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Diffusion Theory in Marketing: A Historical Perspective Frank M. Bass, 1999

Diffusion Theory in Marketing: A Historical Perspective Frank M. Bass, 1999. Before Bass (BB): Tarde: 1903 New Ideas Epidemiology: Disease Rogers (1962): Bell-Shaped Curve-Innovators and Imitators “Discussion largely literary”

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Diffusion Theory in Marketing: A Historical Perspective Frank M. Bass, 1999

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  1. Diffusion Theory in Marketing:A Historical PerspectiveFrank M. Bass, 1999 • Before Bass (BB): Tarde: 1903 New Ideas • Epidemiology: Disease • Rogers (1962): Bell-Shaped Curve-Innovators and Imitators • “Discussion largely literary” • 1999-is 30th Anniversary of Publication of Bass Model, Management Science (1969) Copyright, (c) Frank M. Bass, 1999 (c) Frank M. Bass (1999)

  2. The Bass Model • Diffusion of Innovations • Mark Twain and the Price of a Lecture • “Bass Model”: Urban and Hauser (1980) • More than 250 Papers: Applications, Refinements, and Extensions • Central Themes of this Historical Perspective: Empirical Generalization and Science (c) Frank M. Bass (1999)

  3. Empirical Generalization: Always (Almost)Looks Like a Bass Curve (c) Frank M. Bass (1999)

  4. HistoryPublished in Management Science in1969, “A New Product Growth Model For Consumer Durables” Working Paper 1966 (c) Frank M. Bass (1999)

  5. Color TV Forecast 1966 Industry Built Capacity For 14 million units Peak in 1968 (c) Frank M. Bass (1999)

  6. Empirical Generalizations and Science • Philosophy of Science-Nagel (1961): “Science Seeks to Provide Generalized Explanatory Statements About Phenomena” • Marketing Science (1995) Special Issue on • Empirical Generalizations in Marketing • ETET vs TETE - Ehrenberg • “Higher Level Theories”- Bass (c) Frank M. Bass (1999)

  7. Bass Model:100’s of Applications-An Empirical GeneralizationWidely CitedNumerous ExtensionsPublished in Several Languages Growing Software Applications (c) Frank M. Bass (1999)

  8. How to become famous • Get Lucky! (c) Frank M. Bass (1999)

  9. The Model • f(t)/[1-F(t)]=p+qF(t) Hazard Model • m=ultimate market potential • p=coefficient of innovation • q=coefficient of imitation • S(t)=mf(t)=m[p+qF(t)][1-F(t)] • =pm+(q-p)Y(t)-(q/m)[y(T)]2 (c) Frank M. Bass (1999)

  10. A Differential Equation • Solution: S(t) = • m[(p+q)2/p]e-(p+q)t/(1+(q/p)e-(p+q)t)2 • t*=1/(p+q)Ln(q/p) • Beautiful ! t*=Time of Peak Sales (c) Frank M. Bass (1999)

  11. Special Cases When p=0 and q=0 • Fourt and Woodlock q=0, Exponential Distribution, (1960) Grocery Products Journal of Marketing • Mansfield, p=0, Logistic Distribution, (1961) Industrial Products (Locomotives) Econometrica (c) Frank M. Bass (1999)

  12. Why it Works--Saturation • S(t)=m[p+qF(t)][(1-F(t)] Gets Bigger and Bigger Gets Smaller and Smaller (c) Frank M. Bass (1999)

  13. An Empirical Generalization (c) Frank M. Bass (1999)

  14. Another Example 35 mm Projectors (c) Frank M. Bass (1999)

  15. Another Example: Overhead Projectors (c) Frank M. Bass (1999)

  16. Some Extensions • Successive Generations of Technologies: • Norton & Bass (87,92) • Generalized Bass Model: Includes Decision Variables: • Prices, Advertising (c) Frank M. Bass (1999)

  17. Successive Generations of Technology The Law of Capture-Migration&Growth • The Equations: Three Generations • S1,t=F(t1)m1[1-F(t2)] • S2,t=F(t2)[m2+F(t1)m1][1-F(t3)] • S3,t=F(t3){m3+F(t2)[m2+F(t1)m1]} • mi=incremental market potential for gen.i • ti=time since introduction of ith generation and F(ti) is Bass Model cumulative function and p and q are the same for each generation (c) Frank M. Bass (1999)

  18. Capture Law- DRAMSNorton and Bass: Management Science (1987)Sloan Management Review (1992) (c) Frank M. Bass (1999)

  19. Capture Law-Mainframes-Beautiful! (c) Frank M. Bass (1999)

  20. Generations of PC’s (c) Frank M. Bass (1999)

  21. What About Prices ? (c) Frank M. Bass (1999)

  22. Generalized Bass Model: Bass, Krishnan, andJain (1994) Marketing Science • A Higher Level Theory • Must Reduce as Special Case to Bass Model • Prices Fall Exponentially (c) Frank M. Bass (1999)

  23. The Bass Model (BM) and GBM • BM: f(t)/[1-F(t)]=[p+qF(t)] • GBM: f(t)/[1-F(t)]=x(t)[p+qF(t)] • where x(t) is a function of percentage change in price and other variables (c) Frank M. Bass (1999)

  24. Effects of Different Prices (c) Frank M. Bass (1999)

  25. Impulse Response Comparison: GBM and “Current Effects” Model “Carry-Through” Effects for GBM (c) Frank M. Bass (1999)

  26. Some Applications • Guessing Without Data: • Satellite Television • Satellite Telephone (Iridium) • New LCD Projector • Wireless Telephone Adoption Around World and Pricing Effects • Projecting Worldwide PC Growth (c) Frank M. Bass (1999)

  27. Satellite TV Forecast-1993-”Guessing By Analogy” and Purchase Intentions • Use of “Adjusting Stated Intention Measures to Predict Trial Purchase of New Products: A Comparison …” Journal of Marketing Research (1989), Jamieson and Bass • “Guessing By Analogy”: Cable TV vs.Color TV (c) Frank M. Bass (1999)

  28. 1993 Forecast of Satellite TV Penetration in 1999 (c) Frank M. Bass (1999)

  29. Projection of World-Wide PC Demand, 1999-2010-Data From Bill Gates, Newsweek 5-31-99 (c) Frank M. Bass (1999)

  30. Bottom Line and Quotation “In Forecasting the Time of Peak It is Helpful to Know that a Peak Exists” By Frank Bass (c) Frank M. Bass (1999)

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