Forecasting Trial Sales of New Consumer Packaged Goods

Abstract

One of the most important commercial applications of forecasting can be found in the late stages of the new product development process for a new product, at which time managers seek to obtain accurate projections of market penetration for planning purposes. We review past work in this area and summarize much of it through ten principles. Several model characteristics, such as covariate effects (e.g., promotional measures) and capturing consumer heterogeneity are critical elements for a timely, accurate forecast; in contrast, other features such as a complex structural model and a “never triers” component are often detrimental to the model’s forecasting capabilities. We also make recommendations about certain implementation issues, such as estimation method (maximum likelihood is best) and the length of the calibration period (which is greatly dependent on the presence or absence of covariates). A set of practical implications for forecasters are identified, along with future research needs.