New Product Diffusion with Influentials and Imitators

We model the diffusion of innovations in markets with two segments: influentials who are more in touch with new developments and who affect another segment of imitators whose own adoptions do not affect the influentials. This two-segment structure with asymmetric influence is consistent with several theories in sociology and diffusion research, as well as many “viral” or “network” marketing strategies. We have four main results. 1 Diffusion in a mixture of influentials and imitators can exhibit a dip or “chasm” between the early and later parts of the diffusion curve. 2 The proportion of adoptions stemming from influentials need not decrease monotonically, but may first decrease and then increase. 3 Erroneously specifying a mixed-influence model to a mixture process where influentials act independently from each other can generate systematic changes in the parameter values reported in earlier research. 4 Empirical analysis of 33 different data series indicates that the two-segment model fits better than the standard mixed-influence, the Gamma/Shifted Gompertz, and the Weibull-Gamma models, especially in cases where a two-segment structure is likely to exist. Also, the two-segment model fits about as well as the Karmeshu-Goswami mixed-influence model, in which the coefficients of innovation and imitation vary across potential adopters in a continuous fashion.

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