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Decisioning in Volatile Times–Probability, Intuition or Inaction?

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No doubt, we live in volatile times. The complexity, interconnectedness and intricacy of global markets is causing executives around the globe to check decisions once, twice and even delay important decisions because they cannot "peer around the corner." Some marketing executives are asking themselves, "What are the odds of–" to help make tough decisions. Others are saying, "We're in a new paradigm," and "the past is no longer relevant." How are you making critical decisions?


Like it or not, important marketing decisions regarding forecasting, budgeting, hiring and resource allocation must be made for the coming year and beyond.

Marketing executives who sit on the sidelines and watch/wait could be missing some valuable opportunities to stake a claim in new markets, build market share, or capitalize on competitor weakness. Then again, sitting on the sidelines may be the smarter approach.

A common form of decision making is using probability to determine potential outcomes. In a casino–with games of chance–it's pretty easy to figure out the "odds" of beating the house. Outside of the casino, life gets a little messier. We can however, use statistical analysis based on historical data to help us divine the probability of certain events happening (assuming a normal distribution and independence).

In an Edge essay, Dr. Nicholas Nassim Taleb tells us, "Statistical and applied probabilistic knowledge is the core of knowledge. Statistics is what tells you if something is true, false or merely anecdotal. It is the logic of science, and the instrument of risk taking."

"You cannot be a modern intellectual and not think probabilistically," Dr. Taleb declares. But he also counsels us that there are many instances where "statistics don't work–where stats are unreliable, where your knowledge is no longer valid." And judging from the volatility of events in 2008, we just might be in new and uncharted territory where the usual tools and methods just plain don't work.

If you believe 2008 has ushered in a new paradigm where the old rules no longer apply, one is essentially left with two choices: Pattern recognition of a different kind–(intuition) and thereby making decisions "by the gut", or inaction–doing nothing, at least for now.

Is gut decisioning the best approach to plan for 2009? Gary Klein, author of "The Power of Intuition" says, "Analysis doesn't work well in challenging situations where information is scarce, time is short, and stakes are high."

While it is hard to argue that information is scarce, time is definitely of the essence and for many companies; the stakes (i.e. survival) have never been higher.

Lastly, there's always inaction as a completely valid alternative. Many companies are maintaining the status quo, hoarding cash, letting the bodies pile up, and waiting for a better day before committing to major investments.

Every company is different, and every industry has their own challenges right now. But it has been said that challenge is only one side of the coin. Turn it over, and "opportunity" might be staring back at you.

Key questions:
* Given the events of 2008, are we in a new paradigm? If so, do the old rules no longer apply?
* Consumer confidence is at levels unseen since the early 1990s. Is the marketplace, (both B2C and B2B) overly pessimistic?
* In your forecasting models (or mental processes), are you "weighting the events of 2008" more heavily than previous years?
* How closely are you monitoring daily/weekly events to determine whether to ramp up/down your spending plans for next year? What "key event" are you seeking that will be a major variable in your decision making?


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Paul Barsch directs services marketing programs for Teradata, the world's largest data warehousing and analytics company. Previously, Paul was marketing director for HP Enterprise Services $1.3 billion healthcare industry and a senior marketing manager at global consultancy, BearingPoint. Paul is a senior contributor to MarketingProfs, a frequent columnist for MarketingProfs DailyFix, and has published over fifteen articles in marketing, management, technology and healthcare publications. Paul earned his Bachelors of Science in Business Administration from California Polytechnic State University, San Luis Obispo. He and his family reside in San Diego, CA.

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  • by Claire Ratushny Tue Dec 9, 2008 via blog

    Hi Paul, Teddy Roosevelt once said: "In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." Marketers have seen economic cycles rise and fall many times in the past and the savvy know that we don't have the luxury of doing nothing and postponing decision making until times get better. It seems to me companies ought to be considering ways to gain trust among consumers in the face of waning consumer confidence. We are seeing an erosion of trust--at every level--in the face of new challenges never before seen. What commitment can companies make to their customer and how can they get the message across? How can marketers plan campaigns and events around their customers' current concerns? Long-standing, valued brands have achieved longevity and have not only endured, but grown during periods of economic downturn. They have done so because they have earned, and maintained, customer trust.

