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Innovation EquityAssessing and Managing the Monetary Value of New Products and Services$
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Elie Ofek, Eitan Muller, and Barak Libai

Print publication date: 2016

Print ISBN-13: 9780226618296

Published to Chicago Scholarship Online: May 2017

DOI: 10.7208/chicago/9780226394145.001.0001

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Foreseeing Bumps and Potholes along the Diffusion Road

Foreseeing Bumps and Potholes along the Diffusion Road

Chapter:
(p.101) Chapter Four Foreseeing Bumps and Potholes along the Diffusion Road
Source:
Innovation Equity
Author(s):

Elie ofek

Eitan Muller

Barak Libai

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226394145.003.0005

This chapter explores the diffusion saddle phenomenon, whereby an innovation’s unit sales exhibit an early peak followed by a decline and a subsequent second sales peak. The average duration of the dip in sales is four years and the maximal depth of the decline is over 15 percent. The saddle pattern can be attributed to the existence of multiple adopter segments: Innovation forwards who have a strong individual force, and innovation moderates who have a modest individual force and who are only weakly affected by the innovation forwards’ social force. Given that the bulk of innovation forwards embrace the innovation soon after the launch yet are relatively small in number, while the innovation moderates tend to adopt much later, the former segment can be thought of as early adopters and the latter as mainstream adopters. The chapter introduces a multi-segment diffusion model that can capture differences in diffusion parameters between segments and allows for social effects across segments. This model can yield a saddle-like diffusion pattern. The chapter provides several examples of innovations that exhibited a saddle, such as the PC and electric-drive vehicles, and illustrates how the multi-segment diffusion model can be integrated into the innovation equity framework.

Keywords:   diffusion saddle, customer segments, innovation forwards, innovation moderates, early adopters, mainstream adopters, individual force, social force, cross segment effects, multi segment effects

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