MMA 831

Marketing Analytics

Dr. C. Kolsarici

DOS Assignment #4

July 24, 2015

Mark Liu & Simon Campbell

Order of files:

Filename Pages Comments and/or Instructions

MMA831 DOS #4 Mark Liu &

Simon Campbell.doc

4 Page count include this cover page

Additional Comments:

Summary

In hindsight, the sales of Ford hybrid vehicles has weathered the great recession of 2008-2009 fairly well

– 20% reduction in total US auto salesi, compared to only 8% for Ford hybrid vehicles, as evidenced by

the following graph:

The increasing demand (between 2000-2007) for hybrid vehicles may be attributed to the elevated

gasoline prices at the pump, despite the precipitous fall in crude prices over the past several months;

also, government rebates for eco-friendly vehicles may be another factor driving sales. Nonetheless,

there are headwinds: specifically, sales for the hybrid vehicle appear to have peaked as of 2007 – i.e. it

follows a traditional s-shaped curve for introduction of new products – evidenced by the following plot:

Strong competition from Tesla’s popular hybrid vehicles may be attributed to the fall in sales of Ford’s

hybrid offering. Further, despite the lack of reduction in gasoline prices, consumers are likely opting for

traditional vehicles with the anticipation of lower gas prices given the precipitous drop in crude prices.

0

2,000

4,000

6,000

8,000

10,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Tota

l Un

its

(x 1

00

0)

Year

Ford Hybrid Vs Total Auto Market (U.S.)

Ford

All

Bass Forecasting Model

The Bass model produced the following KPIs based on available historical sales data (1999-2010) for the

Ford hybrid model:

Total market size (m) – 2.06 million units:

The innovation factor (p) – 0.0104

The imitation factor (q) – 0.678

Judging from the diffusion parameters, it appears that 1 in 100 of the car buying population will

purchase the vehicle in the absence of external influencing factors, which is not terribly impressive.

However, the imitation factor suggest that roughly 2 out of every 3 car buyer will imitate the early

adopter and purchase the Ford hybrid vehicle.

The Bass diffusion parameters were derived from a linear regression model, with the current regression

statistics:

Adjusted R2 = 0.9275

F-stat p-value < 0.0001

Ninety-three percent of the observations were accounted for in the regression model – combining that

with low F-stat p-value suggests that the model is fairly sound. Judging from the next couple of plots

comparing predicted versus actual sales, it appears that sales of the hybrid vehicle will peak in 2007 and

subsequently experience a decline in the years ahead. The product is targeted to reach its market size in

sales by 2009, with a product lifecycle (PLC) of ten to fifteen years. The PLC in my opinion is respectable

for a vehicle given that the pace of innovation, especially in the hybrid and fully-electric market

segment.

Moving forward

The obvious approach to improve the diffusion metrics and the product lifecycle for the Ford hybrid

vehicle is to increase awareness (i.e. better marketing campaigns) coupled with continuous product

innovation to improve other desirable characteristics, such as reliability. With increasing pool of early

adopters, overall product adoption will increase given that an astounding two out of three consumers

will purchase the vehicle having seen an early adopter doing so.

i http://www.statista.com/statistics/199974/us-car-sales-since-1951/