Customer Influence Value and Purchase Acceleration in New Product Diffusion

Teck Ho (), Shan Li (), So-Eun Park () and Zuo-Jun Max Shen ()
Additional contact information
Shan Li: Philips Research North America, Briarcliff Manor, New York 10510
So-Eun Park: Haas School of Business, University of California, Berkeley, Berkeley, California 94720
Zuo-Jun Max Shen: Department of Industrial Engineering and Operations Research, University of California, Berkeley, Berkeley, California 94720

Marketing Science, 2012, vol. 31, issue 2, 236-256

Abstract: When social influence plays a key role in the diffusion of new product, the value of a customer often goes beyond her own product purchase. We posit that a customer's value (CV) comes not only from her purchase value (PV) but also from her influence value (IV) (i.e., CV = PV + IV). Therefore, a customer's value can be far greater than her purchase value if she exerts a considerable influence on others. Building on a two-segment influential-imitator asymmetric influence model, we develop a model framework to derive closed-form expressions for PV, IV, and CV by customer segment as well as time of adoption, and we examine their comparative statics with respect to the diffusion parameters. A key parameter of our model framework is the social apportioning parameter, delta, which determines the credit a customer receives by influencing other potential adopters. We develop an endogenous method for determining delta as a function of the new product diffusion parameters. Our model framework allows us to investigate how a firm might accelerate product purchases by providing introductory discount offers to a targeted group of potential adopters at product launch. We find that purchase acceleration frequently leads to a significant increase in total customer value.

Keywords: new product diffusion; purchase value; influence value; purchase acceleration (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:31:y:2012:i:2:p:236-256

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