Like it or not, important marketing decisions regarding forecasting, budgeting, hiring and resource allocation must be made for the coming year and beyond.

Marketing executives who sit on the sidelines and watch/wait could be missing some valuable opportunities to stake a claim in new markets, build market share, or capitalize on competitor weakness. Then again, sitting on the sidelines may be the smarter approach.

A common form of decision making is using probability to determine potential outcomes. In a casino–with games of chance–it’s pretty easy to figure out the “odds” of beating the house. Outside of the casino, life gets a little messier. We can however, use statistical analysis based on historical data to help us divine the probability of certain events happening (assuming a normal distribution and independence).

In an Edge essay, Dr. Nicholas Nassim Taleb tells us, “Statistical and applied probabilistic knowledge is the core of knowledge. Statistics is what tells you if something is true, false or merely anecdotal. It is the logic of science, and the instrument of risk taking.”

“You cannot be a modern intellectual and not think probabilistically,” Dr. Taleb declares. But he also counsels us that there are many instances where “statistics don’t work–where stats are unreliable, where your knowledge is no longer valid.” And judging from the volatility of events in 2008, we just might be in new and uncharted territory where the usual tools and methods just plain don’t work.

If you believe 2008 has ushered in a new paradigm where the old rules no longer apply, one is essentially left with two choices: Pattern recognition of a different kind–(intuition) and thereby making decisions “by the gut”, or inaction–doing nothing, at least for now.

Is gut decisioning the best approach to plan for 2009? Gary Klein, author of “The Power of Intuition” says, “Analysis doesn’t work well in challenging situations where information is scarce, time is short, and stakes are high.”

While it is hard to argue that information is scarce, time is definitely of the essence and for many companies; the stakes (i.e. survival) have never been higher.

Lastly, there’s always inaction as a completely valid alternative. Many companies are maintaining the status quo, hoarding cash, letting the bodies pile up, and waiting for a better day before committing to major investments.

Every company is different, and every industry has their own challenges right now. But it has been said that challenge is only one side of the coin. Turn it over, and “opportunity” might be staring back at you.

Key questions:
* Given the events of 2008, are we in a new paradigm? If so, do the old rules no longer apply?
* Consumer confidence is at levels unseen since the early 1990s. Is the marketplace, (both B2C and B2B) overly pessimistic?
* In your forecasting models (or mental processes), are you “weighting the events of 2008″ more heavily than previous years?
* How closely are you monitoring daily/weekly events to determine whether to ramp up/down your spending plans for next year? What “key event” are you seeking that will be a major variable in your decision making?

A recent article in Fast Company titled, “Going for the Gut,” details how even though we like our “heroes to crunch the numbers, we (also) like them to play their hunches.” Author Rob Walker laments that books like Malcolm Gladwell’s Blink, Jack Welch’s Straight from the Gut and others, give gut decision making first billing over a “careful, rational, empirical” approach.

Walker asks, “Are the narratives of popular culture dominated by super rational heroes triumphing over seat of the pants, gut-trusting bad guys? Actually, it’s the opposite: from Captain Kirk to Indiana Jones to Rambo to Tony Soprano–we’re drawn to the character who follows the hunch and wins.”

And business press and mainstream media largely agree. After all, wouldn’t you rather read about the business executive who had the right hunch and made millions, as opposed to the quant-jock who crunched the numbers and came up with the winning combination?

Gut decision making is “in” and for lack of a better word–cool.

Some senior executives have alluded there’s a mystique to gut decision making–those who have it have it, and those who don’t will never ascend the ivory tower of business success.

Case in point, Ralph Larsen, former CEO of a large consumer product goods company, states in a Harvard Business Review article, “When to Trust Your Gut,” that “very often people will do a brilliant job up through the middle of management levels, where it’s very heavy quantitative in terms of decision making. But then they reach senior management, where the problems get more complex and ambiguous, and we discover that their judgment or intuition is not what it should be.”

I do agree with Mr. Larsen that data driven decision making works best when there is in fact “data” to analyze. Sometimes, senior level decisions can be challenging because situations might be in uncharted territory–and there’s no past data, or too small a data set for analysis or prediction. That said, I’m not convinced that good judgment and intuition is the sole purview of senior management.

There is hope, however, that a data-driven approach can work just as good as gut thinking, and in most instances–compliment it.

