SMART Penetration Forecasting

The ability to estimate consumer acceptance of new products is critical. Market penetration forecasting provides vital input into decisions affecting sales, capital outlays, credit, plant expansion, budgeting, inventory control, production scheduling, marketing strategies and financial planning.

Sales volumes that are significantly below expectations jeopardize cash flow, profitability & other performance-related criteria. On the other hand, sales volumes that significantly exceed expectations strain manufacturing & service functions.

Forecasting the sales of innovative types of products presents unique challenges — beyond those of estimating the business potential of new products in existing categories. Innovative products often:

	Are relatively unfamiliar to potential buyers
	Don't fit conveniently into established product categories
	Are technologically advanced
	May not be introduced for several years

The Bass Model of Diffusion has been widely used to successfully predict the growth rate of numerous new technologies. SMART has unparalleled experience in collaborating with Bass to forecast demand for innovative consumer technologies — including direct broadcast satellite TV — in the U.S. and abroad.

The Bass model assumes that there are three stages in the life cycle of a product:

	Initial slow growth as the product is first adopted by innovators
	Rapid growth as the product is accepted by the majority of consumers
	Eventual saturation

Innovators have great importance in the early stages of new product adoption. Innovators decide to adopt an innovation independently of others, and will spread the idea to ultimate users or adopters. Innovating firms therefore need to understand the characteristics (e.g., attitudes, behavior, lifestyles, media usage, demographics) of likely innovators & early adopters, and direct communications specifically to them.

The characteristics of the innovation also affect its rate of adoption. Some products catch on almost overnight, whereas others take a long time to gain acceptance. Five traits are especially important in influencing the rate of adoption of an innovation:

	Relative Advantage — the degree to which it appears superior to existing products
	Compatibility — the degree to which it matches the values and experiences of the individuals in the community
	Complexity — the degree to which it is relatively difficult to understand or use
	Divisibility — the degree to which it may be tried on a limited basis
	Communicability — the degree to which the results of its use are observable or describable to others

Other aspects of new technologies that influence the rate of adoption include: initial costs, ongoing costs, risk & uncertainty, scientific credibility, and social approval.

SMART researches these new product characteristics
so you can give maximum attention to the
key factors impacting the rate of adoption.

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