New Product Forecasting New Product Forecasting

V Kumar*
V Kumar*
ING Chair Professor of Marketing, and
ING Chair Professor of Marketing, and
Executive Director, ING Center for Financial
Executive Director, ING Center for Financial
Services
Services
University of Connecticut
University of Connecticut
June 27 June 27- -30, 2002 30, 2002
* *
Presented at the ISF 2002, Dublin, Ireland Presented at the ISF 2002, Dublin, Ireland
New Product Forecasting New Product Forecasting
Diffusion Models Purchase Intention ASSESSOR
New Product Forecasting
1. Diffusion Models 1. Diffusion Models
Bass Model Learning Model Flexible Interaction Model
Diffusion Models
Sales Pattern Sales Pattern
Adoption of VCR's by Households
1980-1989
0
2000
4000
6000
8000
10000
12000
80 81 82 83 84 85 86 87 88 89
Year
A
d
o
p
t
i
o
n
s

(
T
h
o
u
s
a
n
d
s
)
Adoptions by Households of
VCR's
Adoption rates across categories
*
Adoption rates across categories
*
Years to reach 1 Years to reach 1
million units million units
(USA) (USA)
Category Category
2 2 HPs HPs Office jet Office jet
all all- -in in- -one one
printer printer- -scanner scanner- -
fax fax- -copier copier
5 5 CDs CDs
6 6 VCRs VCRs
11 11 TV sets TV sets
27 27 Telephones Telephones
* Marketing Engineering, 2nd edition, Lilien & Rangaswamy
Bayes rule- an application Bayes rule- an application
) ( 1
) (
) (
t F
t f
t L

=
) ( 1
) (
) (
t F
t f
t L

=
Where
= probability that someone will adopt innovation by time t
= rate at which the probability of adoption is changing at
time t
= conditional likelihood that a customer will adopt the
innovation at exactly time t since introduction, given
that the customer has not adopted before that time
) (t F
) (t F
) (t f
) (t f
) (t L
) (t L
Bass(1969) Bass(1969)
) (
) ( 1
) (
t N
m
q
p
t F
t f
+ =

) (
) ( 1
) (
t N
m
q
p
t F
t f
+ =

Where
N(t) = the number of customers who have already adopted the
innovation by time t;
m = a parameter representing the total number of customers
in the adopting target segment, all of whom will eventually adopt
the product;
p = coefficient of innovation
q = coefficient of imitation
Where
N(t) = the number of customers who have already adopted the
innovation by time t;
m = a parameter representing the total number of customers
in the adopting target segment, all of whom will eventually adopt
the product;
p = coefficient of innovation
q = coefficient of imitation
The Bass Model Equation The Bass Model Equation
| | ) ( 1 ) ( ) ( t F t N
m
q
p t f
(

+ =
| | ) ( 1 ) ( ) ( t F t N
m
q
p t f
(

+ =
Since
) ( ) (
) ( ) (
t mf t n
t mF t N
=
=
) ( ) (
) ( ) (
t mf t n
t mF t N
=
=
Sales of the product at time t
| |
2
) ( ) ( ) ( ) ( t N
m
q
t N p q pm t n + =
| |
2
) ( ) ( ) ( ) ( t N
m
q
t N p q pm t n + =
Linear and non-linear regression methods
can be used to estimate the parameters p, q and N , if
we have historical sales data
Estimating the parameters Estimating the parameters

Linear Regression
Linear Regression
) 1 ( ) 1 ( ) (
2
+ + = t cN t bN a t n
) 1 ( ) 1 ( ) (
2
+ + = t cN t bN a t n
Where n(t) = Sales in period t , and N(t) = cumulative sales to period t
Where n(t) = Sales in period t , and N(t) = cumulative sales to period t
b p q
and
m
a
p
c
ac b b
m
+ =
=

=
;
:
2
4
2
b p q
and
m
a
p
c
ac b b
m
+ =
=

=
;
:
2
4
2
Actual versus Fitted Actual versus Fitted
Actual and Fitted Adoption of VCR's
1980-1989
0
2000
4000
6000
8000
10000
12000
80 81 82 83 84 85 86 87 88 89
Year
A
d
o
p
t
i
o
n

i
n

T
h
o
u
s
a
n
d
s
Actual Adoption
Fitted Adoption
Extensions of Bass Model Extensions of Bass Model

