Innovation diffusion and new product growth models: A critical review and research directions

Abstract

Diffusion processes of new products and services have become increasingly complex and multifaceted in recent years. Consumers today are exposed to a wide range of influences that include word-of-mouth communications, network externalities, and social signals. Diffusion modeling, the research field in marketing that seeks to understand the spread of innovations throughout their life cycle, has adapted to describe and model these influences. We discuss efforts to model these influences between and across markets and brands. In the context of a single market, we focus on social networks, network externalities, takeoffs and saddles, and technology generations. In the context of cross-markets and brands, we discuss cross-country influences, differences in growth across countries, and effects of competition on growth. On the basis of our review, we suggest that the diffusion framework, if it is to remain a state-of-the-art paradigm for market evolution, must broaden in scope from focusing on interpersonal communications to encompass the following definition: Innovation diffusion is the process of the market penetration of new products and services that is driven by social influences, which include all interdependencies among consumers that affect various market players with or without their explicit knowledge. Although diffusion modeling has been researched extensively for the past 40 years, we believe that this field of study has much more to offer in terms of describing and incorporating current market trends, which include the opening up of markets in emerging economies, web-based services, online social networks, and complex product–service structures.