Business Forecasting Topic 10

Question 1

diffusion

Answer 1

number of people/households/companies
- adopted the innovation (made at least 1 purchase_)

Question 2

sales

Answer 2

includes diffusion and second purchases and replacement of original purchases

Question 3

forecasting diffusion and sales

Answer 3

• easier to forecast diffusion
• no past data on demand to fit statistical model
• rely on judgment to make forecasts
• have demand histories for analogous products = statistical methods are useful

1. normally saturation point for diffusion - sales may have no upper bound
2. modelling decisions on purchasing second or replacement items is difficult

Question 4

customer intentions surveys

Answer 4

• potential customers
• assess probability they would purchase product if launched
  0 = deffo not purchase
  100 = certainly purchase

used to estimate total market
reduced by 50% as people overstate

Question 5

when are customer intentions surveys most reliable ?
5 scenarios

Answer 5

1. real purchase decision soon after study
2. durable product
3. asked to indicate intentions related to specific types of the products
4. predict % of consumers who will buy rather than total mkt sales
5. forecasts for existing products not new ones

Question 6

growth curve models

Answer 6

• diffusion of new products follows pattern

cumulate new adopters = number of those who adopted new product up to end of year = S shaped curve

Question 7

Growth curve

Answer 7

• curve flatten out after years
• approaches market saturation lvl

Question 8

Point of inflection

Answer 8

point where changes from increasing to decreasing growth

Question 9

forces determining the shape of growth curves

Answer 9

1. more adopt = greater exposure = imitate existing adopters = speed up growth = more adopt
2. mkt saturation point is approached = difficult to find new adopters = remaining are those with low propensity to adopt new = slow growth

Question 10

growth curves are used to obtain 4 things

Answer 10

1. medium & LT diffusion forecasting
2. saturation lvls estimates
3. estimates of when peak diffusion occurs
4. estimates of how large peak demand is

Question 11

3 Growth curve models

Answer 11

1. simple logistic (pearl) curve
2. Gompertz curve
3. bass curve

Question 12

simple logistic curve

Answer 12

symmetrical about point of inflexion

• slope depends on y and m-y
  progress achieved stimulates further growth (imitation) -> inhibited as saturation point is approached

Question 13

Gompertz curve

Answer 13

not symmetrical about point of inflexion

large lvl of adoption achieved - slope depends on m-y
implies present levels dont stimulate further growth and continued progress becomes increasingly more difficult

Question 14

Bass Curve assumptions

Answer 14

assumes adoption of innovation depends on

1. coefficient of innovation (p)
2. coefficient of imitation (q)
3. total market potential

-analagous products = estimate coefficients

Question 15

coefficient of innovation

Answer 15

likelihood person will start to use product
because of media/external factors

stable across applications
around 0.03

Question 16

coefficient of imitation

Answer 16

likelihood start using
because of ‘word of mouth’ or other influences from those already using product

more variable
around 0.38

Question 17

Bass curve formulae

Answer 17

Question 18

2 ways of estimating saturation lvls

Answer 18

1. customer intention surveys (may overstate)
2. data based estimate of lvls -> better than judgment

Question 19

appropriateness of models

Answer 19

good indicator are short term forecasts