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The role of prices in models of innovation diffusion
Author(s) -
Bottomley Paul A.,
Fildes Robert
Publication year - 1998
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/(sici)1099-131x(199812)17:7<539::aid-for684>3.0.co;2-s
Subject(s) - econometrics , diffusion , computer science , innovation diffusion , order (exchange) , diffusion of innovations , time series , economics , marketing , business , machine learning , knowledge management , physics , finance , thermodynamics
When evaluating the launch of a new product or service, forecasts of the diffusion path and the effects of the marketing mix are critically important. Currently no unified framework exists to provide guidelines on the inclusion and specification of marketing mix variables into models of innovation diffusion. The objective of this research is to examine empirically the role of prices in diffusion models, in order to establish whether price can be incorporated effectively into the simpler time‐series models. Unlike existing empirical research which examines the models' fit to historical data, we examine the predictive validity of alternative models. Only if the incorporation of prices improves the predictive performance of diffusion models can it be argued that these models have validity. A series of diffusion models which include prices are compared against a number of well‐accepted diffusion models, including the Bass (1969) model, and more recently developed ‘flexible’ diffusion models. For short data series and long‐lead time forecasting, the situation typical of practical situations, price rarely added to the forecasting capability of simpler time‐series models. Copyright © 1998 John Wiley & Sons, Ltd.