The Bass model forecasts within
The Bass model forecasts within
-
-
country sales with
country sales with
within
within
-
-
country influencing factors
country influencing factors

Can it also be used to forecast
Can it also be used to forecast
within
within
-
-
country sales with other
country sales with other
-
-
country factors?
country factors?
Cross-national diffusion patterns Cross-national diffusion patterns

Products introduced in different countries at different
Products introduced in different countries at different
points in time
points in time

Difference in adoption rates in different countries
Difference in adoption rates in different countries

Need to capture the learning effect that takes place
Need to capture the learning effect that takes place
between lead
between lead
-
-
lag countries in the diffusion process
lag countries in the diffusion process
Learning Model Learning Model
( )
( ) ( ) ( ) | | t F t F
m
m
c t F q p
dt
t dF
1 2
2
1
1
1
1 * * * *
(

|
|
.
|

\
|
+ + =
( )
( ) ( ) ( ) | | t F t F
m
m
c t F q p
dt
t dF
1 2
2
1
1
1
1 * * * *
(

|
|
.
|

\
|
+ + =
F
1
(t) = the cumulative penetration ratio till time t for the lag
country
F
2
(t) = the cumulative penetration ratio till time t for the lead
country
p = the coefficient of external influence for the lag country
q = the coefficient on internal influence for the lag country
c = the learning coefficient for the lag country
m
1
= market potential for the lag country, and
m
2
= market potential of the lead country
F
1
(t) = the cumulative penetration ratio till time t for the lag
country
F
2
(t) = the cumulative penetration ratio till time t for the lead
country
p = the coefficient of external influence for the lag country
q = the coefficient on internal influence for the lag country
c = the learning coefficient for the lag country
m
1
= market potential for the lag country, and
m
2
= market potential of the lead country
Factors influencing the
learning process
Factors influencing the
learning process
Culture
Economic Environment
Time Lag
Geographical Proximity
Type of Innovation
Presence of Standardized System

Culture
Culture

Economic Environment
Economic Environment

Time Lag
Time Lag

Geographical Proximity
Geographical Proximity

Type of Innovation
Type of Innovation

Presence of Standardized System
Presence of Standardized System
Learning Effect Learning Effect
i i i
i i i
TLAG ECON
CULT GEOG c


+ +
+ + =
* *
* *
4 3
2 1
i i i
i i i
TLAG ECON
CULT GEOG c


+ +
+ + + =
* *
* *
4 3
2 1
The learning coefficient of the lag country c
i
+
Forecasting Performance
Comparison
Forecasting Performance
Comparison
0.0226 0.0226 0.0036 0.0036 0.0135 0.0135
MAD MAD
0.0186 0.0186 0.0047 0.0047 0.0249 0.0249
MAD MAD
0.0042 0.0042 0.0062 0.0062 0.0135 0.0135
MAD MAD
0.0055 0.0055 0.0064 0.0064 0.0228 0.0228
MAD MAD
0.0007 0.0007 0.0003 0.0003 0.0003 0.0003
MSE MSE
0.0002 0.0002 0.0005 0.0005 0.0003 0.0003
MSE MSE
Learning Learning
Learning Learning
VCRs VCRs Microwave Microwave
Ovens Ovens
Home Home
Computers Computers
0.0005(9) 0.0005(9) 0.0003(9) 0.0003(9) 0.0008(9) 0.0008(9) MSE MSE
Basic Basic
Ireland Ireland
0.0003(17) 0.0003(17) 0.0004(8) 0.0004(8) 0.0008(9) 0.0008(9) MSE MSE
Basic Basic
Switzerland Switzerland
Innovation Innovation
Criteria Criteria Model Model Country Country
The forecasting measures are the mean squared error(MSE) and mea The forecasting measures are the mean squared error(MSE) and mean absolute deviation(MAD) in each period penetration rate averag n absolute deviation(MAD) in each period penetration rate averaged across ed across
the time periods.The number in parenthesis represents the sample the time periods.The number in parenthesis represents the sample size and corresponds to the particular innovation and the count size and corresponds to the particular innovation and the country ry
Limitations of Learning Model Limitations of Learning Model
It cannot accommodate influences from multiple countries
at the same time without creating substantial collinearity
problems
The model does not have a closed-form solution

