Modeling the Impact of Marketing Mix On the Diffusion of Innovation in the Generalized Bass Model of Firm Demand

Abstract

In the field of business simulation and gaming there has been much attention given to the modeling of demand, but very limited research on the role of the marketing mix for new and innovative products. This study examines how the marketing mix impacts the diffusion of demand for new and innovative products using the framework developed by Frank Bass (1969). The Bass Model was chosen because it is widely accepted within academia as a structured and disciplined approach for forecasting the intertemporal dif-fusion of demand. Our concern with the Bass Model is the assumption that market potential is fixed and independent of the marketing mix. Based on a careful review of the liter-ature, revisions to the model were derived and tested by running twenty-eight computer simulations with changes in the pre-specified levels of both price and advertising, given varying assumptions with respect to the elasticity coeffi-cients in the marketing mix function. Our research suggests that management of the marketing mix effects all the key elements of the Bass Model including the coefficients of innovation and imitation, the total market size and thereby the rate of diffusion. These findings are significant with respect to the forecasting of demand and the effective de-sign and internal validity of business simulations used for management education.