![]() Ostensibly, they all follow the Bass diffusion model. In the face of competition for an emerging market, multiple companies will be fighting for these same potential customers. Note it is not different in character from the SIR model or the simple population model. The behavior of this model is shown below. By advertising, awareness of the product is created in the market and some people will become customers without having encountered other customers who are happy with the product. Likewise, if no one is a customer, there is no one to tell others how great the product is so they want to become customers also. If no one is infected, the disease cannot spread. If you examine the SIR model closely, you will see that the initial value of Infected is one. The additional feedback loop, B2, starts the ball rolling and helps a steady stream of customers come in the door. If you are examining policies related to these variables, it would be important to separate them out in the model. Instead of an infection rate, there is a wom multiplier which is the product of the Bass diffusion model’s contact rate and the adoption rate. The feedback loops B1 and R are the same as the balancing and reinforcing loops between Susceptible and Infected in the SIR model. This is shown below (and can be downloaded by clicking here). This is, however, not sufficient to spread the news of a good product, so the Bass diffusion model also includes a constant rate of customer acquisition through advertising. New customers are acquired through contact with existing customers, just as an infection spreads, but in this context this is called word of mouth ( wom). Since we do not usually track customers who have “recovered” from using our product, the model only has two stocks, corresponding loosely to the Susceptible and Infected stocks. The Bass diffusion model is very similar to the SIR model shown in part one. This is also used to implement what Kim Warren calls Type 1 rivalry in his book Strategy Management Dynamics, that is, rivalry between multiple companies in an emerging market. This part introduces the Bass diffusion model, an effective way to implement the capture of customers in a developing market. In part one of this series, I explained the Limits to Growth archetype and gave examples in epidemiology and ecology. ![]() Part one can be accessed here and part three can be accessed here. This is part two of a three part series on Limits to Growth.
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