Featured Posts Archives

Using Mean Absolute Error for Forecast Accuracy

Using mean absolute error, CAN helps our clients that are interested in determining the accuracy of industry forecasts. They want to know if they can trust these industry forecasts, and get recommendations on how to apply them to improve their strategic planning process. This posts is about how CAN accesses the accuracy of industry forecasts, when we don’t have access to the original model used to produce the forecast.

First, without access to the original model, the only way we can evaluate an industry forecast’s accuracy is by comparing the forecast to the actual economic activity. This is a backwards looking forecast, and unfortunately does not provide insight into the accuracy of the forecast in the future, which there is no way to test. Thus it is important to understand that we have to assume that a forecast will be as accurate as it has been in the past, and that future accuracy of a forecast can be guaranteed.

As consumers of industry forecasts, we can test their accuracy over time by comparing the forecasted value to the actual value by calculating three different measures. The simplest measure of forecast accuracy is called Mean Absolute Error (MAE). MAE is simply, as the name suggests, the mean of the absolute errors. The absolute error is the absolute value of the difference between the forecasted value and the actual value. MAE tells us how big of an error we can expect from the forecast on average.

One problem with the MAE is that the relative size of the error is not always obvious. Sometimes it is hard to tell a big error from a small error. To deal with this problem, we can find the mean absolute error in percentage terms. Mean Absolute Percentage Error (MAPE) allows us to compare forecasts of different series in different scales. For example, we could compare the accuracy of a forecast of the DJIA with a forecast of the S&P 500, even though these indexes are at different levels.

Since both of these methods are based on the mean error, they may understate the impact of big, but infrequent, errors. If we focus too much on the mean, we will be caught off guard by the infrequent big error. To adjust for large rare errors, we calculate the Root Mean Square Error (RMSE). By squaring the errors before we calculate their mean and then taking the square root of the mean, we arrive at a measure of the size of the error that gives more weight to the large but infrequent errors than the mean. We can also compare RMSE and MAE to determine whether the forecast contains large but infrequent errors. The larger the difference between RMSE and MAE the more inconsistent the error size. The following is an example from a CAN report,

While these methods have their limitations, they are simple tools for evaluating forecast accuracy that can be used without knowing anything about the forecast except the past values of a forecast.

Finally, even if you know the accuracy of the forecast you should be mindful of the assumption we discussed at the beginning of the post: just because a forecast has been accurate in the past does not mean it will be accurate in the future. Professional forecasters update their methods to try to correct for past errors. However, these corrections may make the forecast less accurate. Also, there is always the possibility of an event occurring that the model producing the forecast cannot anticipate, a black swan event. When this happens, you don’t know how big the error will be. Errors associated with these events are not typical errors, which is what RMSE, MAPE, and MAE try to measure. So, while forecast accuracy can tell us a lot about the past, remember these limitations when using forecasts to predict the future.

To learn more about forecasting, download our eBook, Predictive Analytics: The Future of Business Intelligence.

Interested in seeing how we can help you with forecasting?

January 23, 2012 Nate Watson Featured Posts, News 1 comment

How Not to Introduce Yourself

I got to cross something off my bucket list this year, I was a pastor in a wedding. Two of my really close friends got married and I had the honor of introducing them as man and wife. It was one of the more unique things I will ever get to do. However, I was shocked because I realized that how easy it was to introduce the newly married couple, “I now pronounce you man and wife”, however it can be so difficult to introduce yourself properly at networking events.
If introducing a newly married couple is so easy, how is it so difficult to introduce yourself at a networking event? It shouldn’t be hard or awkward. Yet we go to an event to meet people who we have never met, who are there to meet people they have never met and are scared and clueless as to how to make our introductions. Most of us gather up 20 seconds of insane courage and, more often than not, dive awkwardly into the introduction. I have immense respect for courage, but there are good and bad ways to introduce yourself that will lead to someone remembering you which is the point. In my years of networking, I have experienced quite a variety of these introductions. The following are some of the most “interesting”.

Lesson 1: Never let the act of introducing outshine the introduction.

None of the names used here are real because I did not remember the person or what they did. That is partly the point. I tell new networkers to always keep in mind that 1) most of us, including myself, have done one of these things in our 20 seconds of insane courage, 2) networking is tricky, hard, and has a massive learning curve, and 3) wisdom is only gleaned from the lessons of those that have gone before us.

