Knowledge Bank Blog, Behaviour Change, New Product Launches, Channel Execution

The Importance of Being Realistic

Are you setting realistic expectations?

Yesterday was the first day of the 2018 World Cup.

Expectations for England this time around are muted.  Yes, some of the England players say that they are aiming to win it.  But most pundits, fans (and many players) would probably see a gracious quarter final exit as success.

It hasn’t always been this way.  For the last 52 years the pre tournament hype has been huge.  This has led to high expectations for the England team.  However, the higher the expectations, the greater the fall can be.

And it’s fair to say that England have had some pretty big falls in recent years.  Thrashed by Germany in 2010, not making it out of the group in 2014, beaten by a country with a population of 300,000 in the last Euros.

The science on expectations is mixed.  Some studies suggest that higher expectations lead to an increase in performance.  Set your goals high and you will achieve more than you think you can achieve.

However, the higher you set your expectations, the more chance you have of not meeting them.  There are 32 teams in the World Cup.  If they all have the expectation of winning it, 31 of them will fail.  No matter how well they do.

So, how do you square this?  Have expectations.  But make sure they are realistic.

Why are we talking about this?  In our industry, we often have high expectations.  Expectations about company performance – e.g. we are going to double the size of our business in the next 5 years.  Expectations about brand performance – e.g. we will drive double digit growth next year.  Expectations about individual activities – e.g. our new product will bring lots of new consumers into the category.

There is nothing wrong with setting expectations.  But, they need to be realistic.  Set a stretching target for company performance.  But be realistic.  Have a strong growth ambition for your brand.  But be realistic.  Have faith in your innovation.  But be realistic.  Don’t set yourself up to fail.  Give your expectations a decent chance of being met.  Then exceeded.

So, where can you be more realistic?

Be realistic about the behaviour change you can achieve.  To properly drive category growth, you need to drive consumer behaviour change.  But you need to be realistic about the level of behaviour change you can drive.  What are consumers doing now?  What do you want them to do in the future?  What is the level of change required?  How hard is it going to be to drive that change?  How long will it take to drive it?  Once you have a view on this, set a realistic ambition for the behaviour change.  Then use that to size how much the behaviour change is worth.

Often manufacturers think retailers want to hear big growth ambitions.  So, they set them.  But, is a category that has been declining 1-2% a year for the last few years, suddenly going to grow 5%+ a year over the next few years?  Unlikely.  A retailer would much prefer a realistic growth ambition.  An ambition that they can create realistic plans for.

Be realistic about what your NPD can achieve.  A lot of unrealistic NPD plans get created.  Plans that over estimate the sales the new product can deliver.  That say a lot of these sales will be incremental.  These plans are often based on consumer testing that asks if consumers would buy the product.  It sounded pretty good, so why wouldn’t a lot of them say yes in the concept test?  Even at the (much higher…) price this product will ask for.

This is all fine, until a shopper gets to the shelf.  They are faced with the choice of buying the new product instead of their existing product.  They really like their existing product.  The new product is 50% more expensive.  So, what do they do?  They buy their existing product.  Even though they said they liked the new product and would pay the higher price in the concept test.  The NPD target now looks a lot less realistic.

Be realistic about what you can deliver in store.  We’ve all seen the fancy conference presentation with the great category merchandising solution.  It is a solution that was probably only delivered in one store – too complex and expensive to roll out.  Or it was a great visual from a design agency that never even made it into the first store.

In a recent category strategy project, we spoke to a couple of retailers to get their inputs.  They gave us some really good views on the opportunities for category growth.  They also gave us a polite, but very clear, watch out…”Don’t come back to us with a whizzy fixture solution.  It will never get implemented”.  Fair enough, right?  The fancy stuff makes for a great presentation.  But the fancy stuff doesn’t make for great implementation.  Retailers want simple solutions.  Categories need simple solutions.

We are not saying don’t be ambitious.  With the right ambition, you can go further than you can without it.  But the right ambition is a realistic ambition.

England can’t win the World Cup.

Or can they…?

Feel free to forward.  Have a great weekend and speak to you next week.