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concept evaluation: sales forecasting

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by Pelin Bicen on 4 April 2013

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Transcript of concept evaluation: sales forecasting

concept evaluation:
full screen and sales forecasting All sales forecast models are.... assumption based...
Most difficult part of forecast models... sales projections...
Marketing is on Air...
Concept testing... purchase intention... top two boxes (80 % definitely; 33 % would probably)... gives an idea for trial... Forecast Models: How to predict market share during concept stage... ?

.... ATAR models... = Trial x repeat purchase x Awareness x Availability
... Market Share = Projected Unit Sale x T x (Rs/ 1+Rs-Rr) x Aw x Av

Problem: How will we know how many people will try the product ? who will try first? in DoI models... it is not the people who change but the innovations themselves. Diffusion of Innovation... why do certain innovations spread more quickly than others?

Answer: Rogers (1995)

1... qualities of innovation...
relative advantage... (the biggest issue!)
Compatibility with existing values (other biggest issue)
simplicity
trialability
observable results 2. Peer networks. who are they? Innovators... visionary, imaginary, idealistic...

Early adopters.... love getting an adv over their peers, social prestige is their biggest driver, trend setters, economically successful, confident, socially respected, informed, like talking - a lot, independent test beds,

Secret recipe for success: it is not the persuasion that spreads the innovation... it is whether product is being reinvented to become easier, cheaper, simpler, quicker...

Early majority... want solid benefits, followers, cost sensitive, risk averse, simple-proven methods, hate complexity, they want to hear "user-friendly, no sweat, value for money, plug-and-play"

Late majority... conservative pragmatists- hate risk and uncomfortable with new idea, the fear of not fitting in

Laggards.... high risk in adoption, nostalgic, low income and education status... who are these people? how do they differ? Responses to innovation ... 4 characteristics:
1. evaluation... subjective perceived value
2. ... relative to the reference point
3. advantages = gains ; disadvantage = losses
4. loss has far greater effect than gains (loss aversion) Theory behind it: endowment effect + status quo

endowment effect:
value (own + give up) > value (dont own + obtain) ( x4 approximately ,more)

Status quo = stick with the old... (...gets bigger over time...X9 times less likely to give up) 9 x Effect easy sell
sure failures
smash hits (Prius, Apple, Google, Nike)
long hauls patience for slow adoption (TiVo)
10 x better with better communication
eliminate the old
behaviorally compatible products (e.g., Volvo)
seek out unendowed (e.g., Burton)
find believers and optimists first... they will take care of the rest... what to do to reduce the resistance? next episode : Human Centric...Design... what is full screen? very last step before the ... development
it is called "full" ... you have most of the information available
it is called "screening" ... you filter the not-doable concepts ... has two parts :
(1) feasibility of technical accomplishments
(2) feasibility of commercial accomplishments purpose ...
(1) ... recycle and rework concepts
(2) ... rank & order good concepts
(3) ... track appraisals of failed concepts
(4) ... to encourage X-functional communication
(5) ... potholes become apparent 10-3 A Profile Sheet 10-2 Factor Score (1-5) Weight Weighted Score

Technical Accomplishment:
Technical task difficulty
Research skills required
Rate of technological change
Design superiority assurance
Manufacturing equipment…



Commercial Accomplishment:
Market volatility
Probable market share
Sales force requirements
Competition to be faced
Degree of unmet need... A Scoring Model for Full Screen Source of Scoring Factor Models s(t) = pm + [q-p]Y(t) - (q/m)[y(t)]2
p = initial trial probability
q = diffusion rate
m = # number of potential buyers
y(t) = total number of purchases t*= (1/ (p+q)) ln (q/p)
s*= (m)(p+q)2 / 4q Bass Model Forecast of
Product Diffusion consumers are usually...
- skeptical
- unable to see the need for it
- satisfied with the existing product &
ingenious about adopting the existing problems
- quick to see what they already own as the status quo Companies are often
- convinced the innovation works
- likely to see a need for the product
- dissatisfied with the existing substitude
- innovation as the benchmark 3x3 innovation
e-books
satellite radio
DVD rentals by mail
online grocery shopping what is the gain?
easy portability
broad selection
broad selection & convenience
home delivery what is the loss?
durability
free music
spontaneity
socialization & ability to choose fresh products ATAR Model Profits (from burrito) = Potential market demand x Awareness x Availability x Trial x Repeat purchase x margin Profit = 110 million x .45 x 1 (direct sales) x (1 + (.6 x 24)) x .43 = 327 million (annual sales) so, the evaluation model kicks in, let's say, when you want to increase the profit to 450 million...

which number would you like to change in the above formula? where did I get the numbers? http://www.ft.com/cms/s/0/3b452592-c911-11e1-bcb4-00144feabdc0.html#axzz2NH0dY2WG http://www.franchisehelp.com/industry-reports/fast-casual-industry-report answer: they are increasing the menu prices, increasing the marketing expenses, lowering the growth of new stores...including the vegi options to their menu... if it is the awareness problem? if it is the trial problem? ideas that stick... (from Heath brothers)

- simple
- unexpected
- concrete
- credible
- emotional
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