It cannot accommodate influences from multiple countries
It cannot accommodate influences from multiple countries
at the same time without creating substantial
at the same time without creating substantial
collinearity
collinearity
problems
problems

The model does not have a closed
The model does not have a closed
-
-
form solution
form solution
Generalized Bass Model Generalized Bass Model

Incorporates the effects of marketing
Incorporates the effects of marketing
-
-
mix
mix
variables (e.g., advertising , price) or
variables (e.g., advertising , price) or
other
other

country variables
country variables
| | ) ( ) 1 ) ( ) ( t x Ft t
m
q
p t f
(

+ =
| | ) ( ) 1 ) ( ) ( t x Ft t
m
q
p t f
(

+ =
) 1 ( ) (
) 1 ( ) (
2
1
1
dt
dF
t x
or
dt
dP
t x

+ =
+ =
) 1 ( ) (
) 1 ( ) (
2
1
1
dt
dF
t x
or
dt
dP
t x

+ =
+ =
where
where
Flexible Interaction Models Flexible Interaction Models

A New Class of Multinational Diffusion Models
A New Class of Multinational Diffusion Models

Overcome many limitations posed by earlier models
Overcome many limitations posed by earlier models
Case 1 Case 1
Country 2 Country 2
p p
2 2
q q
2 2
m m
2 2
Simultaneous Introduction.
Simultaneous Introduction.
Country 1 affects Country 2,
Country 1 affects Country 2,
Country 2 affects Country 1
b b
21
b b
12
21
12
Country 2 affects Country 1
Country 1 Country 1
p p
1 1
q q
1 1
m m
1 1
t t
Time of introduction Time of introduction
Case 2 Case 2
Country Country
1 1
p p
1 1
q q
1 1
m m
1 1
Country Country
2 2
p p
2 2
q q
2 2
m m
2 2
Country Country
3 3
p p
3 3
q q
3 3
m m
3 3
b b
12 12
b b
1 13 3
b b
23
Country 1 first Country 1 first
Countries 2 & 3 later, simultaneously Countries 2 & 3 later, simultaneously
Country 1 affects Country 2 and Country 3, Country 1 affects Country 2 and Country 3,
b b
32
Country 2 affects Country 3, Country 2 affects Country 3,
Country affects Country 2
32
Country affects Country 2
t t
Time of introduction Time of introduction
Case 3 Case 3
Country 2 Country 2
p p
2 2
q q
2 2
m m
2 2
Country 3 Country 3
p p
3 3
q q
3 3
m m
3 3
Country 4 Country 4
p p
4 4
q q
4 4
m m
4 4
b b
2 23 3
b b
24 24
Country 1 Country 1
p p
1 1
q q
1 1
m m
1 1
b b
1 14 4
b b
1 13 3
b b
1 12 2 b b
34 34
b b
43 43
Time of introduction Time of introduction
t t
Country 1 affects Countries Country 1 affects Countries 2, 3, & 4 2, 3, & 4
Country 2 affects Countries 3 & 4 Country 2 affects Countries 3 & 4
Country 3 affects Country 4, and Country 3 affects Country 4, and
Country Country
4 affects Country 3 4 affects Country 3
Country 1 first, Country 1 first,
Country 2 next, Country 2 next,
Countries 3 & 4 later, simultaneously Countries 3 & 4 later, simultaneously
Case 1 Case 1
We follow the GBM approach and accordingly propose
that for country i, the current effort x
i
(t) includes 1 and
the impact of the change in the diffusion force of the country 2
| |
| || |
| |
(

)
`

+ + =
+ + =
+ =

dt
dF
b t F q p
t b t F q p
t x t F q p
t F
t f
i i i i
i i i i
i i i i
i
i
2
1 ) (
2) country of force diffusion in at time change ( 1 ) (
) ( ) (
) ( 1
) (
| |
| || |
| |
(

