Marketing-Mix Variables and the Diffusion of Successive Generations of a Technological Innovation

Abstract

Research addressing the diffusion of successive generations of technological innovations has generally ignored the impact of marketing-mix variables. As a result, there have been several calls for the development of multiple-generation models that incorporate marketing-mix variables. The authors develop a model of first-time sales and subscriptions for successive generations of a technological innovation, which explicitly captures the effects of marketing-mix variables through a proportional hazards framework. The empirical analysis estimates the impact of price for two generations of cellular telephones in a European country. The results suggest that there are important substantive insights to be gained from the parameter estimates for this marketing-mix variable when intergenerational interdependencies are considered. For example, although the time path of the estimated price elasticities in a multiple-generation setting closely follows those reported previously for single generations, the authors find evidence of an important interaction in price response across generations. Therefore, empirical estimates in single-generation models may be missing an important part of the pricing equation.