Lesson 2: Wait until you are acknowledged before jumping in, and then stay and talk.

The Cannonball. These guys are the worst. There I am having a nice conversation with 4 of my friends when a person walks up to the table introduces themselves, in the middle of my sentence, to explain they are so and so and they are glad to meet me, and here is their card. Then they leave without another word and do the same thing at the next table. I believe this is the number one cause of sorting through cards at the end of the event and not being able to remember who half of them are.

Lesson 3: A card is not an introduction, throwing a card is like introducing yourself by yelling your name at someone as you drive by them.

The Dealer: This one makes me laugh every time. This is when someone walks up to you and your friends at a table and proceeds to introduce themselves as they toss you, not hand you, a card. It goes something like this:

“Hi, I’m Rick”,”Hi, I’m Rick”,”Hi, I’m Rick”, “Hi, I’m Rick” each time dealing you one of their business cards; not passing or handing, dealing. Throwing a card at you. I always laugh when “Rick” is done. A table full of people now have your card, but are thinking to themselves “Did I just get introduced to someone?” Its never a good sign when after you introduce yourself, people are still asking what just happened.

Lesson 4: Use an excuse to refill your plate or cup to disengage from a Never Ending Story. It is good for you and them.

The Never Ending Story: Great movie in 1984. Horrible way to introduce yourself. NES’ers think the only way to make you remember them is to talk to you. The. Entire. Time. I can’t tell you how many times I have gotten myself stuck with one of these. I just have to excuse myself to go get more food or drink and pray they find someone else to stick to. The hard part is when they find me again on the other side of the room and I have a full plate . The best way of getting rid of them is by using a trick my friend Rick Sheahan came up with. Give them a card, and tell them to call you. It works because they think they have accomplished their goal; and, to date, not one of them has actually ever called.

Lesson 5: Always give cards face up with your name facing them so they can see, not just hear, what your name and your company’s name is.

The Reverse Pick Pocket: This is my favorite networking story. So there I was, eating another plate of food, avoiding the Never Ending Story, when a man I had never met, walked up and introduced himself. While simultaneously shaking my right hand, slipped his card into my shirt pocket with his left hand. I think I probably looked at him for a full 5 seconds before I could say anything. What do you even say? Thanks for card Mr.??? Wait, Let me get the card back out of my pocket so I can know what your name is.” Unbelievable. He actually violated my personal space to try and give me his card.
A few things jump out at me about this story. While being very brave, he was very lucky I don’t have much personal space. I found it more funny than offensive, but he didn’t know that. Try that on a different guy he might get knocked out. We won’t even mention how wrong that would be for the opposite sex.

Lesson 6: Its hard enough to coach people to give referrals. People do not give them of their own free will. Especially not to someone they just met.

The Double Carder: This is when someone walks up to a complete stranger and hands them two cards so that you use the extra card to refer them. This is way too forward. Why should I refer you? I just met you, I barely understand what you do, let alone, am I confident enough to refer you to people that value my opinion. I do send double cards in Thank You notes and Christmas cards, but never as an introduction.

Lesson 7: It is hard remembering people at the end of the night. It just becomes confusing when you have two companies.

The Two Card Monte: Similar to the Double Carder, you get two cards from this person too. This time, they are different. One for each company this person has. You then have to play the game similar to the one played on a box on a street corner for money. Follow the queen, which company am I with, anyone can win. I feel like if I hold out the right card and say “this one” I might have a chance to win $5 dollars. Giving someone two cards does not promote two businesses. It just confuses me. Do I have to listen to two 30 second commercials and then pick which one fits my business. What about me? Do I get to give a one minute elevator speech now? I have always viewed people with two business cards from two companies at the same time as confused. I don’t usually follow up with them. Take that to heart, as I am not unique in how I handle this.

Lesson 8: I don’t know you. I don’t know if I need to know you. Let’s get pleasantries out of the way before we start with the power point.