)
`

+ + =
+ + =
+ =

dt
dF
b t F q p
t b t F q p
t x t F q p
t F
t f
i i i i
i i i i
i i i i
i
i
2
1 ) (
2) country of force diffusion in at time change ( 1 ) (
) ( ) (
) ( 1
) (
Case 1 (continued) Case 1 (continued)
It is rather straightforward to show that this equation, like
the GBM, can be solved to yield the following closed
form solution for
F
1
(t) and F
2
(t)
as follows:
, ,
)}] )}] ( ( ){ ){ ( ( exp[ exp[ 1 1
)}] )}] ( ( ){ ){ ( ( exp[ exp[ 1 1
) ) ( (
2 2 1 1 1 1 1 1
1 1
1 1
2 2 1 1 1 1 1 1
1 1
t t F F b b t t q q p p
p p
q q
t t F F b b t t q q p p
t t F F
+ + + + + +
+ + + +
= =
, ,
)}] )}] ( ( ){ ){ ( ( exp[ exp[ 1 1
)}] )}] ( ( ){ ){ ( ( exp[ exp[ 1 1
) ) ( (
1 1 2 2 2 2 2 2
2 2
2 2
1 1 2 2 2 2 2 2
2 2
t t F F b b t t q q p p
p p
q q
t t F F b b t t q q p p
t t F F
+ + + + + +
+ + + +
= =
Model Estimation Model Estimation
Since each set of equations developed in the previous section co Since each set of equations developed in the previous section consists of nsists of
simultaneous equations, we estimate the parameters using an iter simultaneous equations, we estimate the parameters using an iterative method. Let ative method. Let
us take, for illustration purposes, the set of equation for case us take, for illustration purposes, the set of equation for case 1: 1:
)}] )}] ( ( ){ ){ ( ( exp[ exp[ 1 1
)}] )}] ){ ){ ( ( exp[ exp[ 1 1
) ) ( (
2 2 1 1 1 1 1 1
1 1
1 1
2 2 1 1 1 1 1 1
1 1
t t F F b b t t q q p p
p p
q q
t t F F b b t t q q p p
t t F F
+ + + + + +
+ + + +
= =
)}] )}] ( ( ){ ){ ( ( exp[ exp[ 1 1
)}] )}] ( ( ){ ){ ( ( exp[ exp[ 1 1
) ) ( (
1 1 2 2 2 2 2 2
2 2
2 2
1 1 2 2 2 2 2 2
2 2
t t F F b b t t q q p p
p p
q q
t t F F b b t t q q p p
t t F F
+ + + + + +
+ + + +
= =
In the first step, assume In the first step, assume F1 (t) =F2(t) = F1 (t) =F2(t) = 0 for all 0 for all t t and and estimate the parameters of the estimate the parameters of the
two equations 1 and 2. In the second step, use the estimated par two equations 1 and 2. In the second step, use the estimated parameters and ameters and
evaluate evaluate F1 (t) F1 (t) and and F2 (t) F2 (t) in the two equations and estimate once evaluated values in the two equations and estimate once evaluated values
as the independent variables as the independent variables F 1 F 1 (t) (t) and and F 2 (t) F 2 (t) in the two equations and estimate in the two equations and estimate
once again the parameters therein. Repeat the process till the p once again the parameters therein. Repeat the process till the parameters converge. arameters converge.
Case 2 Case 2
Applying a modeling logic similar to Case 1, it can be Applying a modeling logic similar to Case 1, it can be
shown that shown that
)} )} ( ( ) ) ( ( ){ ){ ( ( exp[ exp[ 1 1
)}] )}] ( ( ) ) ( ( ){ ){ ( ( exp[ exp[ 1 1
) ) ( (
2 2 3 3 1 1 13 13 3 3 3 3
3 3
3 3
2 2 3 3 1 1 13 13 3 3 3 3
3 3
t t F F b b t t F F b b t t q q p p
p p
q q
t t F F b b t t F F b b t t q q p p
t t F F
+ + + + + + + +
+ + + + + +
= =
)} )} ( ( ) ) ( ( ){ ){ ( ( exp[ exp[ 1 1
)}] )}] ( ( ) ) ( ( ){ ){ ( ( exp[ exp[ 1 1
) ) ( (
3 3 2 2 1 1 12 12 2 2 2 2
2 2
2 2
3 3 2 2 1 1 12 12 2 2 2 2
2 2
t t F F b b t t F F b b t t q q p p
p p
q q
t t F F b b t t F F b b t t q q p p
t t F F
+ + + + + + + +
+ + + + + +
= =
, ,
] ] ) ) ( ( exp[ exp[ 1 1
] ] ) ) ( ( exp[ exp[ 1 1
) ) ( (
1 1 1 1
1 1
1 1
1 1 1 1
1 1
t t q q p p
p p
q q
t t q q p p
t t F F
+ + + +
+ +
= =
Distinctive Features of Flexible
Interactive Models
Distinctive Features of Flexible
Interactive Models

