The "Free Bird" of Marketing Theory -- Bass' Diffusion Model

Funny thing about the song "Free Bird": People like to make fun of it because it has been referenced and played to exhaustion. But, there's a reason it's been overexposed--it's a good song. And, whether you are shouting requests to the New York Philharmonic or grinding with a biker chick at the local VFW, that's the song you go to because it gets the job done -- it always satisfies.

The same could be said of Bass' Diffusion Model (BDM).

First appearing in 1969 in Management Science, Frank Bass of the University of Texas, Arlington, published an article "A new product growth model for consumer durables". This piece established a series of equations to determine the speed of adoption of new products and predict the arc of its sales. The article has been cited over two thousand times (an astronomical number) in other academic works and was recently named the journal's top five articles of all-time (the only marketing article to be included in that list). Bass' model is the standard for forecasting new product sales worldwide as well as the basis of many commercial software packages. So, what is the Bass Diffusion Model? Here's one way of describing it:

 Here's another:

 Diffusion is the study of how quickly a new product can spread in the market. Typically, new products spread throughout market segments in this order:

1. Innovators
2. Early Adopters
3. Early Majority
4. Late Majority
5. Laggards

Influencing the rate at which these new products are accepted in these audiences include  A.) product attributes (price, market segment, etc.) and B.) social pressures to use the product  derived from the number of people who had already adopted it (think anything made by Apple, North Face or Miley Cyrus).  Bass called A "The innovation coefficient" and B "The imitation coefficient" (what economists would call a "network effect") and incorporated them into a formula to enable the forecast that product's peak in sales.

Billy Bass sings, "Log of the coefficient of imitation, q, minus the coefficient of innovation,

p, divided by the sum of p and q, ye-ah-ah..."

Bass developed his formulas using historical data, looking at product introductions of previous years. Then, as the true test of the formulas' potency, he used the formula to forecast peak sales of color television sets. Where industry analysts had predicted skyrocketing sales into infinity, Bass predicted an initial peak of sales in 1968 and then a drop off, with the product having hit a saturation point in the market. His prediction was right on the money.

He published his findings in 1969 and the first marketing science rock star was born.

Lance Bass of N'Sync says, "You don't have to be an astronaut to use 

the Bass model, but it'd be rad if you were."

Since the debut of the Bass Model, it has been enhanced/modified to apply to a wide array of scenarios. For instance, to predict sales for new releases of products, to adjust for pricing levels and so on. The Bass model is important not only for its commercial applications but it stands as a powerful example of the pool of marketing knowledge out there about which many in industry are unaware.  

When business people stare into the abyss of a new market, they often find only darkness and the dizzying swirl of hopes and fears the go along with significant risk. What Bass (among others) proves is that there is a pool of powerful and elegant knowledge that can be applied to reduce risk and increase certainty in new products and ventures. 

That's terrific Bass.