The Role of Evoked Range in the Integration of Discrepant Sales Forecasts: Process and Resultant Bias

Citation:

Anne L. Roggeveen and Gita Venkataramani Johar (2002) ,"The Role of Evoked Range in the Integration of Discrepant Sales Forecasts: Process and Resultant Bias", in AP - Asia Pacific Advances in Consumer Research Volume 5, eds. Ramizwick and Tu Ping, Valdosta, GA : Association for Consumer Research, Pages: 315.

Asia Pacific Advances in Consumer Research Volume 5, 2002      Page 315

THE ROLE OF EVOKED RANGE IN THE INTEGRATION OF DISCREPANT SALES FORECASTS: PROCESS AND RESULTANT BIAS

Anne L. Roggeveen, Babson College, U.S.A.

Gita Venkataramani Johar, Columbia University, U.S.A.

Sales forecasts, which serve as a foundation for marketing planning, are often based on several market research reports. Yet due to differences in methodologies, definitions, and assumptions assumed by the data sources, these reports often present discrepant projections. This research explores the process by which managers integrate discrepant projections to form a sales forecast and the biases that arise during this integration process.

The authors suggest that while integrating projections to form a forecast, managers evoke a range for judging the validity of the different projections. The range is hypothesized to be from zero to the highest projection received. Experiments have shown that adults automatically and unconsciously convert a numeral into an internal quantitative representation when processing quantities (Dehaene 1992, 1997) and the resulting representation which is in the form of a mental number line, underlies people’s intuitive understanding of numbers (Dehaene, Bossini, and Giraux 1993). The mental number line begins at zero or one on the left (Devline 2000, Dehaene 1997). Hence, zero assumes a prominent role when a person is evaluating sales projections and is expected to serve as a lower endpoint for the evoked range.

In terms of an upper endpoint for the evoked range, there is no point where the number line ends. Hence there is no firmly established internal anchor. If the market size is known, then the highest plausible sales forecast is known to be the market size. In the absence of this information (e.g., forecasting for new products), the upper bound is likely to be the highest projection received. This proposition i based on research demonstrating that internal anchors assimilate to proximate external stimuli, especially when the internal anchors are not firmly established (c.f. Lichtenstein and Bearden 1989).

This will result in the evoked range being from approximately zero to the highest projection received. Hence if a manager receives two projections, one forecasting sales of 10,000 units and one forecasting sales of 4,000 units, s/he is likely to form a mental number line with zero as the lowest value and 10,000 as the highest value (Dehaene 1997). The projections are then judged within the context of this range (Kahneman and Miller 1986).

Based on these findings, we expect that the evoked forecast range will influence how managers judge (Janiszewski and Lichtenstein 1999; Volkmann 1951) and subsequently integrate discrepant information. Because the evoked range is proposed to be from zero to the highest projection in the set, we suggest that managers will integrate the two projections in such a way that the forecast is closer to the lower projection. This is because the higher projection represents the upper bound of the evoked range and is considered an extreme case whereas the lower projection lies within the range and therefore represents a more likely scenario. For example, if a manager receives two sales projections of 4,000 and 10,000, we expect an integrated final forecast that is closer to 4,000. If a manager receives two projections of 10,000 and 16,000 (an equivalent discrepancy), we expect the forecast will be closer to 10,000. In sum, we suggest that managers’ mental representations of the sales range, as being from zero to the highest projection available, will influence how they integrate the projections to form a forecast. This is hypothesized to result in an integrated forecast that is closer to the lower of two projections in a set.

Four experiments test this hypothesized process and resulting bias. Consistent with our proposition, managers appear to spontaneously evoke a zero to higher projection range within which the forecast should fall. Experiment 1 demonstrates that a lower numbers bias exists. Experiment 2 addresses whether motivationally biased processing can underlie the results. This experiment rules out the alternative explanation that lower projections receive more weight because they represent bad news.

Finally, experiments 3-4 provide direct evidence for the evoked range process presumed to underlie the bias. Experiment 3 demonstrates that the forecast formed when no range is provided is the same as when a range from zero to slightly above the highest projection given is provided. This result is consistent with the idea that subjects spontaneously evoke and use a zero to higher number range. Experiment 4 provides powerful evidence for the impact of ranges on integration. When subjects are given a range, they use the information and integrate so that the forecast is not extreme in terms of the overall range provided. Thus, the lower number bias is eliminated when the mean of the given range is the initial information given. Importantly, when the mean of the given range is closer to the higher rather than the lower number, we demonstrate that a higher number bias is obtained. These results suggest that subjects indeed evoke a negatively skewed range and use it as information when they integrate discrepant sales forecasts. Contributions of this research and implications of the finding are discussed.

REFERENCES

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