Can incorporate multiple lead countries and multiple lag
Can incorporate multiple lead countries and multiple lag
activities
activities

Based on the GB model
Based on the GB model

Provides closed
Provides closed
-
-
form solution
form solution

Easy to understand by practitioners
Easy to understand by practitioners

What
What
-
-
if analysis
if analysis

Better forecasting and estimation
Better forecasting and estimation

Flexible Framework allows model extensions
Flexible Framework allows model extensions

Exploring simultaneous causality between any
Exploring simultaneous causality between any
two countries
two countries
Results - Case 1
Product Category: CD players
Results - Case 1
Product Category: CD players
Year Year
of of
introduction introduction
innovation innovation
p p
imitation imitation
Q Q
market market
potential potential
m m
('000s) ('000s)
mutual mutual
interaction interaction
Belgium(1) Belgium(1) 1984 1984 .013 .013 .43 .43 519 519 .003 (b .003 (b
21 21
) )
Germany(2) Germany(2) 1984 1984 .01 .01 .49 .49 14960 14960 .009 (b .009 (b
12 12
) )
Results- Case 2:
Product Category: Cellular Phones
Results- Case 2:
Product Category: Cellular Phones
interaction interaction Year Year
of of
intro intro
innovation innovation
p p
imitation imitation
q q
market market
potential potential
m m
('000s) ('000s)
from C from C
1 1
mutual mutual
Norway(1) Norway(1) 1981 1981 .021 .021 .20 .20 509 509
Denmark(2) Denmark(2) 1982 1982 .014 .014 .22 .22 431 431 .006 .006
(b (b
12 12
) )
.004 .004
(b (b
32 32
) )
Finland(3) Finland(3) 1982 1982 .005 .005 .40 .40 618 618 .009 .009
(b (b
13 13
) )
.007 .007
(b (b
23 23
) )
Results-Case 3:
Product Category: Microwave Ovens
Results-Case 3:
Product Category: Microwave Ovens
Year
of
intro
Innova-
tion
p
Imita-
tion
q
Market
potential
m
(000s)
Interaction
from
C1
from
C2
mutual
Germany
(1)
1974 .0006 .38 33618
UK (2) 1975 .003 .52 17961 .007
(b
12
)
France (3) 1976 .0005 .61 12644 .009
(b
13
)
.005
(b
2
3
)
.002
(b
43
)
Denmark
(4)
1976 .002 .45 596 .007
(b
14
)
.003
(b
24
)
.004
(b
34
)
Evaluation of Forecasting
Performance - Case 3 (on the hold-
out time periods)
Evaluation of Forecasting
Performance - Case 3 (on the hold-
out time periods)
Country Model Criteria Microwave Oven(n=7)
U.K. (2) GBM MSE
MAD
.0004
.0047
Bass MSE
MAD
.0005
.0052
France (3) GBM MSE
MAD
.0003
.0049
Bass MSE
MAD
.0006
.0092
Denmark (4) GBM MSE
MAD
.0005
.0201
Bass MSE
MAD
.0011
.0367
The forecasting measures are the mean squared error (MSE) and mean absolute
deviation (MAD) in each period penetration rate across the hold-out time periods.
Future Research Future Research
Validation on additional product categories
Use of marketing-mix variables
Use of Cultural and Economic Variables
Unit of analysis
Time-domain vs. Adopter-domain
Deriving Implications for International Market Entry
Strategies
2. Purchase Intention 2. Purchase Intention

Are purchase intentions a good way to predict sales?
Are purchase intentions a good way to predict sales?

