New Product Diffusion with Influentials and Imitators

TLDR

The two‑segment structure with asymmetric influence aligns with sociological theories and viral marketing strategies. The study models diffusion of innovations in markets comprising influentials and imitators. The model assumes influentials are more connected to new developments and influence imitators, while imitators’ adoptions do not affect influentials. The two‑segment model reveals a diffusion chasm, non‑monotonic influence of influentials, bias from mis‑specified mixed‑influence models, and outperforms standard models in 33 empirical series, fitting comparably to the Karmeshu‑Goswami model.

Abstract

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.