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Diffusion Forecasts. Diffusion Forecasts. Diffusion Spontaneous spreading of momentum New product entering the market Forecast Estimate of a condition in the future. . Diffusion Forecasts. Application to Marketing Predict momentum of products/services in the future More specifically
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Diffusion Forecasts • Diffusion • Spontaneous spreading of momentum • New product entering the market • Forecast • Estimate of a condition in the future.
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
Main Diffusion Elements • Diffusion of Innovations Theory • Bass Diffusion Model
Diffusion of Innovation • Everett M. Rogers • 1962 book Diffusion of Innovations • Categorized individuals into adoption groups
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
Diffusion of Innovation • Diffusion Rate • Movement from innovator to laggard • Trickle down effect • Determined by: • Nature of product • Marketing of product • Disease Analogy
Small samples Consistent Simplicity Advantage Declining Costs Industrial Product Medical Product Target Market Everett M. RogersIncreased Adoption Rate If . . .
Main Diffusion Elements • Diffusion of Innovations Theory • Bass Diffusion Model
Bass Diffusion Model • Frank M. Bass • 1969 paper A new product growth for model consumer durables • Interaction between users vs. potential • Mathematical ideas
Bass Diffusion Model • Classifies adopters into two groups: • Innovators • hear about product • Imitators • knowing others have adopted
Bass Model Formulation • Requires three inputs: • p, the coefficient of innovation • q, the coefficient of imitation • m, the market potential • Equation