Innovation Diffusion Model for a Product Incorporating Segment-specific Strategy and the Spectrum Effect of Promotion

Abstract

Promotion is an important component of a fi rm's marketing mix. It assists in dispersing the product information into minds of the customers and takes them to the fi nal stage of purchase. Various promotional strategies are used by fi rms to capture maximum potential adopters in the market. Firms adopt segment driven marketing to best utilize its fi nite marketing resources. Mass market promotion and diff erentiated market promotion are amongst the two widely used techniques of promotion used in a heterogeneous market, segmented into homogeneous segments. Through mass market promotion, a product is promoted in the entire market, using a common promotional strategy, thereby creating a spectrum eff ect in all the segments of the market. Whereas, diff erentiated market promotion targets each segment of the market with distinct promotional strategies. In a segmented market, both types of promotional strategies play diff erent and important roles for product adoption in the market. Innovation diff usion models are used to describe the adoption growth of durable technology products over their product life cycle. There is vast literature of innovation diff usion modeling. The existing literature mostly assumes a homogeneous market while formulating the model and eff ect of mass and diff erentiated promotion techniques on adoption growth in a segmented market is not yet analyzed. In this paper, we develop an innovation diff usion model for a durable technology consumer product considering the combined eff ect of mass and diff erentiated promotion along with the internal infl uence factors on adoption growth in segmented market. Model validity is tested on a real time data in four segments. Fairly good results have been obtained.

Effect of Repeat Purchase and Dynamic Market Size on Diffusion of an Innovative Technological Consumer Product in a Segmented Market

“…Diffusion of innovation in segmented market is a research area explored very limitedly in the literature. We propose here some diffusion models in this area by extending the work done due to Jha et al (2014). The models are developed considering a marketing environment, which is different from the previous study, and are applicable to wider marketing situations.…”

“…One of the recent studies Jha et al (2014) caters to this particular marketing environment with some major limitations. An innovation diffusion model is developed by the authors for technological consumer product assuming that the product diffuses in each segment due to the combined influence of mass promotion and differentiated promotion along with the internal influence factors.…”

“…Rate of promotional effort at time t in the th i segment of the market; The proposed model uses basic mathematical structure of Jha et al (2014) sales growth model considering its flexible mathematical form and applicability. The model describes external as well as internal influence so that its mathematical structure becomes even more useful for us to use it as a basic building block for the development of our models.…”

“…The adoption is influenced both due to mass and differentiated promotional efforts. The differential equation of the Jha et al (2014) model for the th i segment is given as:…”

“…Many other factors plays role here in influencing the size of the market potential such as increase in the purchasing power of the consumer. Assumption (4) of the Jha et al (2014) model may result in giving an underestimated diffusion of the product. Thus, it is very important for a diffusion model to allow the market size to change with time.…”