Steps to an Example Forecast
The following steps will build a forecast for the (inevitable) Internet of Pugs Cloud Service:
1. Specify the product category — In the App above, click the Product tab and enter “Internet of Pugs Cloud Service.” Notice that the title of each sheet reflects the change such that, for example, the first sheet title is Potential Market Penetration — Internet of Pugs Cloud Service.
2. Click the App Parameters tab to enter the remainder of the required information.
3. Specify M, the potential market, which is the number of pugs that will ultimately be connected to the Internet and subscribe to the Pug Cloud Service. I will assume (1) the number of pugs worldwide is 4 million (I have no clue except for the one under my desk) and will remain constant for the period of the forecast. I will further assume that ultimately 50% of all pugs will be connected to the Internet. Of course, all owners will want their pug connected; however, not everyone will be able to afford the connecting device and service. In conclusion, I will use the potential market M as 2 million; therefore, slide the M slider to the far right as shown.
4. Specify the beginning year of the forecast as the first full year of product sales, which I will assume is 2017, which should be entered in the box to the right of the M slider, which is labeled Year 1.
5. Specify p as the percentage of the potential market M that will be sold in the first full year of sales. I’ll say 0.5%, which means p = 0.005. Do this by either moving the p slider to select 0.001 or (as a shortcut) specify the maximum value of p in the box to the right of the slider and move the slider to the far right.
6. Now for the fun. Set the saturation slider (to the left of “saturation”) to some percentage of market penetration that you can get your head around. I’ll use 60% here, but I often use 95% (which I think of as market saturation) so that I can compare to how long it took other products to reach market saturation. Then select how many years you think it will take for the market to reach 60% saturation by using the slider to the left of “years to.” I’ll use 15 years.
Notice as these two sliders are moved, the q slider moves automatically. This is because years to saturation T and saturation level sat can be used to determine q. This is done in the App using a solver-type search for q given p, T and sat. The Bass Model curves are then calculated using the q so determined. There is no simple formula for calculating directly from p, T and sat.
Years ago when I first started building this app, doing the search for q was too time-consuming for the app to be responsive. But technology has marched on until today the T and sat sliders are almost as responsive as p and q in spite of the nonlinear solver required.
The result is a market forecast with 3 graphs as well as the data that can be downloaded. Now all we need is a press release …
“Forecast Joy Expects 1.4 Million Internet of Pugs Cloud Service Subscribers by 2031”
If I were a forecast publisher, I would wrap a few more pages about the pug connection market around this, profile a few expected competitors and charge $2,000 for the result — then on to the next hot product forecast.