Recent books, “Super Crunchers” by Ian Ayres and “Smart Enough Systems” by Neil Raden and James Taylor show case study after case study where companies and government entities of all sizes are using data analysis, experimentation and analytical applications to make smarter and faster decisions.

And the business press also seems to be noticing. In the same Fast Company issue (November 2007) executive Matt Carey cites how he’s attempting to create a “culture of analytics” at eBay, where experimentation, data and testing rule. “I want to eliminate feelings,” he says, “and get down to true math.”

If 2007 was “The Year of the Gut”, perhaps 2008 will be the “The Rise of The Quant Jock.”

Well, “quant jock” might not be the best terminology, and “analytics” might not be the sexiest noun, however running the company and making decisions based on the hard facts and numbers is something that I believe will never go out of style.

* Have you seen other examples of the “glorification of the gut”?
* How is decision making approached in your company (and in your marketing department)–by the numbers or by the gut? Do you see a trend one way or another?

No surprise to anyone, some upscale retailers and hotels are looking for visual cues to determine the service level they should provide to customers. According to a WSJ article, “The Gatekeeper: How Posh Hotel Sizes Up Guests”, May 10, 2007, some hotels are sizing up guests based on what car they park in valet, or what they’re wearing when they walk in the door.

In addition to keeping a record of the spending of hotel guests, the staff of the Peninsula Beverly Hills looks for signs of wealth and sophistication in guests. The article notes,

“The hotel’s managing director, Ali Kasikci, is something of an anthropologist of status signals. He is highly aware of the delicate hierarchy of fashion and symbols of influence, and he looks for small details to tell him what a pair of jeans and a T-shirt can’t.”

In the article, Mr. Kasicki spots a Hermes tie and a Charvet shirt among his wealthy guests and says, “It’s like a skunk. There’s enough scent being sprayed around that you can connect the dots.”

Mr. Kasicki is thin-slicing; segmenting and treating his customer’s differently based on his seasoned observations and intuition.
It’s also a dangerous strategy.

Malcolm Gladwell, in his best seller, Blink, defines the concept of thin-slicing as, “the ability of our unconscious to find patterns in situations and behavior based on very narrow slices of experience.” Essentially, it’s the ability to see patterns based on extensive experience in a particular field or discipline. In the case of Mr. Kasicki, his years of hotel experience are giving him visual cues and “distinctive signatures” of which guests can afford his services.

Solely relying on “at a glance” decision making, or decision making based on gut instinct can be very costly to our business and careers. For Mr. Kasicki to make better decisions on which guests should receive special attention, both observational data (visual cues) and hard numerical data are necessary.

It’s probably challenging in a service business like high-end hoteling, to not consciously or unconsciously segment and then treat customers differently based on how they dress or what they drive. However, even Mr. Kasicki admits that sometimes he gets it wrong when it comes to sizing up his guests. For example, the article notes a poorly dressed retired pharmaceutical executive is one of Mr. Kasicki’s wealthy guests!

It often makes sense to build loyalty programs, marketing campaigns and service/product offers to keep valuable customers spending money with your company. A good segmentation strategy, based on quantitative data, can help a company determine what customers to keep and which ones to let go to the competition.

For example, a data-driven customer profitability and life time value analysis could show that while an individual is a frequent guest to Mr. Kasicki’s hotel, they also tend to bargain for the lowest rates, berate the service staff, tip poorly, steal towels and swipe hotel fixtures.

In the case of Peninsula hotel, the best dressed customers might be the least valuable customers! Just because someone is wearing a Hermes suit doesn’t mean they won’t abscond with the light fixtures and conversely, the guest who is dressed like a slob might have a very large bank account!

The article mentions that Peninsula hotel tracks guest spend, but doesn’t say if it’s a manual or technology based approach. There are many solutions both custom and off the shelf that can help Peninsula hotel track customer interactions and provide analysis to help make sense of mountains of collected data. The Ritz-Carlton provides a great case study of service and technology happily married to each other in the hospitality business.

In an era of fierce competition, taking care of your most profitable and valuable customers has never been more important. Just don’t base your definition of a valuable customer on criteria such as he or she “looks the part.” Even Gladwell admits, “We are often careless with our powers of rapid cognition.”

Providing better levels of service to your top customers is a good strategy, but close your eyes for a moment and let your data speak to you for a comprehensive picture of who is “valuable.”