  • by Lewis Green Tue Dec 9, 2008 via blog

    Paul, Yes, I use historical data. And I use it to account for predicting the marketplace in 2009. However, I don't think my clients hire me because I know the data (although they are glad I do) but because I have a sense (call it gut feeling) not only about what worked yesterday and what works today but what will work next year, as well. Marketers need to be visionary. Some of that vision relies on data; much of it comes from experience, which leads to a 6th sense about what will work next year. As always, Paul, thank you for making me think.

  • by Paul Barsch Tue Dec 9, 2008 via blog

    Claire, great comment on the need to restore trust between entities and consumers. There are many industries (autos, financial services) that need to restore trust and others (healthcare, govt) that need to start building trust from near record lows. How might you suggest companies begin to build/re-build levels of trust with their customers? Consistency, transparency and refocus on quality are a few that come to my mind...

  • by Paul Barsch Tue Dec 9, 2008 via blog

    Lewis, in volatile times, there is something to be said for the quality of "experience" and trusting the judgment of those individuals who have built a nucleus of lessons learned and best practices from years in the trenches. What does your "6th sense" tell you regarding a makeup of the near future? Will it resemble anything like this year or last year, or have we entered an entirely new paradigm? How are you advising clients - slow/steady, make big bets, or sit on the sidelines?

  • by Claire Ratushny Tue Dec 9, 2008 via blog

    "How might you suggest companies begin to build/re-build levels of trust with their customers?" Excellent question, Paul. First, I'd find out exactly what my most valued customers' current concerns/needs/challenges are and seek to fill them better and more meaningfully than my competitors can or will. The game has changed just since the early fall for many customrs. Second, I'd stand by my brand promise, push for consistency in quality, service and marketing my strengths to the customer. Delivering more value than my competitors in customer perception, in other words. Value does not solely equate to price, does it? Most importantly, I'd want to react to customer problems with more immediacy than ever. In other words, I'd show them I respect them and truly value their business. Third, I'd look at what my company's greatest strengths are and reinforce them--right now. Remember, in an economy like ours, people haven't stopped buying but they are buying less and they are buying more judiciously. As markets contract, the perception of greater value in one brand over others may influence a change in purchasing behavior during tough times. That's where smart marketers might pick up more market share, right? Smart companies continue to drive their business in spite of economic challenges. Winning more business now as consumers are vacillating about their past "go to" choices during the present downturn, means good things for the future for the companies with the gumption to do the hard work and go after the business.

  • by Claire Ratushny Tue Dec 9, 2008 via blog

    "How might you suggest companies begin to build/re-build levels of trust with their customers?" Excellent question, Paul. First, I'd find out exactly what my most valued customers' current concerns/needs/challenges are and seek to fill them better and more meaningfully than my competitors can or will. The game has changed just since the early fall for many customrs. Second, I'd stand by my brand promise, push for consistency in quality, service and marketing my strengths to the customer. Delivering more value than my competitors in customer perception, in other words. Value does not solely equate to price, does it? Most importantly, I'd want to react to customer problems with more immediacy than ever. In other words, I'd show them I respect them and truly value their business. Third, I'd look at what my company's greatest strengths are and reinforce them--right now. Remember, in an economy like ours, people haven't stopped buying but they are buying less and they are buying more judiciously. As markets contract, the perception of greater value in one brand over others may influence a change in purchasing behavior during tough times. That's where smart marketers might pick up more market share, right? Smart companies continue to drive their business in spite of economic challenges. Winning more business now as consumers are vacillating about their past "go to" choices during the present downturn, means good things for the future for the companies with the gumption to do the hard work and go after the business.

