Forecasting with a Repeat Purchase Diffusion Model

Ambar G. Rao and Masataka Yamada
Additional contact information
Ambar G. Rao: Graduate School of Business Administration, New York University, New York, New York 10006
Masataka Yamada: Nagoya University of Commerce and Business Administration, Nagoya, Japan

Management Science, 1988, vol. 34, issue 6, 734-752

Abstract: A methodology for forecasting the sales of an ethical drug as a function of marketing effort before any sales data are available and for updating the forecast with a few periods of sales data is presented. Physicians' perceptions of the drug on a number of attributes, e.g. effectiveness, range of ailments for which appropriate, frequency of prescriptions, are used to estimate the parameters of a model originally proposed by Lilien, Rao and Kalish (Lilien, G. L., A. G. Rao, S. Kalish. 1981. Bayesian estimation and control of detailing effort in a repeat purchase diffusion environment. Management Sci. 27(May) 493--506.). This model conceptualizes the drug adoption process as a repeat purchase diffusion model; sales are expressed as a function of a drug's own and competitive marketing efforts and of word of mouth. The model is first validated in this paper via predictive testing on 19 drugs prescribed by three types of physicians. The forecasting methodology is illustrated using physicians' perceptions on these drugs. Forecasts obtained without any sales data, and updated forecasts using seven periods of sales data are presented, and are encouraging.

Keywords: marketing; buyer behavior; new products; forecasting applications (search for similar items in EconPapers)
Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.34.6.734 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:34:y:1988:i:6:p:734-752

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().