The Used Car Salesman: I shake my head in disbelief when I see this. I don’t need your companies history, how great your products are, how many people are in your office, and all the awards you have won before I know if I need something you have. Introductions are about introducing yourself, not making a presentation. Let me figure out if I want a sales presentation before you make one. If you are new to networking , you get a pass on this, but all the more reason I ask new networkers to read my posts on networking first.
Learning to introduce yourself can be hard. Introductions take some planning and some courage to introduce yourself to someone you have never met. I hope you understand that while funny, all of these introductions are serious gaffes that lead to zero second meetings. In all of these cases, I don’t remember the names of the gaffers and I’m pretty sure that is the whole point of networking. When in doubt go introduce yourself, try this: Shake someone’s hand, tell them your name, hand them your card, comment on the food, and see where the conversations goes. It works for me.

Would you like to learn more about how you can improve your sales process using the power of predictive analytics?

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December 12, 2011 Nate Watson Featured Posts, News 2 comments

Leads vs. Referrals — Knowing the Difference.

If you can effectively develop relationships your sales efforts will go from good to great. However, it is important to understand the difference between leads vs. referrals. Most people who get leads from business relationships, think they are referrals and that they have succeeded. This is not true. There is a difference between a lead and a referral. Understanding this difference will change the way you call, email, or text leads, and a large difference in how you get the business from that person. Let’s look at the difference. (more…)

August 30, 2011 Nate Watson Featured Posts, News 5 comments

A Simple 6 Step B2B Sales Process

The following is an introduction to the basic sales process we teach new sales reps at CAN. Our 6 step sales process guides them from selecting the right prospects, making first contact, selecting your sales approach, your first face-to-face meeting, determining next steps, and getting the deal closed. I hope that it will help you build a reliable sales strategy you can use to close more deals. (Learn how we predicted who was most likely to enroll at a Top 10 Online University)

Sales Process Step 1: Select the Right Prospects

Investing the time to carefully select your prospects is essential because you want to make sure that you are investing your time and energy on developing the right opportunities. I recommend looking for people that have the need, willingness and resources to purchase what you sell. Focusing your efforts will help ensure that you invest in providing your prospects with a great client experience. At CAN, in addition using predictive analytics for lead generation, our salespeople spend a lot of time looking through business cards and LinkedIn connections from trade shows and networking events.

Sales Process Step 2: Make First Contact

Once you have selected your targets the next step is to make first contact. Your goal at first contact is to simply get a meeting. This is especially true if you prospect is not familiar with who you are. We have found using a combination of email and LinkedIn messages work the best. One of CAN’s sales reps studied the linguistic patterns behind our most successful emails and developed the following formula to produce good results when sending requests for the first meeting to prospects:
Greeting + Lead in {positive emotion} + profit/growth hook + Who We Are + the product and results + Outcome for Client + Meeting Request with 2 possible options + Close = Meeting
The following is example of a meeting request email from one of the CAN salespeople;

Steve,
Good morning. We spoke briefly at the alumni center after your presentation on CompanyX and building a start-up within a company. Based on your experience and position at CompanyX, I think you might be interested in my company, Contemporary Analysis.

Contemporary Analysis uses mathematics and big data to predict and influence human behavior. One of our products, Pulse, applies predictive analytics to analyze the profitability, loyalty and activity of individuals in your client portfolio. This allows you to focus your marketing and customer service efforts, anticipate trends in your portfolio, and engineer greater retention and profitability by contacting the right people at the right time. I would like to explore how you could use Pulse and perhaps some of CAN’s other solutions to increase sales for the CompanyX family. Are you available to meet this week or next at our office at 1209 Harney #200, online via Skype or over the phone? I am available on Monday after noon and Tuesday at 10am and 1:30pm.

Thank you,

Jefferson

As a tip, I recommend scheduling your meeting request emails to be sent at 7:00 am on a Monday or Tuesday. This is optimal because most people check their emails when they first get into the office, and on a Monday or Tuesday their schedules are the most open to explore new opportunities. Also, it makes people feel like they were your first priority of the day. If someone does not respond to your email, I recommend connecting with them using LinkedIn or another social network.

