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Research Article

An Empirical Study on the Spatio-Temporal Diffusion of Non-Durable New Products

Yoon, Manhui

Published: January 1996 · Vol. 25, No. 2 · pp. 281-332
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Abstract

This study proposes and empirically analyzes a nonlinear diffusion model that considers the effects of advertising, price, sales of other products, customers' geographical distance, and purchasing hierarchy to explain the diffusion process of low-price, low-involvement, non-durable new products. In addition to the model's goodness of fit, the dynamics and uncertainty that model parameters may commonly exhibit during the early stage of market entry were also examined. For the empirical study, a new product launched by a food manufacturer in early 1989 was selected as the research subject, and data on purchasing households, number of purchases, and management-related information during the three months following the new product launch were used as sample data. The proposed model demonstrated satisfactory goodness of fit, and notably, external effect factors were found to exert a far more powerful influence on the new product diffusion process than internal effect factors. Furthermore, in terms of predictive validity, the proposed model proved superior to three alternative prediction models with the same number of parameters. Although this study did not demonstrate results superior to Indirect Nonlinear Least Squares (INLS), the necessity of Kalman filtering for time-varying parameter estimation was noted.