New product diffusion acceleration: Measurement and analysis

It is a popular contention that products launched today diffuse faster than products launched in the past. However, the evidence of diffusion accelera tion is rather scant, and the methodology used in previous studies has seve ral weaknesses. Also, little is known about why such acceleration would hav e occurred. This study investigates changes in diffusion speed in the Unite d States over a period of 74 years (1923-1996) using data on 31 electrical household durables. This study defines diffusion speed as the time it takes to go from one penetration level to a higher level, and it measures speed using the slope coefficient of the logistic diffusion model. This metric re lates unambiguously both to speed as just defined and to the empirical grow th rate, a measure of instantaneous penetration growth. The data are analyz ed using a single-stage hierarchical modeling approach for all products sim ultaneously in which parameters capturing the adoption ceilings are estimat ed jointly with diffusion speed parameters. The variance in diffusion speed across and within products is represented separately but analyzed simultan eously. The focus of this study is on description and explanation rather than forec asting or normative prescription. There are three main findings. 1. On average, there has been an increase in diffusion speed that is statis tically significant and rather sizable. For the set of 31 consumer durables , the average value of the slope parameter in the logistic model's hazard f unction was roughly 0.48, increasing with 0.09 about every 10 years. It too k an innovation reaching 5% household penetration in 1946 an estimated 13.8 years to go from 10% to 90% of its estimated maximum adoption ceiling. For an innovation reaching 5% penetration in 1980, that time would have been h alved to 6.9 years. This corresponds to a compound growth rate in diffusion speed of roughly 2% between 1946 and 1980. 2. Economic conditions and demographic change are related to diffusion spee d. Whether the innovation is an expensive item also has a sizable effect. F inally, products that required large investments in complementary infrastru cture (radio, black and white television, color television, cellular teleph one) and products for which multiple competing standards were available ear ly on (PCs and VCRs) diffused faster than other products once 5% household penetration had been achieved. 3. Almost all the variance in diffusion speed among the products in this st udy can be explained by (1) the systematic increase in purchasing power and variations in the business cycle (unemployment), (2) demographic changes, and (3) the changing nature of the products studied (e.g., products with co mpeting standards appear only late in the data set). After controlling for these factors, no systematic trend in diffusion speed remains unaccounted f or. These findings are of interest to researchers attempting to identify patter ns of difference and similarity among the diffusion paths of many innovatio ns, either by jointly modeling the diffusion of multiple products (as in th is study) or by retrospective meta-analysis. The finding that purchasing po wer, demographics, and the nature of the products capture nearly all the va riance is of particular interest. Specifically, one does not need to invoke unobserved changes in tastes and values, as some researchers have done, to account for long-term changes in the speed at which households adopt new p roducts. The findings also suggest that new product diffusion modelers shou ld attempt to control not only for marketing mix variables but also for bro ader environmental factors. The hierarchical model structure and the findin gs on the systematic variance in diffusion speed across products are also o f interest to forecasting applications when very little or no data are avai lable.