IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v2y1983i1p1-17.html
   My bibliography  Save this article

Advertising and the Diffusion of New Products

Author

Listed:
  • Dan Horsky

    (Graduate School of Management, University of Rochester, Rochester, New York 14627)

  • Leonard S. Simon

    (Executive Vice-President, Community Savings Bank, Rochester, New York 14604)

Abstract

This paper examines the effects of advertising on the sales growth of new, infrequently purchased products. It is assumed that producer originated advertising serves to inform innovators of the existence and value of the new product while word-of-mouth communication by previous adopters affects imitators. Such a diffusion process is modeled and tested for the case of telephonic banking. It is shown that advertising accelerates the diffusion process of the new product. The implications for a firm introducing a new product and wishing to maximize its discounted profits over the product's life cycle are discussed. In particular, it is demonstrated that the optimal advertising policy is to advertise heavily when the product is introduced and to reduce the level of advertising as sales increase and the product moves through its life cycle. Evidence that such a strategy is commonly practiced by firms is cited.

Suggested Citation

  • Dan Horsky & Leonard S. Simon, 1983. "Advertising and the Diffusion of New Products," Marketing Science, INFORMS, vol. 2(1), pages 1-17.
  • Handle: RePEc:inm:ormksc:v:2:y:1983:i:1:p:1-17
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.2.1.1
    Download Restriction: no

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:2:y:1983:i:1:p:1-17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc). General contact details of provider: http://edirc.repec.org/data/inforea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.