By coincidence the random shuffle on my phone decided to play a
Nirvana song in the background just as I opened a Word doc to write
today’s blog post. It’s coincidental if you know where the title from
last week’s post came from, and coincidental because a conversation I
had a couple of days ago (which by chance got around to how weather
affects in-store retail sales) made me want to revisit the central
theme of that very post – how important the big picture is.

Weather changes moods. It changes GDP too, and during the past week US
GDP for Q1 was revised downwards significantly (from low growth into
contraction) and as usual the weather was partly blamed for slowing
economic activity.

Now, I’m not convinced that this is entirely accurate in this case.
Though I agree that weather is important I’d actually take a closer
look at trends in money velocity over periods longer than any
implicated weather cycles when looking at these GDP numbers. Still,
the willingness to fall back to weather as a factor in GDP results
shows there are many overarching external factors that influence
economic activity.

So today I want to explain just why we look at larger external factors
when advising clients on more micro issues.

Our last quarterly updates to retail spending projections indicate a
slight slow-down from recent quarters, before rising into the year end
(we forecast construction to be holding up ok next quarter relative to
recent past quarters, and even manufacturing to be comparatively
stable short-term).

This means that any short-term activities in retail need to be
evaluated against an expected broad-based dip in activity within the
sector.

Forecasting your results based solely on internal measures gives a
less complete picture. Even when internal measure forecasts are
detailed enough take a large range of data into account, from sales
probabilities based on customer engagement and product demand profiles
through to seasonality trends, it is really important to consider
external factors.

You need to consider where the next dollar coming in sits within the
context of the wider economy outside of the relationship between you
and your client.

A rising tide lifts all boats. When the overall sector you are in is
expanding, are good results the outcome of what you are doing or are
they largely just a result of you simply turning up and being open for
business? In such case, could you be doing even better? Conversely,
when the tide starts to drop, would you be ready?

Of course, the broader economy will impact not only the relationship
that you have with your clients, it will also affect what your
competitors do.

Being in a position to anticipate what your competitors may do in
future will obviously put you at a huge advantage. Within their own
competitive landscape, many small to medium enterprises are
reactionary though. Sadly, even some larger enterprises are too.

Anticipating competitive pressures is important when considering your
strategy on matters such as pricing. Again getting back to earlier
posts here, we’ve covered some of the micro factors of behavioural
economics that are important in pricing.

But also important is the fact that setting and altering prices
requires good timing and it can’t be done too often. It needs to be
done rarely and done right. This micro aspect that covers direct
interaction with consumers needs to be considered as an important
component sitting within the bigger macro picture.

Having an understanding of the big picture numbers is vital to
properly understanding your own numbers.

That’s why we construct projections for key industry segments.

Planning your activities is best considered a long game, and you need
to be aware of the moves your opponents may make.

That’s why deploying behavioural science into on-the-ground activity
must be done with consideration of just what will make an optimal
setting.

Nothing in life is certain or guaranteed. For example anyone in the
retail sector needs to understand that even the best attraction
strategy will fail to draw in customers if cold and rainy weather is
working to keep them away from the shops (or if nice and sunny weather
is keeping them away from an online offer). Unusually cold weather
maybe can even take a little bit off GDP.

We can’t provide meteorological advice but we can give guidance based
on macroeconomic trends.

Any actions you plan to make, or have taken and now want to measure,
must be considered alongside the broader external context they sit in.

Get it all aligned and your results are more likely to end up in bloom.