ECONOMETRICS IN ACTION © Vince Daly & Kingston University, October 2009 This work is licenced under a Creative Commons Licence. Forecasting the rate.
Download ReportTranscript ECONOMETRICS IN ACTION © Vince Daly & Kingston University, October 2009 This work is licenced under a Creative Commons Licence. Forecasting the rate.
ECONOMETRICS IN ACTION
© Vince Daly & Kingston University, October 2009
This work is licenced under a Creative Commons Licence.
Forecasting the rate of adoption of new products
S-CURVES & MARKET DIFFUSION
THE CLASSIC STAGES OF MARKET PENETRATION FOR A NEW PRODUCT
The S-curve shape reflects the stages of market development.
100 90 80 70 60 50 40 30 20 10 0 2000 2002 2004 2006 Market Penetration 2008 2010 2012 2014 2016 2018 2020 Early adopters Take off Mass adoption Slow down
TRANSFORMING TO A LINEAR MODEL
The S-curve has a complicated formula but a change of variables produces a simple linear equivalent.
P t S
1 1
e
( .
t
) The non-linear S-curve
Can be changed by ‘logistic’ transformation to
ln
S P t
P t
.
t
Its linear transformation S: market saturation level (i.e. max possible sales) = 100 in this example P t : penetration of market at time t
MOBILE TELEPHONES IN EUROPE
AN EXAMPLE OF FITTING & EXTRAPOLATING S-CURVES MSc student T. Vrionis gathered the OECD data for % penetration of this market
DATA:
t P 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 1.49 1.91 2.39 3.29 5.19 8.25 12.38 18.62 28.57 45.05 61.86
Ln[P/(100-P)] -4.19 -3.94 -3.71 -3.38 -2.91 -2.41 -1.96
-1.47 -0.92 -0.20
0.48
ln(P/(100-P)) trend EXCEL’s TREND function can be used to fit a linear trend to the transformed data by the OLS method, and also to extrapolate this trend.
5,0 3,0 1,0 -1,0 -3,0 -5,0 1990 1995 P 2000 forecast 2005 2010 The logistic transformation can then be reversed for a graph that shows observed and extrapolated market penetration.
100,0 80,0 60,0 40,0 20,0 0,0 1990 1995 2000 2005 2010
COMMERCIAL APPLICATION
ADVENTIS PLC have used S-Curve calculations as a basis for forecasting development of various M-commerce markets Saturation Levels Vary By Segment
30% 25% 20% 15% 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Clothing Computer Software Event ticketing
© Adventis PLC, 2001 Extract from presentation to IBC conference Forecasting the Telecoms Market , London 2001