How supply chain leaders can leverage marketing data and analysis to improve forecasting accuracy and planning effectiveness
Supply chain leaders often overlook the data gathering, standardizing, and analysis led and executed by their own company’s Marketing department. Often times, the supply chain side can struggle to understand how to use marketing data.
Despite the CMO’s deep interest and efforts in collecting and understanding customer data, their analysis may not be a contributing input to Sales & Operations Planning, which is meant to align goals of the Sales organization with realistic operational capabilities. Failing to consult Marketing leaders when constructing demand forecasts, however, is a misguided approach that will result in less-than-accurate projections and a plan that is fated to fall short of expectations.
One of the many functions of Marketing is to shape customer demand. Whether they need to increase the number of sales, adjust pricing, or promote specific products; CMOs rely heavily on customer data, both demographic and behavioral, to model, build, and test customer journey scenarios – including combinations of customer profiles, marketing channels, and product positioning – that will drive optimal demand.
New Product Introductions
When arguing for more Marketing involvement in S&OP, Downard and Kune mention that “although forecasts for existing products can always be improved, nowhere is this collaboration more important than for the forecasting of new product sales. Benchmarking indicates that median forecast accuracy for new products ranges from 9% to 22% lower than for existing products, depending on the industry.” 1
New products are usually developed for a reason – either there was existing demand not being met or a potential new opportunity was seen. Hopefully, an immense amount of data collection, standardization, and analysis has already taken place before product prototypes are even put to paper.
With this level of investment in understanding demand for new products, why not leverage the customer profiles, regional adoption forecasts, and price-point recommendations already presented by Marketing to carry out the Sales & Operations functions as smoothly as possible?
Including the Chief Marketing Officer
We can draw out a list of ways to convince Marketing leadership to join the S&OP discussion. We can tie key S&OP goals to values all Marketers hold dear, like the customer experience, overall cash flow (ability to invest), and brand perception. By suggesting S&OP’s improvements to KPIs like Perfect Order Fulfillment and Order-to-Delivery Time, you might convince the CMO to take a seat at the planning table. But chances are, they won’t need convincing.
Marketing views Sales as their internal customer. Because both functions ultimately measure success by revenue, Marketing already shoulders the burden of aligning their efforts to Sales plans. It may actually be that your CMO has wanted more input into the operational side of the business to ensure customers are, in the end, delighted.
The Business Case for Demand Forecasting