Most Companies recognise that a continuing stream of new product developments is essential to ensure long term organisational health, but they also recognise that innovation is accompanied by high cost and risks. These risks can be controlled through a well-conceived and professionally managed program of new product development. Presumably a new product is introduced by a company when a favourably estimate has been made of its future sales, profits and other impacts on the firm's objectives. New products sales are shaped by many factors, including the size of the potential market, the nature of competition, and the company's marketing plan and resources. The appropriate sales-forecasting model varies with the type of new product situation. These situations are distinguished by the degree of newness of the product re-purchasing.
[...] Pure Innovative Model: Fourt & Woodlock T-1 Qt = rQ(1 Qt = increment in cumulative sales as fraction of potential sales R = rate of penetration of untapped potential Q = total potential sales as fraction of all buyers t = time period Pure Imitative Diffusion model: Fisher and Pry (1971) df/ dt = b(1-f)f _ f = fraction of market having adopted new Q b = constant characterising growth to potential associated with particular technology Combined Innovative & Imitative: The Bass Model The Bass model has been used for many years in marketing, it is most appropriate for forecasting sales of an innovation (or new product) for which there are no closely competing alternatives existing in the marketplace. [...]
[...] the solution of the differential equation specification of the Bass model (New product diffusion models Journal of Marketing) NLS is thought to be a more superior estimation procedure than OLS, although maximum likelihood procedure is said to perform equally well when survey type diffusion data are used to estimate the parameters because of the dominance of sampling errors ( Mahajan, Mason and Srinivasan 1986, Srinivasan and Mason 1986) NLS (NonLinear Least Squares) estimation in the Bass Model coefficients are biased and that they change systematically as one extends the number of observations used in the estimation. [...]
[...] In-fact these studies suggest that stable and robust parameter estimates for the Bass model are obtained only if the data under consideration include the peek of the non cumulative adoption curve. Because of these concerns attempts have been made in recent years to develop estimation procedures that update parameter estimates as additional data become available after the initiation of the diffusion process. Time invariant estimation procedures One of the first procedures suggested to estimate the diffusion parameters is the Ordinary Least Squares (OLS) procedure proposed by Bass. [...]
[...] In such a situation, the adopter distribution is the same as the supply distribution and applying the Bass model to these adoption data is inappropriate. Therefore the Bass model must be extended to integrate the demand side dynamics with the supply side restrictions There is only one adoption by an adopting unit. The objective of a diffusion model is to represent the level or spread of an innovation among a given set of prospective adopters. For a great many product innovations, the increase in the number of adopters may consist of first-time buyers as well as repeat buyers. [...]
[...] Top of the Document Adopter % Categories Adopters Innovators 2.5 Early Adopters 13.5 Early Majority 34.0 Late Majority 34.0 Laggards 16.0 (Adapted from Mahajan & Muller) Adoption Cycle (Kotler) Innovators Early Early Late Laggards Adopters Majority Majority Adoption categorisation on the basis of relative time of adoption of innovations (Rogers 1983) Relative Size and the associated time Interval for innovators and majority for the Bass Model (Mahajan & Muller 1998) an example; Product Innovators Time Majority Time Innovators/ Interval Interval 2 Majority Home Freezers Refrigerators New models have tried to be introduced to alter targeting to the innovators and all have failed, although one must take into consideration of the goods already available. [...]
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