Forecasting behaviour

15th Nov 2016

Learning how consumers make decisions is crucial to tailoring customer service to their needs. As global modelling and analytics manager at Unilever, understanding how consumers reach those decisions is Stephen Lovelady’s job.

“We have to be faster and smarter about how we use insights from our consumers,” he says, “and how we feed this knowledge into our marketing process, our customer service and our product development journey.”

His role involves understanding the driving forces behind, and ultimately predicting, the growth of the company’s brands across four broad categories – personal care, home care, refreshments and foods – over both the short term and the long term.

With short-term forecasting, the goal, says Lovelady, is to “understand volatility, trying to grasp the impact of recent events, trying to interpret ever-changing consumer preferences and fast-moving consumer demands”.

Data is the lifeblood of such work, but there’s no single ‘right’ answer because there are so many different problems that the organisation is trying to solve, from supply chain questions to demand-planning issues. “We don’t have enough computing power in the world to solve all the problems at the same time,” Lovelady says. “So we decompose it into smaller questions and then build up the picture from there.”

Playing the long game

The process of trying to look further ahead is a different beast. “With longer-term forecasting, the precise numbers shouldn’t be the primary focus because they are always going to be wrong,” acknowledges Lovelady.

That’s not to say that the operation serves no purpose. Lovelady explains: “The purpose of those exercises is to get people thinking about the fundamental drivers of growth, to get them thinking about the root cause of change within our business, to engender a real interest in some of the key triggers and the key moments of critical importance for our brands.”

To help him do so, Lovelady has embraced behavioural economics, which “sits at the intersection between psychology and economics”, he says. “It helps me understand the surprising ways in which consumers are influenced and make decisions.”

Behavioural economics challenges the conventional economics orthodoxy that talks about economic agents being ‘rational’ – when that is so often not the case.

Rational thinking

At the same time, it’s one way of making what appears to be irrational, rational. “To understand that next level down, you have to consider the fact that consumers may not be rational at all times,” says Lovelady. “They could be looking to take mental shortcuts. Or they might be influenced by things they don’t realise they’re being influenced by.”

It is, he says, about “taking our knowledge about consumers from good to great. It gives me an extra 10% insight that I didn’t have before”.

For a business such as Unilever, if that extra 10% translates into even a small increase in market share, the bottom line results can be enormous.

To help organisations interpret customer data and achieve better results, The Institute recently launched Deliberata, its new strategic insight arm – go to www.deliberata.co.uk to find out more.

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