Black Ops Newsletter - May 23

Typically we write business plans, budgets and strategy with some level of assumptions built in. This is necessary to some extent, but where we have seen this end in disaster time and time again is when the assumptions are never checked, validated and adjusted.

Here’s an example of how this can escalate very quickly in FMCG:

Say your assumption is that your new product will launch in the market and grow to a 2 UPSPW baseline after 6 months. You model your pipefill and baseline sales based on your 300 store launch and push the button on the production of 31k units and a marketing launch budget of 30k (a healthy 10% of top line projection).

You then get to the end of the 6 month period, look at the results and sales data only to find you have only sold 360 units (0.2 UPSPW), are paying huge storage fees on the 30k units still in the warehouse, you have a top line sales gap of 300k in your budget, have spent 10x your actual sales value in marketing and have a deletion letter from your retailer.

How did it go so wrong so fast? 

We see this happen all the time in FMCG businesses and we’ve experienced it ourselves. In a year where we’ve seen extreme rises in interest rates and costs of living, resulting in a softening retail and ecommerce market - it can be even worse.

Here are some of the things we have put into place to manage the ‘Assumption Disaster’.

1. Validate before you launch - before you launch any new brand or products, you must check in with your target customers to test your visual communication and functional product cues (we recommend Design Sprints for this), but also to test your hypotheses and use these to build intelligence around your forecast.
2. Monthly Check In - review your forecasting assumptions every month to see if they are still true and to what extent, be prepared to soften or increase your sales number or marketing budget accordingly. This way you add real data to your assumptions every month and move closer and closer to an accurate year end forecast.
3. Perpetual Beta - the most important skill to develop to become an expert forecaster to become committed to the process of updating your beliefs and self-improvement. Research found that this method is roughly three times as powerful a predictor as its closest rival, intelligence. (Read more about it in the book Superforecasting).

PS. Do any of these issues sound familiar? Need fresh eyes or a second opinion validating your assumptions? Chat to us.

PPS. Did you all see the recent half yearly results released by Coles and Woolworths?

Key Takeaways:

Woolworths supermarket profits were up 3.2% and Coles increased by 4.6%.

Woolworths B2C e-commerce sales decreased by 7.5%. Coles e-commerce sales decreased by 6.6% over the same period. We are seeing this everywhere, customers are returning to shopping in stores and for the first time since COVID we've seen online sales decline....

SLEEP - this macro trend is continuing to grow in momentum

SLEEP MASKS - Joel recently bought a sleep mask - why? - to get better REM sleep.

Here's how it went. "It blocks out literally all the light from your eyes, am definitely sleeping better, waking up more refreshed and more productive at work". He could be onto something...

Therabody has just released a new product called Smart Googles, tapping into the fast growing sleep meta trend, the product claims to improves sleep quality with a gentle temple massage which delivers slow-wave vibration to lull you into a restful sleep.

What kind of products could launch in FMCG? Sleep in every aisle of the supermarket - drinks, body care - we're working on a new product for the laundry aisle.....

MICRO DOSING CAFFEINE - so how does this help with sleep? Instead of the usual 100mg of caffeine per cup that is consumed, micro dosing involves taking small amounts of caffeine throughout the day to maintain your energy and focus. The negative effects of caffeine like headaches, anxiety and the inability to fall asleep are therefore reduced.

What kind of products could launch in FMCG? Low caffeine tea bags, coffee, micro dose caffeine chews, low caffeine RTD iced coffee, snacks like protein balls....

BWX - what's next? ...

We've got some thoughts ...

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Joel, Jarryd & Nicole - Black Ops