Horrendous as it may sound, we can’t deny the fact that every business will have its marketing risks no matter how good is your marketing initiative. The next question is how well can you manage your risks? The effectiveness in risks management is prominently apparent in this complex and competitive operating environment in order to be ahead of your desired marketing objectives.
We have heard of companies being successful in their marketing strategy but subsequently turned out to be disastrous due to failure in identifying certain risks or mismanagement of risks.
There were some who were well prepared for potential risks with proper controls and contingency plans as opposed to some who were caught off guard which often led to failure in marketing and other losses. We have also seen cases where some initiatives which didn’t start off well initially but turned out to be a blessing in disguise at a later stage upon implementing effective risk management practices.
In general, there are controllable and uncontrollable marketing risks. Just to name a few, some of the marketing risks that should not be set aside by any organisation are for example:
- Price risk. This can lead to a price war as most products/services may not want to be left behind in order to be price competitive.
- Brand risk. Declining brand awareness, failure in brand differentiation or simply a brand losing its value due to competition can all lead to brand risk.
- Demand risk. This refers to change in customers’ tastes or preferences.
- Reputation risk. Your corporate image may be tarnished as a result of poor customer service or after-sales services.
- Sales risk. For instance, the resignation of a key salesperson who has channelled all your major customers to his new company may have an adverse effect on your sales.
- Operation risk. This broad risk can be due to several causes. One example is a hiccup in the production process which may lead to delay in the product launch.
It’s always easy to name various marketing risks that are associated with the respective business. But it can be challenging to effectively manage them, especially in today’s competitive world with constant changes. The challenge is whether have you identified your relevant risks and the biggest test is whether these risks are substantiated by adequate controls and preventive measures. This is not forgetting the use of risk management tools that will prevent losses or lost opportunities and sustain the business as well as its reputation in the long run.
The identification of relevant marketing risks at the appropriate time most probably may only win less than half the battle. In other words, being risk awareness alone is never sufficient. The spectrum of risks is endless and can be very wide, depending on how prudent you are and how you look at certain risks. Juggling between the prioritisation of risks and handling them effectively require tremendous risks management experiences and knowledge to manage them adequately. Narrowly focused risk management is a risk by itself which can backfire your marketing plan at any one time.
A typical risk management framework normally comprises of business objectives and development platform to track and manage the identified risks. They are Key Performance Indicators (KPIs), Key Risk Indicators (KRIs), Key Control Indicators (KCIs), etc that form part of the development platform. The business objectives will assist in the formulation of KPIs where the latter will lead to the enhancement of KRIs. KRIs will guide a company in identifying the key marketing risks and help the organisation to decide the action plans/controls that are required to minimise the risks. Lastly but not least, the KCIs refer to ways and controls to manage the risks and processes to achieve the objectives.
The above framework is a continuous cycle which has to be reassessed from time to time so that rapid decision-making can be made to improve or revise the marketing plan accordingly. Risks management will affect the allocation of your market resources. Timely and effective marketing resource allocations play crucial roles in shaping your marketing plan which will affect your revenue and profit.
Marketing risks management is the responsibility of the entire marketing organisation to either prevent or mitigate any complications or negative risks implications that can have on an organisation. Rather than taking the ‘blame’ approach and costly changes, it pays well to be prudent in taking the necessary precautionary measures to prevent risks from accelerating to uncontrollable status. Marketing risks that are managed effectively, are like a protective shield to shelter any sales performance from being hindered and hence, preventing missing any good opportunities to grow and heighten its competitive advantage.