Forecasting market penetration is an essential step in the development and assessment of new technologies. This report reviews several methodologies that are available for market penetration forecasting. The primary objective of this report is to help entrepreneurs understand these methodologies and aid in the selection of one or more of them for application to a particular new technology. This report also illustrates the application of these methodologies, using examples of new technologies, such as the heat pump, drawn from the residential and commercial sector. The report concludes with a brief discussion of some considerations in selecting a forecasting methodology for a particular situation. It must be emphasized that the objective of this report is not to construct a specific market penetration model for new technologies but only to provide a comparative evaluation of methodologies that would be useful to an entrepreneur who is unfamiliar with the range of techniques available. The specific methodologies considered in this report are as follows: subjective estimation methods, market surveys, historical analogy models, time series models, econometric models, diffusion models, economic cost models, and discrete choice models. In addition to these individual methodologies, which range from the very simple to the very complex, two combination approaches are also briefly discussed: (1) the economic cost model POknbined with the diffusion model and (2) the discrete choice model combined with the diffusion model. This discussion of combination methodologies is not meant to be exhaustive. Rather, it is intended merely to show that many methodologies often can complement each other. A combination of two or more different approaches may be better than a single methodology alone.
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