Forecasting a prospective market can be quite tough. Especially if you are a small business that lacks the resources to acquire and use costly third-party database results and analytical software. In some niche markets, data can be even harder to uncover even with these resources at your disposal. For instance, I focus on the drum industry and even though there are a “crap ton of drummer’s out there” –words from an SEO consultant I worked with. It is tough to get empirical evidence on their behaviors. Luckily, I had developed my own forecasting model in grad school and was able to use that when working on my business plan for Spirit and Groove™.
My model follows a four-step process that creates a funnel from a 100% total market through a potential audience to the final stage of prospective buyers. The last step is a calculation I call the “gut metric” that allows me to adjust the data based on a “gut” feeling. Some would argue the use of this step, but I disagree for two reasons.
Number one, data is both qualitative and quantitative. Analytical software rarely includes the qualitative metrics. Algorithms are great, but there is a reason even Google and Facebook continue to seek out ways to model the “human” perspective. Number two, having run my own company, worked for firms of all sizes, and studied the business plans of countless publicly traded brands during my MBA studies, I have a refined understanding of what is actually possible when you have that empirical evidence in your hands and I am able to sift out marketing “pipe-dreams” from that data.
Perhaps the most important, my model aligns with the concept of “underpromise…overdeliver” – a theory I learned with one of the world’s top brands.
While working as a retail specialist and store mentor with Apple, I witnessed firsthand just how powerful this corporate mantra can be. Apple doesn’t simply include it in their employee manual and call it good. No, they drill it into the corporate-wide psyche. As a retail specialist, it is a concept you learn in your initial training before you are introduced to any of their coveted i-products. At Apple, you are taught to always tell the customer their iPhone would be fixed in 30 minutes, even if you are sure it will only take 10. This way, you are able to increase the consumer’s buy-in when you do deliver ahead of schedule, and that is just the tip of their underpromise…overdeliver iceberg.
If you follow the tech giant in the news, especially when earning’s statements come out. You will notice that (somehow) Job’s brainchild regularly outperforms their own corporate estimates. There is no doubt in my mind that part of this phenom lies in a brand-wide “underpromise/overdeliver” mentality.
Business owners and managers often “over-assume” their results will beat expectations. Managers see the glass as half full because their bonuses and growth-potential are directly related to those results. Owners usually adopt the same ideal, but for different reasons. They are emotionally attached to the brand, see things others may not have in their field of vision, and have much more on the line, which forces them to hope for better-than-expected results.
Neither of these are good ways to engage in business. Yes, overhyping serves a purpose in specific sections of the marketing mix. However, overhyping your forecasts with owners can be detrimental. Imagine what an investor would think if you told them you would hit 1,000,000 units sold in the first quarter of 2018, but you only hit half. Now imagine, that happens every quarter. Soon you will lose their confidence…then their support. Now instead, flip the coin. You forecast that you plan to sell 500,000 units in the first quarter of 2018 and you end up selling just over 10% of those figures. To you, it may look like slight gains (maybe even losses, because through your rose colored glasses you were hoping for one-million). However, to that investor you now over-performed. If you continued this method for future quarters and witnessed similar results. Your investor’s confidence would grow exponentially and with that, your opportunity for explosive future growth would be solidified via their willingness to spend more on your ideas.
Remember, the underpromise/overdeliver concept is rooted in marketing and not finance. It is not designed to “cook the books” or to “sell a lemon.” Rather, it is a mantra that your entire team should adopt, so that it will become part of your overall corporate culture and brand. When properly instituted it impacts both sides of the ball. Your customers will constantly be “surprised” by your service while your investors will continue to experience a responsible and growing company worthy of continued investment.