Diffusion Forecasts

1. Diffusion Forecasts

2. Diffusion Forecasts • Diffusion • Spontaneous spreading of momentum • New product entering the market • Forecast • Estimate of a condition in the future.

3. Diffusion Forecasts • Application to Marketing • Predict momentum of products/services in the future • More specifically • Flow of new products through a population • Predicting the rate of flow

4. Main Diffusion Elements • Diffusion of Innovations Theory • Bass Diffusion Model

5. Diffusion of Innovation • Everett M. Rogers • 1962 book Diffusion of Innovations • Categorized individuals into adoption groups

6. Diffusion of Innovation • Rogers’ Groups • Innovators – venturesome, risk takers • Early adopters – educated, social leaders • Early majority – deliberate, informal social contacts • Late majority – traditional, lower econ status • Laggards – fear of debt, friends/neighbors

7. Diffusion of Innovation • Diffusion Rate • Movement from innovator to laggard • Trickle down effect • Determined by: • Nature of product • Marketing of product • Disease Analogy

8. Small samples Consistent Simplicity Advantage Declining Costs Industrial Product Medical Product Target Market Everett M. RogersIncreased Adoption Rate If . . .

9. Main Diffusion Elements • Diffusion of Innovations Theory • Bass Diffusion Model

10. Bass Diffusion Model • Frank M. Bass • 1969 paper A new product growth for model consumer durables • Interaction between users vs. potential • Mathematical ideas

11. Bass Diffusion Model • Classifies adopters into two groups: • Innovators • hear about product • Imitators • knowing others have adopted

12. Bass Model Formulation • Requires three inputs: • p, the coefficient of innovation • q, the coefficient of imitation • m, the market potential • Equation