Predicting Future Consumer Behaviour: The Power of Scenario Planning

By Malobi Mukherjee

In today's constantly adapting retail environment, attracting and retaining consumers is a major challenge, even for large, global brands. Consumers and retailers are trying to adapt to globalisation, digitisation and disruptive technologies. For retailers to maintain a competitive edge, being able to predict consumers' changing needs, expectations and aspirations is a vital part of success. But in the absence of a crystal ball with which to peek into the future, what can retailers do to preempt how consumers will behave in the next 5 to 10 years?

A predictive tool referred to as "scenario planning" is now gaining considerable traction in the field of market research and provides marketers with a new method of exploring multiple possible future scenarios in order to predict how consumers will adapt. In 2009, researchers from the University of Oxford used this approach to study the future of Indian retail development at a time when there was considerable debate amongst the Indian political and business communities on whether to open up the Indian market to allow 100% foreign direct investment in multi-brand retailing. In the study of Indian retail development, scenario planning enabled the researchers to identify the combined role of regulatory intervention and consumer behaviour in retail development in Asia. The findings suggested that in emerging Asian markets, the politics of retail development can result in multiple retail scenarios with the onus of determining the preferred trajectory of retail growth in those countries remaining with the regulatory bodies. Scenario planning also highlighted that the combined influence of traditional and modern values would continue to drive Asian consumer behaviour thereby ensuring relevance of traditional and modern retail formats.

More recently, the researchers have applied the method to study the future of malls and department stores in China where the disruptive influence of technology is radically altering the way consumers shop. In this study of the future of departmental stores and malls in Asia, applying scenarios research enabled organisations in the real estate sector take note of a future where the proliferation of technology and the resultant digitisation of consumers would alter the relevance of stores. In these future scenarios, stores could become locations to pick up products ordered, using mobile technology or they could only be showrooms for consumers to come in, check the product quality and size before ordering them online for home delivery. In another scenario there would be ambiguity between indoor and outdoor spaces in shopping areas making them venues for entertainment and shopping. The alternative perspective which these scenarios provided, allowed the managers of the real estate company to re-perceive their business as a provider of experience to shoppers compared to the existing role as commercial developer of property selling retail space.

This re-perception also had implications for its relationships with tenants (the retailers) to whom they rent out space.

The technique, which emerged from the US military after WW2, exploits the human capacity to imagine different future scenarios in order to both understand why things are the way they are today, but more importantly, to identify new potential strategies that will allow companies to future proof themselves from uncertainties in the business environment. Unlike traditional methods such as forecasting or future trend analysis which only predict the future, scenario planning helps to create scenario stories of the future to engage managers to discuss the current status of their business from points of view of a future context. Each scenario story provides an alternative perspective of the immediate business environment, prompting managers to surface and identify current assumptions about their business and test alternative pathways to improving competitiveness. Being stories of the future, scenarios become a safe space for managers to re-perceive their business. In doing so, scenarios help managers overcome existing biases and avoid a 'business as usual' mind set.

How does it work?

Scenarios are typically conducted by expert moderators in a workshop setting. The scenario planners work closely with a team of senior employees from a company, their clients and participants representing the company's extended business network. All invited participants are jointly decided by the research team and the company for whom the workshop is being conducted.

During the workshop, the moderators, together with the participants, develop the scenarios by focusing on how the uncertain driving forces in the wider (macro) business environment of the company might change the immediate business environment (sector) of companies in the future. By combining the different uncertain driving forces, the researchers and the participants come up with a number of different potential scenarios, or stories of the future. The senior management team are asked to imagine what would happen to their business (or consumers, or their products) "if" that particular scenario was to become a reality.

The scenarios are typically worked through in pairs, so that in their comparison, insights and nuances emerge from the discussion between moderators and the business team. Focusing on uncertainties as the foundation for developing the scenarios gives its users a mechanism to explore the unexpected and improve their ability to cope with situations of turbulence. Scenario planning is an ideal methodology to research unstable and potentially unpredictable situations which traditional quantitative or qualitative research, or 'forecasting methods' that rely on the extrapolation of historic data cannot achieve as they do not consider the effects of unprecedented futures.

Three reasons to believe

• Scenarios research challenges the managers' 'mental model of the future,' sometimes called the "business as usual" future. The process draws on the participating group's intuition (informed by their experience and expertise) to identify the main factors driving the future of the sector/business and in particular those that are significantly uncertain. By stretching these to their extreme, the group tries to create a number of possible futures that are entirely plausible but very different from 'business as usual' (van der Heijden, 2000) and if any of these futures were to become a reality, they would have a significant impact on the business /sector for which the scenarios were being developed.

• The involvement of participants (stakeholders) who are external to the organisations undertaking scenarios research is integral to scenario planning. Including external stakeholders in the process broadens the scope of thinking of the managers beyond the domain of their respective organisation. Managers use the future scenarios to reflect on their current business capabilities and this process of reflection allows them to revisit and revise current fundamental business decisions and assumptions, which would not have been possible in an in-house organisational strategy workshop.

• The scenario method, with its inbuilt mechanism of relating seemingly unrelated variables, enables researchers to think about the future of any business or sector in an innovative way.

Taking note of the significant contribution scenarios research can make to the business community, the Institute on Asian Consumer Insight, at the Nanyang Technological University in Singapore is in the process of developing the in-house capability to conduct scenarios research.

This capability will equip ACI to undertake projects for companies seeking to ascertain their future relevance and competitive advantage in the context of disruptive macro environmental challenges. Scenario research has the power to open up new perspectives for leaders and is an appropriate tool for companies to consider in their continued assessment of organisational capabilities in the context of macro level economic, social, technological, environmental and political changes.

 

About the author

Dr Malobi Mukherjee is a Research Fellow at ACI. Her chief research interest is in international retailing, particularly the development of scenarios for retail development in India. Malobi's research into Indian retail scenarios has been the subject of several public policy forums and has been covered by leading national newspapers in India (the Times of India and Indian Express) as well as in the Retail Images Report 2013 for Indian retail practitioners.