Innovation Diffusion Model for a Product Incorporating Segment-specific Strategy and the Spectrum Effect of Promotion

Abstract

Promotion is an important component of a firm's marketing mix. It assists in dispersing the product information into minds of the customers and takes them to the final stage of purchase. Various promotional strategies are used by firms to capture maximum potential adopters in the market. Firms adopt segment driven marketing to best utilize its finite marketing resources. Mass market promotion and differentiated market promotion are amongst the two widely used techniques of promotion used in a heterogeneous market, segmented into homogeneous segments. Through mass market promotion, a product is promoted in the entire market, using a common promotional strategy, thereby creating a spectrum effect in all the segments of the market. Whereas, differentiated market promotion targets each segment of the market with distinct promotional strategies. In a segmented market, both types of promotional strategies play different and important roles for product adoption in the market. Innovation diffusion models are used to describe the adoption growth of durable technology products over their product life cycle. There is vast literature of innovation diffusion modeling. The existing literature mostly assumes a homogeneous market while formulating the model and effect of mass and differentiated promotion techniques on adoption growth in a segmented market is not yet analyzed. In this paper, we develop an innovation diffusion model for a durable technology consumer product considering the combined effect of mass and differentiated promotion along with the internal influence factors on adoption growth in segmented market. Model validity is tested on a real time data in four segments. Fairly good results have been obtained.