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An Integrated Two-stage Innovation Planning Model with Market Segmented Learning and Network Dynamics

Innovation diffusion models have been studied extensively to forecast and explain the adoption process for new products or services. These models are often formulated using one of two approaches: The first, and most common is a macro-level approach that aggregates much of the market behaviour. An advantage of this method is that forecasts and other analyses may be performed with the necessity of estimating few parameters. The second is a micro-level approach that aims to utilize microeconomic information pertaining to the potential market and the innovation. The advantage of this methodology is that analyses allow for a direct understanding of how potential customers view the innovation. Nevertheless, when individuals are making adoption decisions, the reality of the situation is that the process consists of at least two stages: First, a potential adopter must become aware of the innovation; and second the aware individual must decide to adopt. Researchers, have studied multi-stage diffusion processes in the past, however a majority of these works employ a macro-level approach to model market flows. As a result, a direct understanding of how individuals value the innovation is lacking, making it impossible to utilize this information to model realistic word-of-mouth behaviour and other network dynamics. Thus, we propose a two-stage integrated model that utilizes the benefits of both the macro- and micro-level approaches. In the first stage, potential customers become aware of the innovation, which requires no decision making by the individual. As a result, we employ a macro-level diffusion process to describe the first stage. However, in the second stage potential customers decide whether to adopt the innovation or not, and we utilize a micro-level methodology to model this. We further extend the application to include forward looking behaviour, heterogeneous adopters and segmented Bayesian learning, and utilize the adopter's satisfaction levels to describe biasing and word-of-mouth behaviour. We apply the proposed model to Canadian colour-TV data, and cross-validation results suggest that the new model has excellent predictive capabilities. We also apply the two-stage model to early U.S. hybrid-electric vehicle data and results provide insightful managerial observations.

Identiferoai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:OTU.1807/35066
Date28 February 2013
CreatorsFerreira, Kevin D.
ContributorsLee, Chi-Guhn
Source SetsLibrary and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada
Languageen_ca
Detected LanguageEnglish
TypeThesis

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