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Forecasting Guide
Overview
Categories
Selecting the Approach
Combining Approaches
Judgmental Models
Delphi Method
Curve Fitting
Analogous Data
Time Series Models
Moving Average
Exponential Smoothing
Decomposition Models
Box-Jenkins Models
Regression
Leading Indicator
Input-Output Models
TECHNIQUE #4: Analogous Data

BASIC IDEA: Data about another product currently on the market, or one that existed at an earlier time, can be used to forecast a new product's expected growth pattern.

PROCEDURE: First, it is critcial to establish a logical connection between the sales of the two products, for example, the two products serve a similar need. Then, determine the pattern of data (e.g. sales) for the current or historical product. Intuitive judgment is then used to trace out the expected pattern of data for the new product, taking into consideration environmental factors and market conditions that may uniquely affect the new products growth pattern.

EXAMPLE: Forecast for HDTV equipment provides a good example of this technique. Since no history exists to provide sales patterns for HDTV technology, forecasts are based on the history of several similar consumer products: color TV receivers, projection TV, and videocassette recorders. For example, a VCR growth curve might be used as one basis for projecting future growth patterns of HDTV technology, subject to factors which may be unique to either the VCR market (e.g. conflicting formats of Beta and VHS) or the HDTV market (e.g.acceptance of quality differential versus existing TV).

COMMENTS:

The method of using historical data to predict new products is one of the oldest forecasting techniques. It can be useful, but only if the "analogy" holds.

Article continues below

To make this forecast credible, it is very important to establish the logical connection between the products involved and provide detailed assumptions.


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