategy building

A friend of mine is an airline pilot, and he maintains that the biggest problem he has in a real emergency is reminding himself he’s not in a flight simulator. During any flying situation he can keep amazingly calm because he’s been through it many times before, in a training environment. Simulation technology has also proved its worth in Formula One racing. Driver Jacques Villeneuve mastered unfamiliar circuits during his first season long before he was ever strapped into a car by “driving” computer simulations.

Likewise marketers can be empowered by desktop computer simulations which can evaluate the impact of marketing decisions, such as pricing, advertising, and distribution, before making them a reality.

This simulation toolkit enables marketing directors to optimise prices by SKU (stock keeping unit) across a range of products or calculate optimal budgets for a portfolio of brands, examine the different competitor reactions and quantify the impact on sales growth, value and profitability. These tools are particularly useful when setting budgets and informing media decisions and recommendations.

Simulation tools can also draw together different elements of a client’s business (such as the different business units of a bank) and can be linked directly across frontiers to create a European media management resource or allow direct access between a marketing director and his agency.

These tools have come about because of a revolution in econometrics. Increases in PC computing power enable possible outcomes of marketing models to be estimated easily, and improvements in the quality and quantity of input data – weekly or daily point of sale data, loyalty card data and actual customer orders for example are now easily accessible – mean forecasts are increasingly accurate.

Media strategy and expenditure is becoming a boardroom issue for major advertisers, and computer simulations take a lot of the uncertainty out of these decisions.

Simulation technology has two implications for advertising and media.

First, desktop simulation of the profit and loss implications of advertising and marketing strategies puts greater pressure on agencies relying on less rigorous thinking to justify their recommendations. Media agencies will no longer be able to get away with half-baked ideas.

Second, because simulation tools can be updated with weekly or even daily sales and media data, as fast as the market permits, media is moving into an environment where media plan ning for a particular product for a particular time is a reality.

Strategy building will no longer be based on marketers’ whims but on hard facts and results.

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