The hierarchy-of-effects model and prelaunch forecasting

Abstract

Pre-release forecasting of the opening box office revenue allows a studio to prepare a more effective marketing campaign and budget allocation. The purpose of this study is to forecast the opening box office revenue using attitudinal tracking measures. The proposed model aims to establish a relationship between the opening box office and the tracking data of the hierarchy-of-effects (HOE) constructs, which managers can use as the target of marketing planning. To test the causal relationships between the HOE constructs and opening box office revenue, we estimate a serial mediation model that incorporates direct and indirect effects of advertising to the HOE constructs with the covariates including marketing efforts, movie characteristics, and viewer demographics. Based on the posterior predictive distributions of the model parameters, we obtain the forecasts of opening box office revenue as new data become available. The validation results show highly encouraging predictive accuracy, indicating the benefit of utilizing attitudinal tracking.