Is simple extrapolation of past sales more accurate?
Is simple extrapolation of past sales more accurate?
When sales figures are available , it is better to calibrate
When sales figures are available , it is better to calibrate
intentions against them
intentions against them
Purchase intention
measurement
Purchase intention
measurement

3
3
-
-
point scale
point scale
-
-
Does anyone in the household plan to
Does anyone in the household plan to
buy a car in the next 6 months?
buy a car in the next 6 months?
(A) Yes___ (A) Yes___
(B) No___ (B) No___
(C ) Maybe___ (C ) Maybe___

Purchase probability scales with more scale
Purchase probability scales with more scale
-
-
points
points
have greater validity
have greater validity
-
-
How likely are you to subscribe
How likely are you to subscribe
to a wireless service in the next 6 months?
to a wireless service in the next 6 months?
(A)Definitely___ (A)Definitely___
(B) Probably____ (B) Probably____
(C) Might___ (C) Might___
(D) Probably not____ (D) Probably not____
(E) Definitely not___ (E) Definitely not___
An Example An Example
Distribution of intention scores in a sample of 100
Distribution of intention scores in a sample of 100
P(E) Definitely
P(E) Definitely
not
not
10
10
P(D) Probably
P(D) Probably
not
not
10
10
P(C) Might
P(C) Might
20
20
P(B) Probably
P(B) Probably
30
30
P(A) Definitely
P(A) Definitely
30
30
Probability scale
Probability scale
score
score
Number of
Number of
respondents
respondents
Mean Intent = 0.9 X P(A) + 0.4 X P(B) + 0.1 X P(C)
= 27 +12 + 2 = 41 %
Integrating Intentions and Sales
Data
Integrating Intentions and Sales
Data

Multiple intender groups
Multiple intender groups
-
-
Intent
Intent
-
-
behavior sales rate for respondents in each intender
behavior sales rate for respondents in each intender
and non
and non
-
-
intender group is equal to the corresponding rate
intender group is equal to the corresponding rate
for the previous time period
for the previous time period

Intender/non
Intender/non
-
-
intender groups
intender groups
-
-
Compute separate intent
Compute separate intent
-
-
behavior conversion rates for
behavior conversion rates for
intenders and non
intenders and non
-
-
intenders.Pooled measure increases
intenders.Pooled measure increases
reliability, but may lose richness in distinguishing different
reliability, but may lose richness in distinguishing different
intender groups
intender groups
Integrating Intentions and
Sales Data(continued)
Integrating Intentions and
Sales Data(continued)

Average Intentions
Average Intentions
-
-
Percent of buyers
Percent of buyers
(t )
(t )
= mean intent
= mean intent
(t )
(t )

bias
bias
(t
(t
-
-
1 )
1 )
( bias is estimated using data from previous year)
( bias is estimated using data from previous year)
-
-
Does not distinguish intender and non
Does not distinguish intender and non
-
-
intender
intender
groups, but may eliminate noise in the data
groups, but may eliminate noise in the data
Combined Forecasts Combined Forecasts

Effective when component forecasts differ
Effective when component forecasts differ
substantially from one
substantially from one
-
-
another
another

Useful when different methods make different
Useful when different methods make different
assumptions about the same data
assumptions about the same data
Case studies Case studies
Relative absolute errors for intentions-based forecasting methods
(F, number of forecasts; M, horizon in months)
3. ASSESSOR 3. ASSESSOR
Trial/Repeat
Model
Preference Share
Model
ASSESSOR
Trial/Repeat Trial/Repeat
Analysis of test market
Analysis of test market

Decompose total sales into trial and repeat
Decompose total sales into trial and repeat

Long run market share = P* x R*
Long run market share = P* x R*
where P* is the penetration level and R* is the
where P* is the penetration level and R* is the
ultimate repeat rate
ultimate repeat rate
Long run share Long run share
Share among triers
Cumulative trial
P*
R*
Months after Introduction
Trial- Repeat Model (long-run share= P* x R*)
Consumer Panel Data Consumer Panel Data
C C N N C C N N C C N N C C C C C C C C 8 8
C C C C C C C C C C C C C C C C C C C C 7 7
C C C C C C C C C C C C C C C C C C C C 6 6
C C N N C C N N N N C C N N N N C C C C 5 5
C C C C C C C C C C C C C C C C C C C C 4 4
C C C C C C C C C C C C C C C C C C C C 3 3
N N C C N N N N N N C C N N N N N N C C 2 2
N N N N N N N N N N N N N N N N N N C C 1 1
Consumer Consumer
10 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1
Week after Week after
launch launch
Market share forecast Market share forecast

