Comments on the Model Testing by Goodwin and Meeran (2012): Comparison of the Utility‐based and the Gompertz Curve Approach for High‐technology Product Sales Forecasting

Abstract

Starting from a comprehensive examination of recent empirical studies focusing on consumer behavior in high‐technology markets and the resulting identification of factors probably affecting individual buying decisions as well as aggregate product sales, Decker and Gnibba‐Yukawa developed and empirically verified a utility‐based sales forecasting approach in their earlier work. Based on data for 14 consumer electronic products and using the Gompertz curve as a benchmark, Goodwin and Meeran carried out a “more extensive testing” of this proposal. However, at least from a practical point of view, the plausibility of their testing framework regarding the market potential m is not unquestionable. This paper, therefore, first discusses some theoretical aspects of both approaches by addressing issues challenged by Goodwin and Meeran, especially regarding the use of short time series and the consideration of replacement purchases. Then, the quasi‐endogenous estimation method for m favored by Goodwin and Meeran for the Gompertz curve is examined in terms of sensitivity to better understand its influence on sales forecasts, and the adequacy of the suggested range for m in the case of the approach by Decker and Gnibba‐Yukawa is investigated. In addition, the results presented in Goodwin and Meeran are considered from a more distant perspective, and possible causes of the variations in forecasting accuracy are discussed, which finally reveals that the forecasting performance of the utility‐based approach is not that “disappointing” as claimed. It provides more accurate (or at least equivalent) forecasts than the Gompertz curve approach in 64% of the cases considered. Furthermore, if product 14 (portable MP3 players) is excluded from the analysis because of the nonconsideration of probably existing product improvement effects, then the utility‐based approach, on average, outperforms the benchmark in all forecasting years. Altogether, this suggests that the approach by Decker and Gnibba‐Yukawa could achieve more accurate forecasts when applying a more reasonable range for m, rather than varying it between 2 and 15 times the cumulative sales by the end of year 7 as proposed by Goodwin and Meeran. It turns out that the Gompertz curve approach can perform on a par with the utility‐based approach in high‐technology product sales forecasting based on short time series if the market potential m is estimated exogenously. A combination of the outcomes of both approaches can even lead to more accurate forecasts as when being used individually insofar as composite forecasting seems to be a practicable approach to the problem of shorter time series compelled by the accelerated diffusion speed in high‐technology markets, rather than relying on one presumably “best” model.

The identification of difficulties in using advanced technologies in the implementation of projects

“…The right choice of advanced technologies is of a crucial importance (Peng and Jang, 2013;Shengbin and Bo, 2011;Jigeesh, 2012). For example, some of the difficulties with the right use of advanced technologies arise, for example from shortterm planning possibilities (Cooper et al, 1992;Sood and Tellis 2005;Gnibba-Yukawa and Decker, 2012) which are caused by the dynamic and unpredictable changes in the sector of advanced technologies, such as the software industry (Hakala, 2013) and the fast-changing expectations of the clients (Nathan et al, 2005).…”

Investigating Adoption of Free Beta Applications in a Platform‐Based Business Ecosystem

“…However, the Bass model has been shown to be susceptible in its forecasting performance when a limited number of data points is available for fitting, and this is especially the case during early phases of the adoption process. At the same time, these early phases have been argued to be increasingly important in current high‐technology markets (e.g., Gnibba‐Yukawa and Decker, ), and so we selected another model that does not require theoretical behavioral rootings, and that has been shown to be applicable in highly dynamic, high‐technology markets. Namely, we follow recent investigations (e.g., Goodwin and Meeran, ) that have verified the applicability of the Gompertz model for adoption studies as a rather simple growth model.…”