Modeling Adoption of a Successive Generational Product in Multiple Markets

Introduction

In order to sustain in today’s cutting edge competitive environment, companies always enhance their products with new and additional features to make customers attracted towards their offering. This new and updated version of existing product is called new or successive “generation” of the product. Moreover, it is very well accepted fact that newer generations give clients a better product that they value more (Jiang & Jain (2012), Anand et al. (2014), Aggarwal et al. (2014), Aggarwal et al. (2015)). When these new technologies or latest offerings become available, they provide an opportunity for potential adopters of earlier technologies to substitute the more recent technologies for earlier ones. Examples from various fields can be quoted to supplement this substitution. Be it software, be it a durable product, or be it a non-durable product, this phenomenon has proven itself everywhere. The Microsoft Windows and Office lines of products are two well known examples, with new versions typically introduced every few years (Jiang & Jain (2012)). The replacement of black & white TV with those of color TV and then in today’s time the coming of high definition (HD) TV have further transformed the meaning of technological advancements. In another case, a recent survey by Aseem Gaurav (2014) showed how the newer version of Hyundai’s i10 car i.e. the all new Hyundai Grand i10 is a much more attractive version of the car. It has been seen since the launch of this newer version of i10; the sales have been continually growing.

The bulk of the literature on new product sales model is based on innovation-diffusion theory (Kapur et al (2012), Singh et al (2012), Aggrawal et. al, (2014), Anand et al. (2016), Bansal et. al (2016)). Diffusion is the process by which a new idea or new product is accepted by the market. The difference among individuals in their response to new ideas is called their innovativeness; it represents the degree to which an individual is relatively early or late in adopting a new product or services. Hence the diffusion process is the aggregate of all individual adoptions over time. Tarde (1903) first claimed that sociology was based on small psychological interactions among individuals, especially imitation and innovation. Rogers’ (1962) in his classic book “The diffusion of Innovation” has studied the diffusion process extensively from a variety of view points and concludes that consumers go through number of stages before accepting and adopting a new product. The diffusion process has been studied by many researchers in the literature. The pioneering work in this context has been provided by Bass (1969). The beauty of this mixed influence model has been that though it is confined to single generation modeling only, this methodical approach has been widely used by researchers to give their propositions. One of the ground-breaking works in the field of marketing literature was given by Norton- Bass (1987). Their model was also inspired by the seminal Bass model and they have been credited as pioneers in the field of multi-generational modeling of diffusion process. The diffusion curves of two successive generations when they are present in the market simultaneously and the effect of their cannibalization can be pictorially shown in Figure 1.