A dynamic model of Market share and sales behavior
Bass, F. M. (1963)
Proceedings, Winter Conference American Marketing Association, Chicago, IL; pg 263-276
The problem of measuring the impact of advertising dollars on market share is a complex one. This paper describes the four basic types of market share behavior over time. An "Imitation" model is developed to explain serial correlation in the number of new customers buying a brand in each time period. The analysis casts doubt on the feasibility of measuring the impact of advertising expenditures on sales through analyzing aggregative data.
This paper’s main focus is on measuring the impact of advertising dollars on market share. It develops an “imitation” model in order to explain the correlation of the number of new customers buying a brand in each time period.
It is that imitation model that has particular relevance to us and innovation diffusion. Whilst not referenced as innovation diffusion at the time, the magic is in these sentences:
- “Suppose the new product is a durable good and that over the life of the product …m people will make a first purchase”
- “Among those who will make a first purchase are two distinct market segments…”
- “…innovators…will by the product independent to the actions of others…”
- “…imitators…the time at which these people make a purchase will depend in varying degrees upon the number of people who have already bought the product”
- “innovators tend to buy early…so number of innovators will be decreasing..over time”
- “the number of imitators will increase at first and later decrease as saturation is approached”
This thinking later evolved into Bass’ more famous innovation diffusion model described in his 1969 paper.
Mostly referenced in my article on Bass diffusion model.