Dollars and Sense

Published 12:59 pm Wednesday, July 23, 2008

Securitized debt obligations, hedge funds and derivatives have certainly received plenty of attention lately.

Economists and experts in the financial sector are frequently asked to share their perspective on the current and future economic impact of financial engineering. Among them, we hear a wide range of opinions but most agree that the problems arose from financial models that proved fatal for long term forecasting.

I have read a sizable amount of commentary attempting to account for this problem. The best summarization I have found to date was given by Robert Brooks, a professor of finance at the University of Alabama’s College of Business. In an interview with Chris McFadyen, reported in the July 2008 publication of Business Alabama, Professor Brooks said; “Finance is a social science. Humans don’t behave like models suggest.”

I believe this statement exposes the underpinnings of faulty financial modeling and calls attention to the hazards of assumptive modeling practices in a much broader sense.

As applied in marketing and growth strategies, the acquisition and retention of customers or clients is vital to business success. Long-term accomplishment requires an ongoing and accurate assessment of consumer value because marketing efforts based on pure assumption suffer erosion and will ultimately fail to connect.

In contrast, direct communication with consumers is the best way to foster and maintain market insight. An over reliance on data and statistics develops products and services best suited for a statistical market. When this occurs, intrinsic consumer values eventually go unmet due to misinterpretation. The highest level of market intelligence always comes from a collection of collaborative resources. The most important among them is having a well-structured process that consistently works to collect, analyze and compare consumer feedback.

Remember, it is those dealing directly with prospects, customers or clients in public relations, sales, service and support departments that hear the most candid critiques. Harness the power of this feedback on a daily basis and implement a collaborative plan to share and leverage new insight. It works much better than trying to predict behavior.

Scott Gassner is the Executive Director of Design Group LLC. He can be reached at 205-668-9740 or by e-mail at