Forecasting Flashcards
Why do consumers not cooperate when it comes to forecasting?
- Attitude-Behavior Inconsistency: breakdown between words and follow-through Ex. Diet
- Attitude-Attitude Inconsistency: consumer gives a different response than first response. Ex. Beer - I’ll never drink again
What are some reasons for Forecasting Inaccuracy?
o New technologies are often inferior to existing ones (e.g., “disruptive technologies”).
o The innovation begins in a primitive state, and its characteristics are not well understood (e.g., Intel x 2).
o New technologies may require trade-offs, and the firm may accentuate the downside of the new technology—sometimes to ridiculous extents: Ex. Horse & Carriage
o The innovation becomes part of a new technology and in the early stages people can think only in terms of the technology it is replacing.
o The biggest market is not apparent. The innovation is intended to solve a particular problem for a particular niche and other applications are difficult to envision. Ex. Carbon Fiber in Sports as opposed to Aerospace
o There is a lack of insight due to an inability to identify consumer needs and behaviors and how technology can change those needs and behaviors. Ex. The internet was a defense project
What are 3 approaches to forecasting? (NCS)
- Normed Purchase Intent
- Critical Issues Grid
- Scenario Analysis
What is Normed Purchase Intent?
Process that looks at what % of my target market becomes buyers. Simple is to estimate market potential as the size of the relevant population. Thus, you determine the positioning of the product and then determine the segment to which it is intended.
Market population consists of the size of the relevant population adjusted for ________ ________.
Purchase Intent
Potential = ______ x ________
Population; Buyers
______ = Sigma (Itbi)(Twti)
Buyers
Itbi =
proportion of sample indicating an intention to buy in the ith response category (eg defintely will purchase)
Twti =
translation weight applied to the ith response category based historical response rates
To find the buyers you can only perform the equation if you know what?
Translation weights
What are translation weights
Indicators based on past experience within the same or similar product category
When do consumers tend to grossly overestimate their true purchase likelihood?
In the case of familiar products
When do consumers tend to underestimate ultimate adoption?
In the case of unfamiliar new technologies
What are constraining factors?
Additional actions by the firm such as advertising (awareness) and distribution (availability) that are factored into the projected sales equation…
Sales = Population x Buyers x Awareness x Availability
What is the critical-issues grid?
The Critical Issues Grid deals with this by focusing on the 5 “environment” or forces, each of which is considered at 3 levels of abstraction…
What are the 5 environments of the critical-issues grid? (P - BEST)
- Political
- Behavioral
- Economic
- Social
- Technological
What are the 3 levles of the critical-issues grid? (CBI)
- Company
- Business Ecosystem
- Infrastrucutre
What is Scenario Analysis?
a. Start out with Critical-Issues Grid to serve as starting point for scenario planning, involves construction of multiple possible futures. Helps weed out products or ideas that are insufficiently developed or too expensive to prototype prior to production or unreliable consumer reactions to concepts.
b. May not be able to definitively questions posed in each cell of critical-issues grid. Different probabilities can be assigned to each answer however. Changes in probs produce different outcomes.
c. Probs set at least favorable levels a “worst-case” scenario ensues, and when set at the most favorable levels, a “best-case” scenario ensues. Objective is to work toward identification of most likely outcome(s).
What is a project premortem?
Process by analyzing what will go wrong or risks at outset of a product. Write down every reason you think of failure. Sensitizes team to pick up early signs of trouble once the project gets under way.
What two areas must firms be concerned with when it comes to diffusion of a new product?
Demand and Supply
What two reasons cause new products to fail?
- Consumers do not want the product
- Consumers do not want the product fast enough
What term do marketers play close attention to in the forecasting equation?
The buyer’s variable
P =
probability of “spontaneous” innovation or coefficient of innovation
Q =
an estimated diffusion factor or the coefficent of imitation
New Adopters at time (t) =
[p + q(old adopters/population)] x [population - old adopters]
The more old adopters are out there the more likely ________ _______ will drive people to buy it
social pressure
What are innovators in the model?
those people who spontaneously purchase without influence of other consumers and tend to purchase early in the life cycle
What are the 5 segments in the classic view of apotion-based segmentation?
a. Technology Enthusiasts: experts at technology and value technology for its own sake (geeks?)
b. Visionaries: “change agents” who seek breakthrough improvement in business outcomes
c. Pragmatists: seek measurable improvement buy are cautious in adopting something new
d. Conservatives: prefer the status quo and require lots of evidence and support before adopting
e. Skeptics: may try to block adoption by casting doubt on the promised benefits of the technology
Why can there be a “chasm” in this model?
people have different objectives, there is less basis for communication and persuasion
When we are not sure of p and q we can examine these 7 qualitative determinants of innovation diffusion…
- Relative Advantage
- Risk of Adoption
- Perceived Complexity Ex. Genetically Modified Foods
- Compatibility
- Ease of Observing the Benefits
- Likelihood of Communicating the benefits
- Divisibility ex. TIVO
What does the theory of overlapping S Curves belong to?
Disruption and the Supply Side
What is the crossover point?
Where the two curves touch and people begin using the new technology
What 2 supply side factors determine the speed of disruption?
- Technology Ecosystem Ex. Electric Vehicles
- Response of the Incumbent Technology Ex. Gas Powered Vehicles much more efficient
