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Diffusion Forecasts

Diffusion forecasts provide insights into the market success of new products by analyzing the spontaneous spreading of momentum among consumers. Based on the Diffusion of Innovations Theory, primarily articulated by Everett M. Rogers, these forecasts categorize individuals into adoption groups: Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. The Bass Diffusion Model further refines this approach by considering the coefficients of innovation and imitation to predict the adoption rate over time. Marketers can leverage these models for strategic planning and targeted campaigns.

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Diffusion Forecasts

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  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

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