Changes in product attributes and costs as drivers of new product diffusion and substitution

• 成果类型: Article
• 署名作者: Schmidt, GM; Druehl, CT
• 署名单位: Georgetown University; University System of Maryland; University of Maryland College Park
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• 发表日期: 2005
• 页码: 272-285
• 关键词: diffusion; substitution; reservation price; INNOVATION

摘要

Diffusion theory has typically focused on how communication, internal or external to a social system, leads to adoptions and diffusion of an innovation. We develop a diffusion and substitution model based on a somewhat different perspective. In some cases, progressive improvements in product attributes and/or continual cost reduction seem to be a key driver of the diffusion process. For example, after introduction of the 5.25-inch disk drive, its capacity continually increased, and accordingly, so did customer willingness-to-pay. Our model is based on a linear reservation price framework, in which a product is described by its depth (defined as the difference between a product's maximum reservation price and its production cost), and its breadth (related to the slope of its reservation price curve), indicating how broadly it appeals across various customer segments. Because of changes in product depths and breadths over time, customers who previously preferred the old product may later prefer the new product, thus creating the diffusion process. While the Bass model describes diffusion as a function of the coefficients of innovation and imitation, in our model, it is described by the coefficients of depth and breadth (the rates of change in relative depth and breadth), along with an S-coefficient that we associate with the technology S-curve. We fit our model to data from the disk-drive and the microprocessor industries.