GOLDER, PETER NEWMAN; PHD
UNIVERSITY OF SOUTHERN CALIFORNIA, 1994
BUSINESS ADMINISTRATION, MARKETING (0338)
A firm's ability to compete in new product markets is vital to its profitability
and long-term survival.
Therefore, it is important to understand the genesis and development of these markets. Diffusion of
innovation theory and models based on this theory have traditionally provided this understanding in
marketing. A review article (Mahajan, Muller and Bass 1990) and meta-analysis (Sultan, Farley and
Lehmann 1990) summarize the many contributions of diffusion research, however, they only minimally
address some of its limitations. Closer examination of diffusion research suggests that the cumulative
effect of these and other limitations is that diffusion models may not capture the underlying
phenomenon of sales growth, they may only be useful for selective data and they may produce
inaccurate sales forecasts. This dissertation seeks to improve our understanding of the sales growth of
consumer durables through an explanatory approach. Through this approach, I uncover many novel
insights. First, I present generalizable findings about the period of sales before take-off. No other
research has even addressed this important period in the sales history of new products. Second, I
develop approaches of predicting the year of take-off. Third, I evaluate the primary theoretical
determinants of sales growth. Fourth, I develop a model that incorporates these determinants and is
capable of forecasting the complete sales history. The proposed model of sales growth has several
advantages in comparison with diffusion models. First, sales forecasts are more accurate. The
improvement is greater when forecasts are made three years ahead rather than just one year ahead.
Second, parameters are more stable when the period of analysis is varied to consider different years.
Third, an explanation for variation in parameters across categories and over time is presented. The
primary implication of these advantages is that the proposed model is more likely than diffusion models to
be capturing the underlying phenomenon of sales growth.
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