So far, iPhone 8 sales are unexpectedly weak. In some markets, they pale next to those of the comparable iPhone 7 during that phone’s comparable launch period this time last year. Why would this be?
There are probably multiple causes. Whatever the case, the unexpected weakness is causing uncertainty for Apple and its investors, and once again highlights the difficult but critically important role of new product forecasting.
In Part I of this series, we focused on Comparable Forecasting, a method for modeling new product sales using data from previous, comparable product launches, such as the iPhone 7 in the example above.
This week, we’ll focus on Supersession, an adjustment tool that models the transition of demand from an existing product to a new product. Supersession factors the cannibalization effects of the new product introduction (NPI), such as on existing products, or in cases where there are staggered product releases (iPhone 7, iPhone X).
Using the iPhone example, we ask:
- Is marketplace passion for the iPhone X cannibalizing iPhone 8 sales?
- Is this due to potential iPhone 8 buyers holding out for the iPhone X?
- Did Apple overstock the iPhone 8, or is iPhone 8 adoption just latent, not doomed?
- Will Apple have sufficient iPhone X production and inventory in place to meet demand?
- How will both products’ adoption cycles shake out?
- How and when will they steal share from iPhone 7?
While we won’t attempt to answer these specific questions, we raise them to illustrate the difficult challenges of NPIs and product transition planning. We’ll discuss briefly the advanced statistical techniques for managing around these challenges, and the ability of advanced-analytic software to automate the forecast process and improve accuracy more than ever before.
A Supersession is an adjustment tool for a Time Series forecast that models the transfer of demand from one or more products to a new product or set of products. Supersession is useful in modeling:
- Product transitions: One product replaces another product.
- Phase-outs: One product slowly phases out and is no longer sold.
- Cannibalization: A new product competes with an existing product and cannibalizes some of the existing product’s demand.
Supersession is especially useful for consumer technology products because these gadgets are frequently updated with newer, faster, sleeker versions. Supersession is also useful for certain seasonal products that have multiple iterations. Essentially, Supersession is another way to use demand history of old, or base, products to forecast a new product.
Using smartphones as an example, the following are four different types of Supersession:
- One to one: You are phasing out handsets with headphone jacks and transitioning to Bluetooth audio transfer.
- One to many: You are phasing out red handsets and transitioning to black and stainless steel handsets.
- Many to one: You are phasing out red and black handsets and transitioning to stainless steel.
- Many to many: You are phasing out red and black handsets and transitioning to blue and gold.
Supersession with forecast automation
With automated forecasting & planning software, the Supersession feature will automatically map old-item sales data to new items. This lets organizations easily model and maps the gradual (or swift) replacement of existing (or base) products with new products. That’s key to product demand planning, transition planning and strategy, and NPI execution. There are two major ways to model a Supersession, depending on circumstances:
- Using the historical sales data of base products to forecast new products and the transfer of demand (or sales) from old to new. This is done when the new product may have little or no history to factor into the forecast, at least not until it matures sufficiently.
- Combining the sales histories of base products with sales data from the new (or newer) products being forecast, as that new-product data streams in.
The Supersession feature in Vanguard Software’s forecasting & planning platform delivers the best-of-breed capability for predicting demand transitions from one product to another, one to many, many to one, or many to many. This combined with Vanguard’s unmatched arsenal of analytics, automation, and collaboration features, gives you an all-in-one enterprise Sales and Operations Planning (S&OP) solution in a single, cloud platform.
About Vanguard Software
Vanguard Software introduced its first product for decision support analysis in 1995. Today, companies across every major industry and more than 60 countries rely on Vanguard Software’s Integrated Business Planning (IBP), forecasting, and advanced analytic cloud platform. Vanguard Software is based in Cary, North Carolina.