Impact of a Late Entrant on the Diffusion of a New Product/Service

Abstract

Starting with Bass's (1969) article, diffusion researchers have predominantly focused on modeling category-level sales growth and issues surrounding it. In this article, the authors propose a brand-level diffusion model and demonstrate its managerial use by applying it to the following issue: If a new brand enters a category that has not attained its peak sales, how can a practicing manager evaluate its impact on the category and on the incumbent brands? The proposed model helps the manager diagnose whether the late entrant affects the market potential and/or the diffusion speed of the category and of the incumbent brands. The authors test the model using brand-level sales data from the cellular telephone industry in multiple markets.