Trial P*= 4/8 = 50%
Trial P*= 4/8 = 50%

Repeat rate R* = Number of repeat purchases
Repeat rate R* = Number of repeat purchases
observed/ Maximum number of repeat purchases
observed/ Maximum number of repeat purchases
possible once a respondent has tried the product =
possible once a respondent has tried the product =
20/28 = 71.4%
20/28 = 71.4%

Forecasted Market share = 0.5 x 0.714 = 35.7%
Forecasted Market share = 0.5 x 0.714 = 35.7%
Preference Share Preference Share

Preference rating measured for each available brand
Preference rating measured for each available brand

Preference Share =
Preference Share =
Preference rating for Brand N
Preference rating for Brand N
Sum of Preference r
Sum of Preference r
atings for all
atings for all
bra
bra
nds
nds

Example: Preference rating scores for brands N, C1
Example: Preference rating scores for brands N, C1
and C2 are P(N)= 7, P(C1)= 6, P(C2) = 6
and C2 are P(N)= 7, P(C1)= 6, P(C2) = 6

Preference Share for brand N = 7/(7+6+6) = 36.8%
Preference Share for brand N = 7/(7+6+6) = 36.8%
ASSESSOR ASSESSOR

Trial Repeat forecast = 35.7 %
Trial Repeat forecast = 35.7 %

Preference Share forecast = 36.8 %
Preference Share forecast = 36.8 %

Combining Trial /Repeat and Preference Share results,
Combining Trial /Repeat and Preference Share results,
we can arrive at an interval of 35 %
we can arrive at an interval of 35 %
-
-
37 %
37 %
as a forecast for market share for brand N
as a forecast for market share for brand N
ASSESSOR Model ASSESSOR Model

Test marketing is an expensive way for a
Test marketing is an expensive way for a
manufacturer to detect an unsuccessful product
manufacturer to detect an unsuccessful product

ASSESSOR, an integrated modeling and measurement
ASSESSOR, an integrated modeling and measurement
system provides management with predictive and
system provides management with predictive and
diagnostic information about the sales potential of
diagnostic information about the sales potential of
new packaged goods before test marketing begins
new packaged goods before test marketing begins
ASSESSOR ASSESSOR

A sample of consumers are surveyed to measure product
A sample of consumers are surveyed to measure product
awareness, preferences, and purchase patterns
awareness, preferences, and purchase patterns

Subjects are then shown advertising for a new product
Subjects are then shown advertising for a new product
and its major competitors
and its major competitors

They are given a sum of money sufficient to purchase
They are given a sum of money sufficient to purchase
the new product, and then enter a simulated shopping
the new product, and then enter a simulated shopping
facility where the new product and competitive brands
facility where the new product and competitive brands
are displayed
are displayed

