Development of demand forecasting model for new product

Abstract

Forecasting new product sales or service is a critical process in marketing strategies and product performance for an organisation. There are several methods to forecast new product sales or service and the common method used in industry nowadays is Bass Diffusion Model. Since the development of the Bass Diffusion Model in 1969, innovation of new diffusion theory has sparked considerable research among marketing science scholars, operational researchers and mathematicians. This research uses basic Bass Diffusion Model and the model is modified to analyse and forecast the vehicle demand in Malaysia. The objective of the proposed model is to represent the level of spread for the demands of new cars in the society in terms of a simple mathematical function. Since the amounts of available data are limited, a modified Bass Diffusion Model is developed to forecast the demand of new products. The selections of analogous product, parameter estimation method and different value potential market are discussed. A procedure of the proposed diffusion model is presented and the parameters of the model are estimated. The results obtained by applying the proposed model and numerical calculation show that the modified Bass Diffusion Model is robust and effective to forecast the demand of new product sales. This research concludes that the proposed modified Bass Diffusion Model has significantly contributed to forecast the level of spread for new product.