Forecasting New Products in Consumer Goods

One of the toughest demand planning tasks is forecasting new products—particularly in the consumer goods world. Why? First, we don’t really have good math to help us. It would be great if there were a forecasting algorithm that reads consumers’ minds, but there isn’t. Consumer goods manufacturers are at the mercy and whim of the consumer. Their wants, needs, and tastes can change quickly depending on trends, pop culture, the economic environment, and even the price of gas. Second, the statistics we have on new product introductions suggest that most new products will fail within a short period of time. A 2004 Best Practices Study by the Product Development & Management Association (PDMA) found a 49% failure rate for fast-moving consumer goods. Copyright © 2013 Journal of Business Forecasting | All Rights Reserved | Winter 2012-2013 5 6 Copyright © 2013 Journal of Business Forecasting | All Rights Reserved | Winter 2012-2013 Of course, failure is a subjective term and can range from being delisted (removed from shelves by a retailer) to just failing to meet expectations. Nevertheless, the perceived failure rate of new products is high. Third, it is difficult for facts ...