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Market and
Survey Causal
Judgmental Analysis Time Series Analyses
Salesforce Buyer intentions Naïve methods Regression
composite analysis
Product tests Moving averages
Jury of executive Econometric
opinion Chain ratio Exponential models
method smoothing
Delphi methods Input-output
Box-Jenkins analysis
Scenario analysis method
MARMA
Decompositional
methods Neural networks
Methods for Forecasting
New Product Sales
• Repositioning • Breakthroughs—Major
Hi
Lo Hi
New to Company
Overview of ―Stage-Gate‖ New
Product Development Process
Time
Number of Registered Users
eBay (by Quarter)
million
225
210
195
180
165
150
135
120
105
90
75
60 1997
45 Q1 0.09
30 Q2 0.15
Q3 0.25
15 Q4 0.40
0
1997 '98 '99 '00 '01 '02 '03 '04 '05 '06
Source: eBay/SEC filings
The Bass Diffusion Model for
Durables
N (t )
n( t ) [ N N ( t )] p q ...(1)
N
N(t) : Cumulative number of adopters until time t.
Parameters of the Bass Model in
Several Product Categories
Innovation Imitation
Product/ parameter parameter
Technology (p) (q)
A study by Van den Bulte and Stremersch (2004) suggests an average value
of 0.03 for p and an average value of 0.42 for q, The average was
taken across a couple of hundred categories.
Estimating the Parameters of the
Bass Model
Estimation using data
Regression
Specialized nonlinear estimation
Example computations n( t ) pN (q p) N ( t 1) (q / N ) N 2 ( t 1)
Sales in Quarter 1 = 0.01 16,000 + (0.41–0.01) 0 – (0.41/16,000) (0)2 = 160
Sales in Quarter 2 = 0.01 16,000 + (0.40) 160 – (0.41/16,000) (160)2 = 223.35
Factors Affecting the
Rate of Diffusion
Product-related
High relative advantage over existing products
High degree of compatibility with existing approaches
Low complexity
Can be tried on a limited basis
Benefits are observable
Market-related
Type of innovation adoption decision (e.g., does it involve
switching from familiar way of doing things?)
Communication channels used
Nature of ―links‖ among market participants
Nature and effect of promotional efforts
45
30
Probability of Purchase
25
Some Who Say
Some Who Say They Will, Don’t
20
They Won’t, Do!
Purchase Increases with
15
Stated Intention
10
0
Definitely Will Not Buy Probably Will Not Buy Might or Might Not Buy Probably Will Buy Definitely Will Buy
Actual Purchase Probablity Given Stated Intention for 5 Non-Durable Products Actual Purchase Probability Given Stated Intention for 5 Durable Products
Multi-Year Forecast and Actual
Forecast based on p and q of Cable TV (other alternative considered was Color TV) and maximum
penetration set to 16% of population (half that in the stated intent survey).
Multi-Year Forecast-Actual Graph
Construct several scenarios that capture the richness and range of the
―possibilities‖ relevant to a decision situation. Describe all the scenarios
in the same manner, i.e., one is not more ―vivid‖ than another. Focus
your further analyses on scenarios that are internally consistent and
plausible. Develop forecasts and strategies that are compatible with the
scenarios. The strategies include:
Robust actions that are resilient across scenarios (e.g., hedging,
concurrent pursuit of multiple options, etc.)
Contingent actions that postpone major commitments to the future.
Steps in Scenario Planning
(Example for Zenith HDTV)
Identify the major stakeholders.
Summarize the core trends that are relevant (technological,
economic, social, etc.) within the time frame of interest.
Articulate the main uncertainties (e.g., TV studio adoption of new
filming methods).
Construct an initial set of scenarios.
Assess the consistency and plausibility of the scenarios.
Create ―themes‖ (i.e., a story with a name) that combine some
trends into meaningful composites (e.g., a Japanese domination of
hardware and American domination of software).
Identify areas where you need more research (e.g., consumer
acceptance) and seek additional information.
Associate the final set of scenarios with potential product analogs
for diffusion model, select p and q, and generate the forecasts.
Evaluate strategic and tactical choices that will help you realize the
forecasts in the most cost effective manner.
Example ―Middle of the Road‖
Scenario (Zenith HDTV case)
The FCC makes a commitment to the 16:9 NTSC HDTV standard in 1994, with promises to
release details in a year. Initial HDTV sets cost over $3,000 and are seen as a luxury item,
little programming is available so new features (such as use as computer monitors and
compatibility with analog signals) are integrated to justify purchases. Art studios and other
display locations become innovators as they purchase units for displays. Interior designers
realize the benefits of HDTV plasma screens and suggest purchases to their wealthiest clients.
HDTV becomes a ―nouveau riche‖ item, a status symbol much like luxury cars. By 2000, the
manufacturing costs of Plasma and other flat-screen displays decrease drastically from
standards integration and increased competition. Middle-class customers can now afford
HDTV displays. The movie industry embraces digital recordings because of the ease in
editing and persistent quality. New movie features (screen and TV) are filmed in 16:9 digital
format. Subsequent releases on DVD show higher quality. Public TV stations cannot justify
the cost of upgrading, but cable channels such as HBO and Showtime commit to upgrading in
2003. Their recent entry into movie-making and their purchase of new high-tech digital
recording equipment coincides with the need to upgrade transmission hardware. Customers
are then driven to adopt technology not for increased quality on regular programming, but for
movie watching, design, and display of other items.
Comparative Trajectories of Population/GDP
From Global Scenario Group
250
Conventional
Gross World Product ($ trillions)
Market Forces
New sustainability
paradigm
Fortress World
20
1990 Breakdown
Barbarization
5 Population (billions) 10
Pretest Market Models
Objective
Forecast sales/share for new product before a real
test market or product launch
Conceptual model
Awareness Availability Trial Repeat
Draw &
Cannibalization
Estimates Brand Share Unit Sales
Diagnostics
Prediction Volume
Overview of ASSESSOR Measurement
Process
Design Procedure Measurement
Post-entry market
Post-use preference shares (assuming
Post-use constant
ratings consideration
sum evaluations
0.243
Cumulative trial Proportion of
from ad consumers who
(T&R model) consider product
0.235 Predicted Draw &
0.202
post entry cannibalization
market shares calculations
0.057
Pre-test market models are useful for forecasting products that have
repeat purchase potential (e.g., consumer packaged goods).