  • by Paul Barsch Tue Dec 9, 2008 via blog

    Claire, thanks for responding to my query on building customer trust. I love your suggestions to focus on customer intimacy, add more value where appropriate, and reduce latency from event to action. Solid advice on all fronts. Now the trick, of course, is to develop a solid and tangible strategy to achieve each of these goals based on resource constraints and then--execution --(squared)!

  • by Lewis Green Tue Dec 9, 2008 via blog

    I'm recommending that my B2B clients continue to invest wisely in marketing and communications based on what delivered ROI the past 12 months but with an updated message taking into account the economy. Talk most about solutions and less about product.

  • by Johnson Wed Dec 10, 2008 via blog

    What we got here is an economy that's falling into inaction. Companies are geting stalled. One stall ends up stalling another and so on. When everything goes sideways i think we've found bottom.

  • by Paul Barsch Wed Dec 10, 2008 via blog

    Johnson, we can only hope that we've found bottom, right? You have realized that the economy is much more interconnected (within states, regions and globally) than most people think-- giving credence to chaos theorists everywhere that events do domino and sometimes in unexpected ways. I'd still like to know, "Is it different this time, or is this a repeat of bubbles past?" And depending on one's answer to that question, how as a marketer, are you preparing for the imminent future?

  • by Kevin Horne Wed Dec 10, 2008 via blog

    "And judging from the volatility of events in 2008, we just might be in new and uncharted territory where the usual tools and methods just plain don't work. If you believe 2008 has ushered in a new paradigm where the old rules no longer apply" I'm sorry to rain on it, but i think this central theme of the post is fallacious. At its core, Marketing has some long-standing, well-reasoned frameworks and tools. Companies have more than enough consumer data to analyze. There are reams of prior economic data sets for guidance. Returning to these "old rules" would be a good use of time for most marketing practitioners right about now (versus the choices you gave of "gut" or "inaction").

  • by Paul Barsch Wed Dec 10, 2008 via blog

    Kevin, thank you for commenting and I appreciate your POV. When you say, "marketing has some long standing, well reasoned framework and tools" and "reams of prior economic data sets for guidance", are you then assuming the past is a reliable predictor of the future?

  • by Neil Anuskiewicz Wed Dec 10, 2008 via blog

    I think Lewis has it right: experience counts for a lot. However, I do not buy the idea that we are "in a new paradigm" and that research, analysis, and decision making processes should be thrown to the wind. We must continue to use tools that always have been and always will be imperfect. We see where thinking purely from the gut has gotten us. That is not the way forward.

  • by Paul Barsch Wed Dec 10, 2008 via blog

    Neil, thank you for adding to this discussion. Your comment about imperfect tools resonates with me. An executive once complained about the Black-Scholes model most commonly used today for options pricing. His comment was (paraphrased), "We know the model isn't great, but it's all we have." Knowing that the tools and models we have aren't perfect, and even dare I say in some instances flawed to a high degree, as long as they are used as a decision criteria and not as the sole decisioning factor, then something is surely better than nothing... That said, we need to think long and hard about the assumptions feeding our financial/analytical/ and mental models. Do those assumptions still apply?

  • by Neil Anuskiewicz Wed Dec 10, 2008 via blog

    Yes, they are imperfect but in a relatively stable state, they give relatively good results. When things are in flux, there are too many moving parts and the models probably break down a bit. That does not mean you should not still use such models because, as you said, it is "surely better than nothing."

