NEW PRODUCT DIFFUSION MODEL: BASS MODEL

Rajdeep Chakraborti

ASSUMPTIONS OF BASS MODEL

The consumer can adopt the new product only once. There are only two types of customers: innovators and imitators Innovators are not influenced by either by the other innovators or imitators

It was also assumed that there are no other categories of customers except innovators and imitators

ASSUMPTIONS OF BASS MODEL

No repeat or replacement purchase has taken place The potential number of buyers remain constant One adopting unit will adopt only once The diffusion process was assumed to be binary in nature

ASSUMPTIONS OF BASS MODEL

Diffusion of innovation is independent of all other innovations Nature of innovation does not change over time WOM communication was assumed to exist within a particular country

BASS MODEL

Let, m= market potential or, market size p, q specify the shape of the curve and also indicate that how fast the adoption of the new product is expected to proceed Bass Model says that:

Likelihood of purchase= p + {q N(t-1)}/m

BASS MODEL

Where, p= probability/rate that an innovator will adopt the new product. It represents the intrinsic tendency of the innovators to adopt the product (coeff. of initial or external influence)

q= imitation coefficient. It represents the interpersonal communication between the innovators and imitators. It is also known as the coeff. of internal influence

BASS MODEL

N(t-1) is the cumulative number of adopters in time t

The numbers of adopters in time t= S(t) = [p + {qN(t-1)}/m]*[m-N(t-1)]

Where, [m-N(t-1)] represents the adopters who left

BASS MODEL

The time when sales will reach its peak: t*= [1/(p+q)]*ln (q/p)

Peak sales is given by: S(t*)= m(p+q)^2/4q

GENERALISED BASS MODEL

Assumptions: a) Price decrease is assumed to affect the number of adoptions in that period only
b)

The action of the firms through its marketing mix affects every one in the same manner, though in Bass model it was assumed that innovators and imitators behave in different manner

GENERALIZED BASS MODEL

S(t) = [p + {qN(t-1)}/m]*[m-N(t-1)]*Z(t) Where, Z(t)= 1+ 1[ P(t)/ P(t)]+ 2[A(t)/A(t)]

1 and 2 represent the coefficients that indicate the percentage increase in the speed of diffusion that results from a 1% decrease in price and advertising respectively
P(t) and A(t) are the price and advertising in time t while P(t) and A(t) are the rate of change of price and advertising in time t respectively

USES OF BASS MODEL

Forecasting the maximum sales in terms of sales and time for the consumer durables. It is assumed that p and q have same value Pricing, advertising and product characteristics have an impact on the diffusion curve. Thus the generalized Bass model can be used to forecast these By predicting the future sales, Bass model helps to plan for the capacity that would be required to meet that demand.

USES OF BASS MODEL

For the international market, Bass model can be used to assess the diffusion curve To plan the timing of the introduction of innovation which is dependent on the diffusion of the primary innovation It can be used to plan the timing of introduction of successive innovations in which the successive innovations can cannibalize the previous innovation

CRITIQUE

The marketing variables which have possible impact on the adoption process have not been considered The model has considered aggregate probability of adoption by the innovators and the imitators and not at the individual level.

Competition has not been considered in Bass model

CRITIQUE

Bass model assumed that diffusion of innovation is independent of any other innovations, but it is not true always. As for example; Blue Ray discs and the Blue Ray software are dependent on each other

Bass assumed that the nature of innovation remains stationary over time. But successive innovation cannibalizes the old innovation. Ex: Microsoft Windows operating system

CRITIQUE

Bass has not considered the fact that the product and market characteristics do influence the diffusion. This limitation of Bass model was later rectified by considering p and q as the functions of product and market characteristics.

CRITIQUE

It was found that WOM does not remain restricted only within a country, it may flow across borders also. There can be other options available to the customers apart from innovators or imitators. These options like knowledge, awareness, action and indifference to the product, were not considered

REFERENCE

Bass Frank M.; A New Product Growth for Model Consumer Durables; Management Science; Vol 50, No-12, Dec 2004, p 1825-1832

New-product diffusion models; edt by- Mahajan Vijay, Muller Eitan and Wind Yoram; Kluwer Academic Publishers, Boston; p 99-122

BOTTOM LINE AND QUOTATION

In Forecasting the Time of Peak It is Helpful to Know that a Peak Exists - Frank Bass