Forecasting New Products and Services with Forecast Pro

Forecasting New Products and Services with Forecast Pro

New products and services introductions are very important and critical to any company’s success and portfolio development.  Forecast Pro has included several methods in most of versions of the software.  

Forecasting by Analogy

In some conditions, we can use analogy approach to forecasting new products or services. We assume the initial demand pattern will be similar to an analogous product’s initial demand pattern or to a “launch profile” that should be created. For example, in one study we assumed  the demand pattern of 3G mobile generation was similar or « looking like » to 4G mobile generation.

This approach can be used with or without historic demand. When used without historic demand, an estimate of the initial sales over a specific period of time (the “launch total” over the “launch horizon”) is required.

If historic demand exists, the launch total can be estimated using the analogy series’ cumulative relative percentage.

Forecasting Market Share

In this method, the sales forecast begins with an estimate of market size. This means the total number of consumers in the market that would be interested in purchasing the new product. We can assess this to an “ambition” or “target” market in terms of consumers.

When entering a new market, companies will often focus on the market share they expect to capture rather than the unit sales. Market research groups and data providers such as AC Nielsen, IRI and IMS can often provide considerable insight into the size of the current market and its composition. Translating a market share forecast into a unit forecast is usually fairly straight forward.

The Bass Model

The Bass diffusion model is used to forecast the sales of a new product or service. It can help forecasting the long-term sales pattern of any product when one of the following is true.

First, the product has recently been introduced and sales have been observed for a few time periods. Second, the product has not yet been introduced, but it resembles another product in the market whose sales history is known.

There are three Bass Model coefficients (two factors which affect product diffusion in the market and the market growth) that define the Bass Model for any product and service: Both models include three parameters to

m — the potential market (total volume of market of innovators)

p — coefficient of innovation (early adopters of new technology)

q — coefficient of imitation (adopters only of proven, existing technology)

In addition to providing Forecast Pro, PREDICONSULT delivers also a full day training course on how to forecast new products and services.