“Will It Ever Fly? Modeling the Takeoff of Really New Consumer Goods at Whirlpool” by Joseph A. Foster, Peter N. Golder, Gerard J. Tellis.
Whirlpool Corporation, a major U.S. manufacturer of consumer durables, test marketed the Personal Valet Clothes Vitalizing System in 2001, and launched it in 2002. The Personal Valet is the first in a new category of appliances: a substitute for dry-cleaning services, providing an in-home service to customers, replacing a service currently performed outside the home. Hence, it generates significant cost savings and added convenience for consumers. Management needed a sound model for the timing of sales takeoff. The project manager applied the authors’ “time-to-takeoff model” (which correctly identifies takeoff over 90% of the time). Instead of projecting a linear pattern of sales in the first few years, the project manager used the model to project 10-year sales with takeoff in the 6th year. He also simulated various pricing and product modifications schemes to predict time and probability of takeoff. In the absence of the model, the accounting department, using linear growth, would have forecasted much higher sales than is typical for such a new consumer durable as shown by the model. Such forecasts would have led to actual sales disappointment with actual sales (which were low) and to premature termination of the project.