  • by Kevin Horne Wed Dec 10, 2008 via blog

    Paul: Thanks for engaging me a little more on this: "are you then assuming the past is a reliable predictor of the future?" To be clear, what I mean is past economic data should be considered as a guide to different probable scenarios, and not a reliable predictor by any stretch. Let me give one example. So much has already been written that this new period will introduce a new age of frugality and marketers had better plan on years and years of non-premium sales. But when I look back at past recessions and indeed the Great Depression and think a little about the current culture (things like our inability/nonacceptance of putting money away, i.e., savings, I'm more apt to tell people to plan for a return to normal sooner than anyone thinks (to that end, I did a series of posts on my unread blog months ago about planning for the turnaround early 2009). If any of these "spartan" pundits were to show me some back-up, I'd give them a listen. Until then, I see it as more unhelpful noise...although publishers eat it up. Keep in mind also my point about consumer data (as opposed to the economic data). For example, are people seriously predicting that e-mail open rates will change dramatically from April 2008 when compared to April 2009? What about direct mail response? I absolutely believe you can put these "old numbers" into your campaign models next year and not be far off from whatever the "new" reality will be.

  • by Paul Barsch Wed Dec 10, 2008 via blog

    Kevin, you are making some bold prognostications, but why the heck not, since the gloom and doom folks are getting most of the press right now. I love contrarians! You make a good point about how some core micro-metrics likely won't change year over year (such as open rates in email, or response rates for direct marketing etc...) However on a macro basis, we like to assume things will get back to some semblance of normality, that we'll revert to the mean once again and volatility will eventually fade away. This all may happen, and perhaps as quickly as you predict. That said, we must also be on the lookout for a mean that has permanently moved. Hence, the reason why I asked the question to DailyFix readers, "are we in a new paradigm, or do the old rules still apply?"

  • by Neil Anuskiewicz Wed Dec 10, 2008 via blog

    There is a bit of a gloom and doom cottage industry. It is not helpful. I do think Kevin is a bit too optimistic. I think the business cycle will start its upward swing in late 2009 or early 2010. I hope Kevin is right, though. Kevin, what is the evidence for your optimism or perhaps post a link to the blog post where you discuss this?

  • by Neil Anuskiewicz Wed Dec 10, 2008 via blog

    The old rules apply but scaled back. Economic growth has slowed dramatically. Monetary policy will not suffice so the government will step in with Keynesian style investments in infrastructure because it we need it (e.g., bridges) but also to stimulate the economy. In the short run, though, this means less consumer spending and more government driven projects. These government driven (I say driven because contracts will often go to private firms), will result in a higher percentage of the GDP coming from these government projects and less driven by consumer spending. Once these things start rolling the upward swing in the business cycle will begin. I think we will see people try to ratchet back their debt burden and reliance on credit. This change would affect the nature of growth even in the long-run. This is perhaps a healthier and less risky form of consumption. It should be noted that Keynes thought the government should reduce its debt considerably when times are good. Unfortunately, the opposite has happened in recent years, making the challenges of stimulating the economy daunting. It still can be done, though. It is a shame that the budget was not closer to balanced when the economy was in relatively good shape. We would now have more room to invest without as much risk. Having a huge debt burden right when the baby boomers are about to retire is going to really strain social security and medicare. A recession and financial crisis hits and we are deeply in debt. It is too bad that those in power did not think these things through. That said, I do not think the "rules" of marketing have changed fundamentally it is just the game got a lot more challenging and a lot more serious very fast.

  • by Kevin Horne Thu Dec 11, 2008 via blog

    Neil/Paul: Yes it is bold and contrarian, but don't confuse that with "optimistic." It's not in my genes. The original post is here (part 1, followed the next 2 days by parts 2 and 3). http://lairigmarketing.typepad.com/lairig_marketing/2008/10/planning-for-th... I followed that up with a slightly tongue-in-cheek look at NEBR economists unanimously declaring a full-year-2009 recession. That's pretty much money in the bank. Ben Stein was wrong in every single column in 2008 up until the bailout, when all of a sudden he got religion. http://lairigmarketing.typepad.com/lairig_marketing/2008/11/all-you-need-to... Then recently, a quick review of the hard data I am following - some economic, some customer related. Things that have historically coincided with market cycles .... housing inventory, semiconductor supply forecast, etc. http://lairigmarketing.typepad.com/lairig_marketing/2008/11/reading-the-bla... By following these data points continuously, I intend to update my "turnaround" date as needed. Better than a finger in the wind. My preference is not to tell my scant readership to go stick their heads in the sand all of 2009, but act like they've got business to go on the attack and bring in. If you don't ask for budget in January, you're not likely to get it come September.

