Marketing Models

MKTG 343

Bass Forecasting Model

1 lecturer: Muhammad Asim

The Bass Diffusion Model of
New Product Adoption
The model attempts to answer the question:

When will customers adopt a new product or technology?

Why is it important to address this question?

Helps in planning major investments (e.g., building a factory) with
respect to the product.
Graphical Representation of The Bass Model
(Cell Phone Adoption)
5

Non-cumulative Adoptions, n(t)

4

Adoptions due to internal influence

3

2
Adoptions due to external influence

0
0 1 2 3 Time4 5
 The Bass Diffusion Model for Durables
  

nt = number of new adopters during the time period t

Innovation Effect Imitation Effect
N(t) = cumulative number of adopters through the time period t
N(t-1) = cumulative number of adopters through the previous time period, t-1
p = “coefficient of innovation”
q = “coefficient of imitation”
= Eventual number of adopters (aka total market size or potential)
5 Example
  (𝒕)= 𝒑 × 𝑵 𝑵 ( 𝒕 −𝟏 )
𝒏 [ ´ − 𝐍 ( 𝐭 −𝟏 ) ] + 𝐪 × ´ ×[ 𝑵
´ − 𝐍 ( 𝐭 −𝟏 ) ]
𝑵

p
q
6

12/20/2021
  Obtaining p, q, and
  (𝒕)= 𝒑 × 𝑵 𝑵 ( 𝒕 −𝟏 )
𝒏 [ ´ − 𝐍 ( 𝐭 −𝟏 ) ] + 𝐪 × ×[ 𝑵
´ − 𝐍 ( 𝐭 −𝟏 ) ]
𝑵´
  Guess p&q
– use historical data for the product
– Select analogous products based on the similarity in
environmental context, market structure, buyer behavior,
marketing-mix strategies of the firm, and innovation
characteristics.
 obtained from
– Chain ratio method
– Stated intentions survey
Examples of Analogs: Parameters of the Bass
Model in Several Product Categories
Product/Technology Innovation Imitation
Parameter Parameter
(p) (q)
B&W TV 0.065 0.335
Color TV 0.021 0.583
Room Air conditioner 0.010 0.454
Clothes dryers 0.073 0.389
Ultrasound Imaging 0.003 0.506
CD Player 0.028 0.368
Cellular telephones 0.005 0.506
Steam iron 0.036 0.318
Oxygen Steel Furnace (US) 0.001 0.456
Microwave Oven 0.018 0.337
Hybrid corn 0.000 0.798
Home PC 0.003 0.253

A study by Van den Bulte and Stremersch (2004) suggests an average value of 0.03 for p and an average
value of 0.42 for q, The average was taken across a couple of hundred categories.
 Chain Ratio Method
(Estimate of Online Grocery Sales)
 Number of households (2000 census) 105 million
 Grocery purchases per household per year (52x120) $5300
 % of households with Internet access (Census Bureau) 58%
 Will order groceries online if available (Survey) 25%
 Discount of survey intentions 50%
 Online grocery shopping availability (guess) 40%
 Awareness given availability (guess) 50%

Market forecast: $ ???

Intent-to-Buy Scale Used for Generating
Some Inputs to Chain Ratio
1) Definitely would buy
2) Probably would buy
3) May or may not buy
4) Probably would not buy
5) Definitely would not buy
 Adjusting Stated Intentions to Get Actual
Purchase Behavior
Probability of Purchase
Probability of purchase given stated intent for new durable and non-durable products. From Jamieson, Linda F. and Frank M. Bass "Adjusting Stated
Intention...To Predict Trial Purchase of New Products," JMR, August 1989.

45
Probability of Purchase (within six months)
40
Increases with Stated Intention
35

30
Some Who Say
25 They Will, Don’t
20Some Who Say
They Won’t, Do!
15 Purchase Increases with
Stated Intention
10

0
Definitely Will Not Buy Probably Will Not Buy Might or Might Not Buy Probably Will Buy Definitely Will Buy

Actual Purchase Probability Given Stated Intention for 5 Non-Durable Products

Actual Purchase Probablity Given Stated Intention for 5 Durable Products
 Extension: Incorporating Marketing Variables
12
in the Bass Model
   𝑵 ( 𝒕 −𝟏 )
{
𝒏 ( 𝒕 ) = 𝒑 × [ 𝑵 − 𝐍 ( 𝐭 −𝟏 ) ] +𝐪 ×
´
𝑵´
×[𝑵
}
´ − 𝐍 (𝐭 −𝟏 ) ] 𝐱 (𝐭 )

12/20/2021