Customer Influence Value and Purchase Acceleration in New Product Diffusion

Marketing Science, Vol. 31, No. 2, March-April 2012, pp. 236-256

52 Pages Posted: 4 Apr 2019

See all articles by Teck Ho

Teck Ho

University of California, Berkeley - Haas School of Business

Shan Li

City University of New York (CUNY) - Narendra Paul Loomba Department of Management

So-Eun Park

affiliation not provided to SSRN

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)

Date Written: 2012

Abstract

As social influence plays a key role in the diffusion of new product, a customer’s value goes beyond her own product purchase. Building on the two-segment Influential-Imitator asymmetric influence model by Van den Bulte and Joshi (2007), our model posits 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 considerable influence on others as an early adopter. Using the CV = PV + IV framework, our model provides microscopic insights into individual customer values. Specifically, we develop closed-form expressions for PV, IV, and CV by customer segment and by time of adoption, and examine their comparative statics with respect to the diffusion parameters. Our framework allows us to investigate how a firm might implement purchase acceleration to maximize its profit by speeding up the diffusion process via introductory discount offers. Our results suggest that the firm often gains more from increased IV of early adopters than it loses from their PV due to the discounts. Depending on the diffusion parameters, the firm may invite either segment to give discount offers.

Suggested Citation

Ho, Teck and Li, Shan and Park, So-Eun and Shen, Zuo-Jun Max, Customer Influence Value and Purchase Acceleration in New Product Diffusion (2012). Marketing Science, Vol. 31, No. 2, March-April 2012, pp. 236-256, Available at SSRN: https://ssrn.com/abstract=3359824

Teck Ho

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Shan Li (Contact Author)

City University of New York (CUNY) - Narendra Paul Loomba Department of Management ( email )

55 Lexington Avenue
New York, NY 10010
United States

So-Eun Park

affiliation not provided to SSRN ( email )

Zuo-Jun Max Shen

University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR) ( email )

IEOR Department
4135 Etcheverry Hall
Berkeley, CA 94720
United States

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