  • by Paul Barsch Thu Dec 11, 2008 via blog

    Kevin, thank you for answering my question regarding the "trends" you are looking for that affect your decision making and help you make predictions. Your positions are well thought out--so here's hoping your bold and contrarian perspectives come to pass!

  • by Neil Anuskiewicz Thu Dec 11, 2008 via blog

    Kevin, absolutely. Your advice to your readers to ask for budget and keep marketing is bang on the money.

  • by Kevin Clancy Mon Dec 15, 2008 via blog

    A very timely post, Paul. Certainly we're hearing this more and more from clients–"we're in a new paradigm" and "the past is no longer relevant." Especially the last point. There seems to be a growing frustration among marketers that the research that they do is primarily based on past behavioral data. What did Customer A buy? When? How much? How often? You get the picture. The point is marketers walk away with a decent picture of what has been happening, but as for what will happen, well, that's a bit foggy. By no means is this a reason to dump research altogether, however, and go with gut instinct alone. This is just not a one or the other decision. The key for marketers is to ask themselves, OK, we're supposedly in this new paradigm, so what do we need to do differently when it comes to understanding who we want to talk to (because they represent the biggest profit opportunity to our company) and what do we want to tell them about our brand, product, or service. How can we make the research and analysis we do more forward-looking? And the good news is, there are plenty of ways to do this and to come up with insights that will show you where you want to take your brand because that's where the REAL marketing opportunities are.

  • by Paul Barsch Mon Dec 15, 2008 via blog

    Kevin, thanks for taking time from your busy day to post a comment. I've given you a false dichotomy haven't I (data, intuition, inaction) or maybe in this instance a false trichotomy! When using historical data the trick will be how to "weight" the events of 2008, which gets back to my original query of whether we're in a new paradigm, or whether the old rules apply. The chatter in business publications I read seems aggregated around "a return to normality", not allowing for the possibility that the mean has moved, and that we're now in the "new normal".

  • by Shekar Prabhakar Tue Dec 16, 2008 via blog

    A well written topical article. The tendency to either cut deep or choose inaction is high among top management when it comes to marketing. I am of the opinion that marketing especially in these times should not be seen as a current cost but a harbinger of future sales. We need to focus on those opportunities which have gone into a wait and watch mode, and nurture those leads. We need to continue to build trust in the brand so that you are among the top buying choices when things become better. Invest in process improvement if things are slow right now. All in all, I would err on the side of directed action rather than inaction.

  • by Paul Barsch Tue Dec 16, 2008 via blog

    Skekar, thank you for commenting. It's very interesting to read the daily business publications and see how companies are making their bets. Some companies, calling their actions "prudent", are trimming SG&A expenses with a deep knife. Others, like Toyota are delaying the completion of a manufacturing plant in the US. And still others are hoarding cash (like most of the major US financial institutions-- sitting on $600B to lend.) The different industry and company reactions lead me to believe that the outcome of next 12 months is anyone's guess...

  • by Kevin Clancy Tue Dec 16, 2008 via blog

    How to weight the events of 2008. That's a good question to pose to companies. My hope is that folks will let their customers offer some guidance to answer that question. That's not to say that management expertise and judgement don't apply. It's just that whether we are in the "new normal" or in the old, decisions made in a vacuum more often than not lead to less profitable outcomes.

  • by Neil Anuskiewicz Tue Dec 16, 2008 via blog

    A recession is part of the business cycle, albeit this one is accompanied by a financial crisis. As with all past recessions, the cycle will swing up again into recovery. As with past recessions, there will be a lot of people and companies hurt but, when the dust clears, other things will emerge from the ashes. Yes, this recession is a bad one but we have had bad recessions before. We always recover after Schumpeter has done his painful work. The cycle continues: almost a force of nature.

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