Modeling Product Marketing as a Diffusion Process: A System Dynamics Perspective

Abstract

The launch of a new product is of strategic importance to any company. While an exciting moment, it is also the culmination of a long complex process. It is a process that is not one dimensional, but rather a conglomerate of interrelated and interdependent factors such as design, distribution, logistics, finance, and advertising, among many others. All these various factors are interconnected, pushing on each other and being pushed on in return. Accordingly, it is safe to say that the launch and market diffusion of a new product is a clear example of a multi-loop, nonlinear, feedback system characterized by a large number of interrelated variables that interact dynamically over time through an information feedback process. This concept of understanding the behavior of complex systems over time through examining internal feedback loops is known as system dynamics. The objective of this paper is to demonstrate the utility of a system dynamics model to simulate the growth and diffusion of a new or specific product from a marketing perspective.