Multi-stage diffusion dynamics in multiple generation high technology products

Abstract

In marketing literature, traditional innovation diffusion models have been used for measuring new product sales growth with mixed results. This is primarily because such models fail to identify the difference between the diffusion of awareness about a new product and the actual adoption by consumers. This aspect is extremely important for manufacturers of high technology products because there is a definite lag between the time of reception of information about a new product and the time when the final purchase decision is made by a consumer. In this paper a new diffusion model has been proposed for products with multiple technological generations. The proposed model treats sales as a consequence of the spread in awareness about new products, and models awareness diffusion by explicitly incorporating the effects of unfavorable information along with the more traditional positive feedback effects. Our framework also incorporates the effect of prices, thereby addressing one of the major limitations of the existing diffusion models. The proposed model has been validated using data on world-wide DRAM shipments.