Eitan Muller

New Product Diffusion Models in Marketing: A Review and Directions for Research

The diffusion of an innovation traditionally has been defined as the process by which that innovation is “communicated through certain channels over time among the members of a social system” (Rogers, 1983, p. 5). As such, the diffusion process consists of four key elements: innovation, communication channels, time, and the social system.

Talk of the Network: A Complex Systems Look at the Underlying Process of Word-of-Mouth

Though word-of-mouth (w-o-m) communications is a pervasive and intriguing phenomenon, little is known on its underlying process of personal communications. Moreover as marketers are getting more interested in harnessing the power of w-o-m, for e-business and other net related activities, the effects of the different communications types on macro level marketing is becoming critical. In particular we are interested in the breakdown of the personal communication between closer and stronger communications that are within an individuals own personal group (strong ties) and weaker and less personal communications that an individual makes with a wide set of other acquaintances and colleagues (weak ties).We use a technique borrowed from Complex Systems Analysis called stochastic cellular automata in order to generate data and analyze the results so that answers to our main research issues could be ascertained. The following summarizes the impact of strong and weak ties on the speed of acceptance of a new product:••The influence of weak ties is at least as strong as the influence of strong ties. Despite the relative inferiority of the weak tie parameter in the models assumptions, their effect approximates or exceeds that of strong ties, in all stages of the product life cycle.••External marketing efforts (e.g., advertising) are effective. However, beyond a relatively early stage of the growth cycle of the new product, their efficacy quickly diminishes and strong and weak ties become the main forces propelling growth. The results clearly indicate that information dissemination is dominated by both weak and strong w-o-m, rather than by advertising.••The effect of strong ties diminishes as personal network size decreases. Market attributes were also found to mediate the effects of weak and strong ties. When personal networks are small, weak ties were found to have a stronger impact on information dissemination than strong ties.

Determination of Adopter Categories by Using Innovation Diffusion Models

Using the analytical logic underlying the classical adopter categorization approach proposed by Rogers, the authors suggest that adopter categories for a product innovation can also be developed by...

Waterfall and sprinkler new-product strategies in competitive global markets

Abstract How should a multinational firm introduce a new product into its global markets? Should it first attack and conquer the domestic market before moving into overseas markets or should it plan for a global attack by launching the product in all its global markets simultaneously? Using innovation diffusion models in a monopoly and a competitive game theory framework, this paper analytically examines waterfall (where the markets are entered sequentially) and sprinkler (where markets are entered simultaneously) strategies. Optimal conditions for the implementation of these two strategies are derived. The results generally suggest that the current nature of global competition requires a multinational firm to follow the sprinkler strategy in introducing a new product to its global markets.

Decomposing the Value of Word-of-Mouth Seeding Programs: Acceleration Versus Expansion

In word-of-mouth seeding programs, customer word of mouth can generate value through market expansion; in other words, it can gain customers who would not otherwise have bought the product. Alternatively, word of mouth can generate value by accelerating the purchases of customers who would have purchased anyway. This article presents the first investigation exploring how acceleration and expansion combine to generate value in a word-of-mouth seeding program for a new product. The authors define a programs “social value” as the global change, over the entire social system, in customer equity that can be attributed to the word-of-mouth program participants. They compute programs’ social value in various scenarios using an agent-based simulation model and empirical connectivity data on 12 social networks in various markets as input to the simulation. The authors show how expansion and acceleration integrate to create programs’ social value and illustrate how the role of each is affected by factors such as competition, program targeting, profit decline, and retention. These results have substantial implications for the design and evaluation of word-of-mouth marketing programs and of the profit impact of word of mouth in general.

A nonsymmetric responding logistic model for forecasting technological substitution

Abstract This article presents a simple model of technological substitution termed as nonsymmetric responding logistic (NSRL). Based on the theory that substitution is an imitation process, the model can accommodate different patterns of technological substitution by allowing the imitation effect to vary over time systematically. It allows the S-curve to be symmetrical as well as nonsymmetrical, with the point of inflection responding to the substitution process. Data from four medical innovations are analyzed to illustrate the generality of the model.

The Diffusion of Services

Many of the products introduced during the past two decades have been services rather than goods. An important influence on the growth and long-term profits of these services is customer attrition, which can occur at the category level (disadoption) or between firms (churn). However, the literature has rarely modeled how services penetrate a market and has not evaluated the effect of attrition on growth. The authors combine diffusion modeling with a customer relationship approach to investigate the influence of attrition on growth in service markets. In particular, the authors model the effects of disadoption and churn on evolution of a category and on growth of individual firms in a competitive environment. The authors show how neglecting disadoption can bias parameter estimation and, especially, market potential. They also derive an expression for the customer equity of a growing service firm and apply it to valuation of firms operating in competitive industries. The results for six of seven firms in four service categories are remarkably close to stock market valuations, an indicator for the role of customer equity in valuations of growing service firms.

When is it worthwhile targeting the majority instead of the innovators in a new product launch

Despite the relatively small number of Innovators in a potential market for a new product, they are often the main target of a firms marketing efforts. Because the Innovators tend to influence the...

Innovation diffusion in a borderless global market: Will the 1992 unification of the European Community accelerate diffusion of new ideas, products, and technologies?

Abstract One of the more challenging aspects of the economic unification of the 12 nations of the European Community, initiated on January 1, 1993, is its effects on the diffusion of new ideas, technologies, and products. By becoming “borderless” the European Community should expect to create a global market in which innovation diffusion is faster than if its member countries were not united. Will unification lead to faster diffusion of new ideas, products, and technologies? To fully answer this question, a diffusion study that compares preunification and postunification diffusion rates is required. Since the unification process is still in progress, the challenge is whether or not we can shed some light on this question based on what we know about the diffusion processes in the European Community countries prior to their unification. Using a diffusion modeling approach, this article, derives conditions under which unification leads to faster market penetration. In particular, we show that if the innovation diffusion processes in the member nations of the European Community prior to unification were similar to one another, no apparent change will be observed in the diffusion of new ideas, technologies, and products in the unified European Community. We evaluate the above conditions among the member and nonmember nations of the European Community by examining the data on the diffusion of videocassette recorders. The empirical evidence suggests that the diffusion processes to differ among the member and nonmember nations of the European Community and thus the unification should result in faster diffusion of new ideas, technologies, and products.

Does Venture Capital Foster the Most Promising Entrepreneurial Firms

Venture capital seed investments seem not to foster the most promising entrepreneurial firms. The venture capitalists difficulty in assessing an entrepreneurs ability to develop a successful venture is the key to explaining what type of entrepreneur will choose to involve a venture capitalist in the seed stage. The authors find that venture capital backed firms are not initiated by the most capable entrepreneurs because the most able entrepreneurs will not find the prices offered by venture capitalists sufficiently attractive and will seek other sources of financing. Under the current institutional structure of the venture capital industry, a higher failure rate can be expected among venture capital backed firms than in the population of new firms in general.