Modelling successive generations for products-in-use and number of products sold in the market

As most of the high‐technology companies are trying to be more demand driven, technological innovation and diffusion have become important force in today's market. High technology product comes in generations where a new generation offers a significant improvement in performance or benefits over the preceding generation. These successive generations under the same product category often compete in the market. The purpose of this paper is to propose a modelling framework that describes how a fraction of potential purchasers of earlier generation shift to the latest one via; substitution and switching. The proposition explains how actual the number of users is always lesser than the number of customers who buy a particular generation. The study proves that there is a relationship between the proposed model and Norton‐Bass model and asserts that Norton‐Bass model is a model to explain products‐in‐use and not products sold in the market. Empirical implications of the proposed model have been validated on data collected from two industries (Mainframe Industry (USA) and Semiconductor Industry DRAM shipments).