Diffusion Modeling Based on Customer's Review and Product Satisfaction

Diffusion Modeling Based on Customer's Review and Product Satisfaction

Adarsh Anand (Department of Operational Research, University of Delhi, Delhi, India), Ompal Singh (Department of Operational Research, University of Delhi, Delhi, India), Richie Aggarwal (University of Delhi, Delhi, India) and Deepti Aggrawal (Amity University, Noida, India)
Copyright: © 2016 |Pages: 12
DOI: 10.4018/IJTD.2016010102
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Abstract

The purpose of this paper is to determine the internal/external factors that lead to fluctuation in marketplace. Before introducing new products in the market, organization needs proper understanding of the market which can be realized through sound mathematical modeling and scientific decision making tools. The objective is as follows: market size is determined by the number of customers a product is flanked by; therefore, it becomes critical to understand satisfaction of demanders as one of the metric for measuring performance of the product. In this paper, the authors have discussed how the adoption takes place in accordance with the market fluctuation. For this purpose, they have developed four different methodical frameworks to help the management to estimate sales due to varying behaviour of market (as per reviews about the product). Analysis and validation has been done on two different real life datasets. Weighted Criteria Value Approach (WCVA) has been applied to rank the models by using several goodness of fit collectively.
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1. Introduction

Innovation is today’s need for successful penetration in the market. The changing social & economic needs and increasing competition are forcing organizations to innovate in terms of new product and market principles. Therefore, it is mandatory for an organization to be creative, competitive and customer focused. By making maximum use of the opportunities, the organization should organize effective and efficient marketing strategies to manage their relationship with the targeted customers. Firm must introduce new products while knowing that their product may not long last in the market. Management must espouse the most favorable policies, ahead of taking any decision about the introduction of the new product.

The diffusion process plays a key role in the field of marketing research. The four key elements of diffusion process are: innovation, channels of communication, time and social system. Therefore, the innovation-diffusion has been defined as the process by which the innovation “is communicated through certain channels over time among the members of a social system” (Rogers, 1995). The process of innovation and diffusion of a new product is necessary to understand the market position for any organization. Since the start of 1960’s diffusion research is the key in modeling framework in marketing which targeted the entire life-cycle of an innovation; from the perspective of communications and consumer reaction (Aggrawal et al., 2014). The Bass model (1969) is the well-known and most widely used model for the diffusion of innovation in marketing literature. Later on, many researchers like Lehman, (2012); Aggrawal et al., (2013); Anand et al., (2015); Hu et al., (2015) have developed their diffusion models and have tried to apply them in different marketing situations.

The discrepancy between the product performance and customers’ expectation leads to satisfaction or dissatisfaction from the product. Some different customers have different needs and expectations from a particular product, therefore, a situation may arise where a product may be satisfactory for one customer, and for other customers it may lead to dissatisfaction. This altering behavior of customers is difficult to understand and measure. A firm can acquire customers from a pool of nonusers and from those who would like to switch from other brands, whereas on the other hand, there are some potential customers who might be dissatisfied with the same product (Libai et al., 2009). Both types of customers can affect market of the product. The first one leads to expansion in the market size that may increase slowly or rapidly, and other type de-escalates market size by rejecting the product.

A two-factor theory has been developed by Herzberg Frederick that distinguishes dis-satisfiers from satisfiers (Jack Ewing, 2007). The two implications of Herzberg’s theory are:

  • Dissatisfied customers should be avoided by the company by making some constructive efforts;

  • Identification of satisfiers and motivators for selling the product.

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