Relevant Models in a Dynamic Marketplace

HBO’s hit TV series Game of Thrones recently achieved two milestones: the best first-day DVD sales in HBO’s history and the most frequently pirated show of 2012. Should HBO be celebrating its victory or mourning its loss of revenue? Battening down the digital hatches or making it even easier for people to stream online?  By the by, Netflix just surpassed HBO in subscriber numbers. Hulu’s paid subscribers just doubled reaching 4 million, and the lawless terrain of media consumption has entertainment leaders like Harvey Weinstein blasting Google for “stealing content.”

Technology, economics and social interaction now collide, changing how and when we consume and pay for entertainment. This interconnected, webby world wreaks havoc on traditional business models, making it seem nearly impossible to predict and make safe choices. And yet, somehow, we must.

For researchers, the name of the game is: accurate navigation tools. Our HBO example shows the importance of always revising models to accurately frame realities and forecast alternative futures. With changing landscapes confronting numerous industries (as our blog from a few weeks ago explained), warp-speed marketplace changes allow new hero brands to rapidly emerge and replace former favorites. Companies must seize opportunities while minimizing risks. The stakes are high, and the unknowns many. The upside? It’s an exciting time to be in research.

Because trends are now variables, every analysis must be challenged by the question: is this model going to be dependable? Whether developing market segmentation, key driver analysis or demand forecast models, savvy businesses would be wise to incorporate new predictors.

When considering your course of action, remember:

• Make sure your model is relevant. Regularly refresh both your models and assumptions to ensure dependable navigation tools that can accurately guide decision making. Relevant tools must reflect reality.
• Refresh without reinventing. “We absolutely must look at both the underpinnings of the model and the market it’s designed to represent.  Remember, if the underpinnings remain sound (e.g., box office remains the greatest predictor of physical and digital sales), then the model should not be tossed, but rather adjusted to account for market changes (such as disruptive technologies like video streaming).” –Peggy Einnehmer, LRW Senior Vice President and General Manager, Entertainment Research
• Challenge long-held beliefs about how your market works. Look for fissures in the belief system to see where erosion could occur. Even things as simple as the demographic realities of your target audience may have changed and could be falsifying your interpretations. Remember the days when we thought primary grocery shoppers were 80% female? Make sure your baseline assumptions remain dependable.
• Be smart about “When external or internal shocks occur, you may need to revise your model…but probably not immediately. The shock needs time to be noticed and adapted to by the marketplace.” –Hilary DeCamp, LRW Senior VP, Global Director of Marketing Science and Methods

When morale and vision cloud in the face of the unknown, resist panic. Instead, keep your So Wits about you, keep calm and research on.