Diffusion Model for Mexican SMEs to Support the Success of Innovation

Abstract

Developing new and successful products is probably the most critical task of any company. However, developing new products is not only a very complex task but also risky, even more so for an SME. One of the main risks associated with forecasting demand is estimating sales and making decisions regarding production and marketing strategies. This study considers the Bass Model for the pre-launch forecasting of new product demand, and the diffusion of new products in Mexican SMEs. The objective of our proposed model is to represent the level of new distribution developments in a simple mathematical function that has elapsed since the introduction of new products. Therefore, this article exposes the methodology to predict the success of an innovation in SMEs. The experimental validation shows that SMEs represent a driving force in spreading and introducing innovation in the Mexican market in Mexico. The innovation parameter (p) and the imitation parameter (q) are more significant than the stores’ sales in general. This result indicates that SMEs in emerging markets represent an effective means of supporting innovation. Furthermore, a robust Bass model was developed to forecast demand with limited data for new products. We analyze the model empirically, concluding that our extension can improve the accuracy of future demand forecast and, more importantly, identify the expected potential in the diffusion of a new product.