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Lifecycle Forecast for Consumer Technology Products with Limited Sales Data

Research output: Contribution to journalJournal articlepeer-review

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  • Xishu Li
  • Ying Yin
  • David Vergara Manrique
  • Thomas Bäck
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Article number108206
<mark>Journal publication date</mark>30/09/2021
<mark>Journal</mark>International Journal of Production Economics
Volume239
Number of pages10
Publication StatusPublished
Early online date15/06/21
<mark>Original language</mark>English

Abstract

Early lifecycle demand forecast is critical to consumer technology products with a fast innovation speed, as firms which compete on these products focus on timely responding to market changes through new product development and efficient product diffusion, rather than sustaining product sales. The challenge for obtaining an accurate long-range forecast is that sales volumes at the early lifecycle stages are small, which limits the forecast accuracy. We propose a two-step lifecycle forecast approach for consumer technology products with limited sales data. First, we segment products based on market and clustering. Second, we apply the Bass model to aggregated products in a group using the average periodic sales of all products in the group and then use the forecast for related new products. We validate our approach using a dataset collected from Philips Netherlands, which contains consumer healthcare products sold in US and China over an 8-year timespan. The results suggest that for forecasting the lifecycle of a new product, models based on aggregated products generally perform better than models based on an individual product. It highlights the value of data aggregation in product lifecycle forecasts. Clustering is also useful for improving the forecast accuracy: when aggregation is done using sufficient product sales data, the aggregated model based on products with which the new product has the most sales pattern similarities could provide a more accurate forecast than other aggregated models. Based on our results, we provide a practical guideline to firms for obtaining an accurate early product lifecycle forecast.