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Customer Influence Value and Purchase Acceleration in New Product Diffusion

Author

Listed:
  • Teck-Hua Ho

    (National University of Singapore, Singapore 119077; and University of California, Berkeley, Berkeley, California 94720)

  • Shan Li

    (Philips Research North America, Briarcliff Manor, New York 10510)

  • So-Eun Park

    (Haas School of Business, University of California, Berkeley, Berkeley, California 94720)

  • Zuo-Jun Max Shen

    (Department of Industrial Engineering and Operations Research, University of California, Berkeley, Berkeley, California 94720)

Abstract

When social influence plays a key role in the diffusion of new product, the value of a customer often goes beyond her own product purchase. We posit that a customer's value (CV) comes not only from her purchase value (PV) but also from her influence value (IV) (i.e., CV = PV + IV). Therefore, a customer's value can be far greater than her purchase value if she exerts a considerable influence on others. Building on a two-segment influential-imitator asymmetric influence model, we develop a model framework to derive closed-form expressions for PV, IV, and CV by customer segment as well as time of adoption, and we examine their comparative statics with respect to the diffusion parameters. A key parameter of our model framework is the social apportioning parameter, delta, which determines the credit a customer receives by influencing other potential adopters. We develop an endogenous method for determining delta as a function of the new product diffusion parameters. Our model framework allows us to investigate how a firm might accelerate product purchases by providing introductory discount offers to a targeted group of potential adopters at product launch. We find that purchase acceleration frequently leads to a significant increase in total customer value.

Suggested Citation

  • 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.
    • Handle: RePEc:inm:ormksc:v:31:y:2012:i:2:p:236-256
    DOI: 10.1287/mksc.1110.0701
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    References listed on IDEAS

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