A diffusion model for new product introduction in existing markets

This paper reports on the development, estimation and validation of a diffusion model for new products introduced in an existing (competitive) market. The proposed model structure incorporates the impact of the main company and competitive marketing actions that affect new product penetration. The parameterization procedures allows for early estimation of the model parameters, by making optimal use of information available on the complete market. The procedure is also dynamic: as the new product penetration proceeds, some model parameters are re-evaluated on the basis of newly available data. In this paper, the model is applied in a specific segment of the pharmaceutical market. It is indicated, however, that many features of the proposed procedure can be of interest outside of this specific market context.