How new organization determine what products they should pursue? How can you tell if a product will become successful or not? How markets react to new products?
For all of these questions, innovators have the Bass model.
The goal of the Bass Model invented by Frank M. Bass is to predict how new products and technologies are diffused among the market. As a result, the Bass Model (or curve as it is called often) assists greatly in describing and predicting the possible markets of new consumer durable products.
Usually, the adoption of these new products and technologies look like this:
In order to calculate this, Bass have researched many past innovations and came up with the following formula that can be read as “The portion of the potential market that adopts at t given that they have not yet adopted is equal to a linear function of previous adopters”:
m= the potential of the market; the number of people that will actually use the product
p= the coefficient of innovation (external influences); the likelihood that a non-current customer will change its behavior due to mass media coverage or other external factors
q= the coefficient of imitation (internal influences); the likelihood that a non-current customer will change its behavior due to Word-Of-Mouth, or other influences from people who already use the product.
A(t)=the cumulative adoption function
The Bass model allows innovators to come up with initial assessments for their products and technologies without getting into additional complex modelling, and that is its main power.
To position this diffusion on a curve, many tend to use the following (more elegant formula)
The main difficulty in the model is to determine p and q as these varies among the different industries. Gladly, researchers has studied these and came up with lists that can assist us to understand what is the p’q for any existing industry. However, still how can you determine the p or q of a disruption of an existing market? In these cases, the model becomes more of an art.
Obviously, since the model was developed (1963), there have been many additional models that claim to predict the diffusion of new products and technologies with more accuracy. However, still, the Bass Model is considered a corner stone in predicting these. Therefore, I recommend any innovator to learn about this model and use it, even if it just for a ballpark estimation.