Conditional Trend Analysis: A Model that Allows for Nonusers

Goodhardt and Ehrenberg have developed a useful stochastic model for analyzing period-to-period fluctuations in sales. In this article we generalize their model to allow for nonbuyers of the product category. A systematic bias in their simple negative binomial distribution (NBD) model is demonstrated. In fact if the proportion of nonbuyers is large, the simple model will be wrong. We also give explicit formulas and directions that allow a moderately sophisticated analyst to perform his own conditional trend analysis.