INCORPORATING CONSUMER RESISTANCE TO INNOVATION IN A NEW PRODUCT DIFFUSION MODEL: A NEW MODEL AND A SIMULATION COMPARISON WITH EXISTING MODELS (CONSUMER RESISTANCE)

                        CHANG, AI-HWA; PHD

                        UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN, 1992
 
                        BUSINESS ADMINISTRATION, MARKETING (0338)
 

                         This dissertation proposes a new diffusion model for an innovation in durable goods markets and
                         compares the model with four existing models. The distinctive feature of the new diffusion model is an
                         explicit consideration of the competition between an existing product and a new product due to the
                         comparative advantage of the new product and also due to the closer introduction times of the existing
                         product and the new product. Adopting an individual-level modeling approaching, this diffusion model
                         incorporates the phenomena of: interaction of evaluations for successive generation innovations,
                         risk-adjusted utility of the new product, increased new product utility over time, and the Bayesian process
                         of uncertainty reduction. The proposed model has been compared with existing models using both
                         empirical data from the color TV market, and computer-simulated market data. The comparison criteria are
                         (1) goodness of fit in model estimation samples, and (2) forecast accuracy in model validation samples.
                         The results of empirical comparison show that the proposed model performs better than the compared
                         models on both criteria. The results of computer simulation comparison show that the proposed model
                         and Lattin and Roberts' (1989) RAU model are the two best models with the latter being better than the
                         former on goodness-of-fit in seven of twenty-eight market types, and the former being better than the
                         latter on the accuracy of one-step-ahead sales forecasting in twenty-six markets. In addition, in markets
                         characterized by strong consumer resistance, the proposed model is superior to the RAU model on both
                         performance criteria. The proposed model is also superior to the Bass model (1969), a
                         first-order-autoregressive model, and the Lattin and Roberts' (1989) model with price consideration in all
                         the markets examined. Besides, the superiority of the proposed model to these three models increases
                         more often in markets in which diffusion-deterring factors are present. Therefore, the proposed model
                         has demonstrated its superior capabilities in modeling the diffusion of a new product in an environment
                         characterized by stronger consumer resistance. Managerial implications of the proposed model in new
                         product prelaunch forecasting and post-introduction adoption diagnosis are also discussed.
 


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