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The Bass Model

The Bass Model was first published in 1963 by Professor Frank M. Bass
as a section of another paper.1 The section entitled "An Imitation
Model" provides a brief, but complete, mathematical derivation of the
model from basic assumptions concerning market size and the
behavior of innovators and imitators. The paper did not provide
empirical evidence in support of the model.

The classic Bass Model paper was published in 1969.2 It expanded the
theory and provided empirical support. The paper became one of the
most widely cited paper in marketing science. It was named by
INFORMS as one of the Ten Most Influential Papers published in the
50-year history of it flagship journal Management Science.

In both the 1963 and the 1969 papers, Professor Bass credited Peter
Frevert (then a Purdue student, now retired from University of Kansas)
with many of the ideas that led to the theory. As Professor Bass told
the story, Peter came to his office one day to ask how one would
express mathematically the idea of imitators and innovators. Professor
Bass wrote out a precursor of the differential equation

which is read "The portion of the potential market that adopts at t


given that they have not yet adopted is equal to a linear function of
previous adopters." The symbols in the equation are explained on the
Bass Math page.

There are other representations of the Bass Model using different


symbols and what may seem to be a different equation, but they are
all equivalent. One equivalent equation is shown below.

.
The Bass Model is the most widely applied new-product diffusion
model. It has been tested in many industries and with many new
products (including services) and technologies.

The Bass Model assumes that sales of a new product are primarily
driven by word-of-mouth from satisfied customers. At the launch of a
new product, mostly innovators purchase it. Early owners who like the
new product influence others to adopt it. Those who purchase primarily
because of the influence of owners are called imitators.

The preferred Bass Model equation is the solution to the differential


equation, mathematically it is

where A(t) is cumulative adoptions by time t. Adoptions are sales to


first-time buyers. M is the potential market, the maximum number of
cumulative adopters. F(t) is the portion of the potential market M that
has adopted by time t. Mathematically it is

The above formula is the solution to the Bass model differential


equation described on the Bass Math page.

The three Bass Model parameters (or coefficients)are:


• M -- the potential market (the totol number of adopters)
• p -- coefficient of innovation
• q -- coefficient of imitation

The portion of adopters who adopt in time period t is


The above formula for f(t) is the Srinivasan-Mason4 form, which is
preferred for estimation of Bass model parameters M, p and q as well
as for forecasting. These formulae are implemented in the open-source
Excel spreadsheet Bass Model Forecaster, which can be downloaded
here (free).

Adoptions at time t are

The Bass Math page has the complete mathematical derivation of the
Bass Model from basic principles.