Sales Process Step 3: Select your Sales Approach

Once your prospect has agreed to meet with you it is important to prepare for your face-to-face meeting. One of the most important steps in preparing is to select your sales approach. Different people require different approaches, and while it take a little bit of research selecting the right approach will help you make the best first impression possible. The following are 5 typical sales approaches. The key to success is imitation of the person. You don’t want to mock the person, but you want the person to be able to see a little bit of himself or herself in you. If you can successfully do this, the people that you talk to will be more trusting and will connect with you quicker.
1. The Ego: This person wants to feel important, and they will most likely respond to you and possibly purchase your product to satisfy an egotistical need.
2. The Expert: The person considers themselves to be an expert in their field, and will expect you to have a minimum knowledge of their field, or to be an expert if you are approaching them about something in their field.
3. The Good Samaritan: These people are very open to being contacted, but they don’t want to be sold. They want to help out and listen to someone.
4. The Skeptic: With skeptical people you want to lead with facts and figures. They won’t agree to a meeting with you unless you have Case Studies, Testimonials, and or an impressive client list.
5. The Explorer: These people are very open to being contacted, because they love learning about new things. When you approach them about an opportunity, it has to be unique and also be exciting. If it is these to things you will most likely get a meeting.

Sales Process Step 4: The Face-to-Face Meeting

Typically in business-to-business sales your prospects are only able to meet with you once or twice before they decide whether or not they are going to purchase. Because of this, it is essential to make the most of your face-to-face and then move the sale forward using emails and voicemail.
During the first meeting you want to make sure you understand what your prospect the person wants to achieve, what their budget is, and who the key decision makers are. Your goal is to ask as many questions as possible, because this establishes rapport with the prospects and it becomes harder to get answers to the tough questions once you are on longer face-to-face or over the phone.

When learning about your prospects goals make sure to remember that people buy things and companies pay for them. So you don’t want to focus just on the company’s goals, but also the aspirations your prospect has and what pressures they are under. While your solution still needs to produce results for your client the company, helping your client the person will help you win the contract and future contracts.

Sales Process Step 5: Determine Next Steps

During your face-to-face meeting you want to move the call as far as possible towards a decision as possible. However, it is highly unlikely that you will be able to get a decision either for a sale or no sale during your first meeting. The following are definitions that the CAN sales team uses to evaluate the outcome of every client interaction, and this helps us determine where opportunities are in the sales cycle. Having clear definitions of where opportunities are in the sales cycle allows our sales team to determine what next steps to take and which opportunities to prioritize to make sure we meet our sales quotas for the next 15, 30 and 60 days.
Advances (Successful): An advance is when an event takes place either during the call or after the call that moves the sale toward a decision. The events need to represent an agreement with the customer that moves the sale forward toward the ultimate decision. Advancements take many forms, but invariably they involve an action that moves the sale forward. Typical advances might include:

A customer’s agreement to attend an off-site demonstration.
A clearance that will get you in front of a higher level decision maker.
An agreement to run a trial or test of your product.
Access to parts of the account that were previously inaccessible to you.

Continuations (Unsuccessful): Where the sale will continue but where no specific action has been agreed upon by the customer to move it forward. Continuations are often a way to politely get rid of a seller. These calls do not result in an agreed action, yet neither do they involve a “No” from the customer. Typical examples would be calls that end with a customer saying:

“Thank you for coming. Why don’t you visit us again the next time you’re in the area.”
“Fantastic presentation, we’re very impressed. Let’s meet again some time.”
“We liked what we saw and we’ll be in touch if we need to take things further.”

Orders (Successful): This is when the lead closes the deal by signing a contract or paying. This is not a “I am 99.9% likely to close,” event. Orders have to be contractual or monetary.
No-Sale (Unsuccessful): This is when a customer actively refuses your principal call objective. Good examples of this are when a client tells you that they aren’t interested, won’t agree to a future meeting or denies your request to see a more senior person in the account.
Your goal is to choose next steps that continue to move the sale forward until you either receive an order or a no sale.

Sales Process Step 6: When and How to Close the Deal

Once you have led your prospect to the realization that they have the need, willingness and resources to purchase what you sell, the simplest close is to simply ask for the business and then wait until your prospect breaks the silence. Even if it takes 10 minutes, they will eventually break the silence, and if they are confident that you have the solution necessary to achieve their goals they will most likely respond by agreeing to purchase what you sell.

Learn more about the right sales leads for your business:

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July 8, 2011 Nate Watson Featured Posts, News 54 comments

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