Utilizing Concept-Stage Word-of-Mouth for Early Sales Forecast

Abstract

Sales forecasting is critical for the production, distribution and promotion of new products. The earlier the forecast can be made, the more valuable it is for strategic planning. Utilizing movies as the empirical context, this study explores whether and how early sales forecast, especially when information about the to-be produced new product is still limited, can benefit from incorporating concept-stage online word-of-mouth (WOM). Concept-stage WOM is defined as consumer communication generated in the concept stage of new product development. Our results show that, among key textual and sentiment measures of concept-stage WOM, WOM volume is the most useful metric for sales forecast—accounting for the volume of concept-stage WOM enhances the forecasting accuracy by 21% for early sales of new products (e.g., opening-week box office sales for movies). However, it does not improve the forecasting accuracy for total sales of new products (e.g., total box office sales). Moreover, in contrast to prerelease WOM, concept-stage WOM tends to be more positive and more subjective. We further show that new products that are extensions of successful brands (e.g., sequels of movies) or have higher production budget are more likely to receive WOM messages in the concept-stage. We discuss the managerial implications of these findings.

Keywords: Sales forecasting, Concept-stage WOM, Pre-production sales forecasting, Movie.