Once they have had time to sample the product, the
Once they have had time to sample the product, the
subjects are interviewed about their repeat purchase
subjects are interviewed about their repeat purchase
intentions
intentions
The ASSESSOR Model The ASSESSOR Model
The long run market share of a new product
The long run market share of a new product
= trial rate x repeat rate x usage rate index
= trial rate x repeat rate x usage rate index
Hot off the oven -
The MSHARE model
Hot off the oven -
The MSHARE model
Diffusion
Model
Ring down
Survey
Purchase
intention
Survey
MSHARE
Model
Additional References Additional References
Kumar, V. Kumar, V. (1994), "Forecasting Performance of Market Share Models: (1994), "Forecasting Performance of Market Share Models:
An Assessment, Additional Insights and Guidelines," Internationa An Assessment, Additional Insights and Guidelines," International l
Journal of Forecasting, 10, 295 Journal of Forecasting, 10, 295- -312. 312.
Kumar, V. Kumar, V. and T. Heath (1990), "A Comparative Study of and T. Heath (1990), "A Comparative Study of Market Market
Share Models Using Disaggregate Data," International Journal of Share Models Using Disaggregate Data," International Journal of
Forecasting, Forecasting, Vol Vol 6, No. 2, (July) pp.163 6, No. 2, (July) pp.163- -174. 174.
Kumar, V. Kumar, V. Anish Nagpal Anish Nagpal and and Rajkumar Venkatesan Rajkumar Venkatesan, , MSHARE: MSHARE:
A Framework for Forecasting A Framework for Forecasting Marketshare Marketshare in Wireless Communication in Wireless Communication
Industry, Industry, forthcoming, International Journal of Forecasting. forthcoming, International Journal of Forecasting.
Venkatesan Venkatesan, , Rajkumar Rajkumar and and V. Kumar V. Kumar, , A Genetic Algorithms A Genetic Algorithms
Approach to Forecasting of Wireless Subscribers, Approach to Forecasting of Wireless Subscribers, forthcoming, forthcoming,
International Journal of Forecasting. International Journal of Forecasting.
Additional References
(continued)
Additional References
(continued)
Armstrong, S., V. Armstrong, S., V. Morvitz Morvitz and and V. Kumar V. Kumar (2000), "Sales Forecasts for (2000), "Sales Forecasts for
Existing Consumer Products and Services: Do Purchase Intentions Existing Consumer Products and Services: Do Purchase Intentions
Contribute to Accuracy," International Journal of Forecasting, V Contribute to Accuracy," International Journal of Forecasting, Vol. 16, ol. 16,
pp. 383 pp. 383- -397. 397.
Ganesh Ganesh, J., , J., V. Kumar V. Kumar and V. and V. Subramaniam Subramaniam (1997), "Cross (1997), "Cross - -
National Learning Effects in Global Diffusion Patterns: An National Learning Effects in Global Diffusion Patterns: An
Exploratory Investigation," Journal of the Academy of Marketing Exploratory Investigation," Journal of the Academy of Marketing
Science, Vol. 25(3), Summer, pp. 214 Science, Vol. 25(3), Summer, pp. 214 - - 228. 228.
Ganesh Ganesh, J., and , J., and V.Kumar V.Kumar (1996), (1996), Capturing the Cross Capturing the Cross- -National National
Learning Effect: An Analysis of an Industrial Technology Diffusi Learning Effect: An Analysis of an Industrial Technology Diffusion, on,
Vol. 24(4), pp. 328 Vol. 24(4), pp. 328- -337. 337.
Additional References
(continued)
Additional References
(continued)
Kumar, V., Kumar, V., R. Leone and J. Gaskins (1995), "Aggregate and R. Leone and J. Gaskins (1995), "Aggregate and
Disaggregate Forecasting using Consumer Confidence Measures," Disaggregate Forecasting using Consumer Confidence Measures,"
International Journal of Forecasting, Vol. 11, pp. 361 International Journal of Forecasting, Vol. 11, pp. 361- -377. 377.
Kumar, V., Kumar, V., J. J. Ganesh Ganesh and R. and R. Echambadi Echambadi (1998), "Cross (1998), "Cross- -National National
Diffusion Research: What We Know and How Certain Are WE?" Journ Diffusion Research: What We Know and How Certain Are WE?" Journal of al of
Product Innovation Management, Vol. 15(3), May, pp. 255 Product Innovation Management, Vol. 15(3), May, pp. 255 - - 268. 268.
Krishnan, T., F. Bass and Krishnan, T., F. Bass and V. Kumar V. Kumar (2000), "Impact of a Late Entrant on the (2000), "Impact of a Late Entrant on the
Diffusion of a New Product / Service, Diffusion of a New Product / Service, Journal of Marketing Research, Vol. Journal of Marketing Research, Vol.
37, May, pp. 269 37, May, pp. 269- -278. 278.
Brodie Brodie, R., P. Danaher, , R., P. Danaher, V. Kumar V. Kumar and P. and P. Leeflang Leeflang (2001), "Principles of (2001), "Principles of
Market Share Forecasting Market Share Forecasting , Chapter, in Principles of Forecasting: A Handbook , Chapter, in Principles of Forecasting: A Handbook
for Researchers and Practitioners, for Researchers and Practitioners, Kluwer Kluwer Publishers. Publishers.