The role of prices in models of innovation diffusion

When evaluating the launch of a new product or service, forecasts of the di ffusion path and the effects of the marketing mix are critically important. Currently no unified framework exists to provide guidelines on the inclusi on and specification of marketing mix variables into models of innovation d iffusion. The objective of this research is to examine empirically the role of prices in diffusion models, in order to establish whether price can be incorporated effectively into the simpler time-series models. Unlike existi ng empirical research which examines the models' fit to historical data, we examine the predictive validity of alternative models. Only if the incorpo ration of prices improves the predictive performance of diffusion models ca n it be argued that these models have validity. A series of diffusion model s which include prices are compared against a number of well-accepted diffu sion models, including the Bass (1969) model, and more recently developed ' flexible' diffusion models. For short data series and long-lead time foreca sting, the situation typical of practical situations, price rarely added to the forecasting capability of simpler time-series models, (C) 1998 John Wi ley & Sons, Ltd.