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When giving some away makes sense to jump-start the diffusion process

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  • Donald Lehmann
  • Mercedes Esteban-Bravo

Abstract

This paper uses an analytical model to examine when it makes sense to provide incentives to innovators to adopt a new product. The model allows for separate segments of innovators and imitators, each of which follows a Bass-type diffusion process. Interestingly “seeding” the market is optimal for a limited range of situations and these do not appear to include those where there is a downturn in sales (chasm) as sales move from the first to the second segment. Copyright Springer Science + Business Media, LLC 2006

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  • Donald Lehmann & Mercedes Esteban-Bravo, 2006. "When giving some away makes sense to jump-start the diffusion process," Marketing Letters, Springer, vol. 17(4), pages 243-254, December.
    • Handle: RePEc:kap:mktlet:v:17:y:2006:i:4:p:243-254
    DOI: 10.1007/s11002-006-7942-9
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    References listed on IDEAS

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    3. Michelle M.H. Şeref & Janice E. Carrillo & Arda Yenipazarli, 2016. "Multi-generation pricing and timing decisions in new product development," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 1919-1937, April.
    4. Wenjing Shen & Izak Duenyas & Roman Kapuscinski, 2014. "Optimal Pricing, Production, and Inventory for New Product Diffusion Under Supply Constraints," Manufacturing & Service Operations Management, INFORMS, vol. 16(1), pages 28-45, February.
    5. Yifan Dou & Marius F. Niculescu & D. J. Wu, 2013. "Engineering Optimal Network Effects via Social Media Features and Seeding in Markets for Digital Goods and Services," Information Systems Research, INFORMS, vol. 24(1), pages 164-185, March.
    6. Olivier Toubia & Jacob Goldenberg & Rosanna Garcia, 2014. "Improving Penetration Forecasts Using Social Interactions Data," Management Science, INFORMS, vol. 60(12), pages 3049-3066, December.
    7. Landry, Peter, 2022. "Pricing, advertising, and endogenous consideration of an “insistent” product," International Journal of Industrial Organization, Elsevier, vol. 80(C).
    8. Agam Gupta & Arqum Mateen & Divya Sharma & Uttam K. Sarkar & Vinu Cheruvil Thomas, 2019. "Combating incumbency advantage of network effects: The role of entrant’s decisions and consumer preferences," Competition and Regulation in Network Industries, , vol. 20(1), pages 3-32, March.
    9. Peres, Renana & Muller, Eitan & Mahajan, Vijay, 2010. "Innovation diffusion and new product growth models: A critical review and research directions," International Journal of Research in Marketing, Elsevier, vol. 27(2), pages 91-106.
    10. Kocaman, Barış & Gelper, Sarah & Langerak, Fred, 2023. "Till the cloud do us part: Technological disruption and brand retention in the enterprise software industry," International Journal of Research in Marketing, Elsevier, vol. 40(2), pages 316-341.
    11. Nejad, Mohammad G. & Amini, Mehdi & Babakus, Emin, 2015. "Success Factors in Product Seeding: The Role of Homophily," Journal of Retailing, Elsevier, vol. 91(1), pages 68-88.
    12. Yifan Dou & Marius Florin Niculescu & Dongjun Wu, 2011. "Optimal Consumer Network Structure Formation under Network Effects: Seeds Controllability and Visibility," Working Papers 11-07, NET Institute, revised Oct 2011.
    13. Sadat Reza & Hillbun Ho & Rich Ling & Hongyan Shi, 2021. "Experience Effect in the Impact of Free Trial Promotions," Management Science, INFORMS, vol. 67(3), pages 1648-1669, March.
    14. Heiman, Amir & Ofir, Chezy, 2010. "The effects of imbalanced competition on demonstration strategies," International Journal of Research in Marketing, Elsevier, vol. 27(2), pages 175-187.
    15. Christophe Van den Bulte & Yogesh V. Joshi, 2007. "New Product Diffusion with Influentials and Imitators," Marketing Science, INFORMS, vol. 26(3), pages 400-421, 05-06.
    16. Gila E. Fruchter & Ashutosh Prasad & Christophe Van den Bulte, 2022. "Too Popular, Too Fast: Optimal Advertising and Entry Timing in Markets with Peer Influence," Management Science, INFORMS, vol. 68(6), pages 4725-4741, June.
    17. Fruchter, Gila E. & Van den Bulte, Christophe, 2011. "Why the Generalized Bass Model leads to odd optimal advertising policies," International Journal of Research in Marketing, Elsevier, vol. 28(3), pages 218-230.
    18. Abedi, Vahideh Sadat, 2019. "Compartmental diffusion modeling: Describing customer heterogeneity & communication network to support decisions for new product introductions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 536(C).
    19. Vahideh Sadat Abedi & Oded Berman & Dmitry Krass, 2014. "Supporting New Product or Service Introductions: Location, Marketing, and Word of Mouth," Operations Research, INFORMS, vol. 62(5), pages 994-1013, October.
    20. Marius F. Niculescu & D. J. Wu, 2014. "Economics of Free Under Perpetual Licensing: Implications for the Software Industry," Information Systems Research, INFORMS, vol. 25(1), pages 173-199, March.
    21. Teck-Hua Ho & Shan Li & So-Eun Park & Zuo-Jun Max Shen, 2012. "Customer Influence Value and Purchase Acceleration in New Product Diffusion," Marketing Science, INFORMS, vol. 31(2), pages 236-256, March.
    22. Gil Appel & Eitan Muller, 2021. "Adoption patterns over time: a replication," Marketing Letters, Springer, vol. 32(4), pages 499-511, December.
    23. Wijeratne, A.W. & Yi, Fengqi & Wei, Junjie, 2009. "Bifurcation analysis in the diffusive Lotka–Volterra system: An application to market economy," Chaos, Solitons & Fractals, Elsevier, vol. 40(2), pages 902-911.
    24. Yogesh V. Joshi & David J. Reibstein & Z. John Zhang, 2009. "Optimal Entry Timing in Markets with Social Influence," Management Science, INFORMS, vol. 55(6), pages 926-939, June.

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