TITLE

THE FORECASTER'S DILEMMA

AUTHOR(S)
Ehrman, Chaim M.; Shugan, Steven M.
PUB. DATE
March 1995
SOURCE
Marketing Science;1995, Vol. 14 Issue 2, p123
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Influential forecasts occur when the forecast itself determines whether the forecast is tested. New product sales forecasts are often influential because a low forecast may cause a firm not to launch a new product so that actual sales are never observed. This paper considers a dilemma we face as influential forecasters. Our client requests an unbiased forecast but pressures sometimes exist to provide a bias forecast. From theoretical and empirical perspectives, we discuss the impact of these pressures on the quality of forecasts. We find that: Noninfluential forecasts, generally, create no pressure for statistically biased forecasts. As influence increases, the pressures increase. When our forecasts eliminate alternatives, (e.g., product designs, advertising campaigns), not all forecasts are tested. Not validating all forecasts causes two effects: Survivor's Curse and Prophet's Fear. Survivor's Curse makes statistically unbiased forecasts appear optimistic (i.e., overestimate actual sales) because, often, only optimistic forecasts ate tested. Forecasts appearing statistically unbiased or pessimistic might cause concern. Perhaps, some failures are justified. Prophet's Fear encourages pessimistic forecasts because these forecasts cause hidden opportunity losses while optimistic forecasts cause observable actual losses. Tested forecasts may appear completely unbiased despite a pessimistic pre-launch bias. Although no perfect solution exists, clients may lessen bias with experimentation and by seeking more accurate forecasts. Forecasters may lessen bias with forecasts conditioned on launching and by seeking more accurate forecasts.
ACCESSION #
4474848

 

Related Articles

  • Predicting New-Product Sales.  // Futurist;May/Jun88, Vol. 22 Issue 3, p36 

    Reports on the analysis of new product sales by The Futures Group, a management-consulting firm. When new products and new product categories tend to achieve maximum market share; Use of computer-simulation methods in sales forecasting; Development of methods designed to assess long-term sales...

  • Air Care Market Revives.  // Global Cosmetic Industry;Mar2005, Vol. 173 Issue 3, p47 

    The article reports that the maturing global air freshener market reinvents itself as a lifestyle product, providing aromatherapy for the home and car, and assumes a functional role by cleaning house with long-lasting fresh scents. Meanwhile, new products and technologies in modern air care have...

  • A Bayesian Model to Forecast New Product Performance in Domestic and International Markets. Neelamegham, Ramya; Chintagunta, Pradeep // Marketing Science;1999, Vol. 18 Issue 2, p115 

    Abstract This paper attempts to shed light on the following research questions: When a firm introduces a new product (or service) how can it effectively use the different information sources available to generate reliable new product performance forecasts? How can the firm account for varying...

  • Loss leaders in decline. Murray, Rupert // Travel Trade Gazette UK & Ireland;11/27/2009, Issue 2891, p14 

    The article provides an overview on the sales performance of the travel industry in Great Britain. Sarah Smalley of GfK Ascent-MI says that sales of more expensive trips had generated 100 million pounds more revenue in 2009 compared with 2008. She also reveals that retail agents were faring...

  • An Extension of Mixed Estimation, with an Application to Forecasting New Product Growth. Kennedy, P. // Empirical Economics;1991, Vol. 16 Issue 4, p401 

    This paper extends the mixed estimation technique to handle a case in which the coefficients of a set of linear constraints are known nonlinear functions of an unknown parameter vector for which an extraneous unbiased estimate is available. This novel form of the mixed estimation technique is...

  • BAYESIAN ESTIMATION AND CONTROL OF DETAILING EFFORT IN A REPEAT PURCHASE DIFFUSION ENVIRONMENT. Lilien, Gary L.; Rao, Ambar G.; Kalish, Shlomo // Management Science;May81, Vol. 27 Issue 5, p493 

    This paper develops a model and an associated estimation procedure to forecast and control the rate of sales for a new product. A repeat-purchase diffusion model is developed, incorporating the effect of marketing variables -- detailing force effects in particular -- as well as a word-of-mouth...

  • A Probability Model for Early Prediction of New Product Market Success. Barclay, William D. // Journal of Marketing;Jan1963, Vol. 27 Issue 1, p63 

    This article shows the application of a simple probability model to one aspect of the early prediction of new product success. The model is tested by comparing a long-run predicted proportion of Chicago families who would be expected to buy a particular new product during a bi-monthly period...

  • BENCHMARKING FORECASTING MODELS. Jain, Chaman L. // Journal of Business Forecasting;Winter2007/2008, Vol. 26 Issue 4, p15 

    The article provides information concerning the benchmarking of business forecasting models in the U.S. Model plays a fundamental role in forecasting, and each dataset has a pattern of its own. There are three types of forecasting models, including Time Series, Cause-and-Affect, and Judgmental....

  • Customer demand forecasting. Chase Jr., Charles W. // Journal of Business Forecasting Methods & Systems;Fall94, Vol. 13 Issue 3, p2 

    Editorial. Presents a discussion in customer demand forecasting as a function of sales forecasting. Sales forecasting function; Approach for customer demand forecasts; Process; Baseline demand; Promotional lift; Business factors.

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sign out of this library

Other Topics