Forecasting sales of new vehicle with limited data using Bass diffusion model and Grey theory

Abstract

New product forecasting is a process that determines a reasonable estimate of sales attainable under a given set of conditions. There are several new products forecasting method in practices and Bass Diffusion Model (BDM) is one of the most common new product diffusion model used in many industries to forecast new product and technology. Hence, this paper proposed a combining BDM with Grey theory to forecast sales of new vehicle in Malaysia that certainly have limited data to build a model on. The aims of this paper is to examine the accuracy of different new product forecasting models and thus identify which is the best among the basic BDM and combining BDM with Grey theory. The results show that combining BDM with Grey theory performs better than the basic BDM based on in-sample and out-sample mean absolute percentage error (MAPE). Results also reveals combining model forecast more effectively and accurately even with insufficient previous data on the new vehicle in Malaysia.