Track: Operations Research

Abstract

The existing marketing literature of Bass’s innovation -diffusion model and many of its extended forms have been applied to depicting and predicting adoption curve for products. The loyalty towards a brand is often reflected when the products are bought by the consumer. In such case, the theory of repeat purchasing is exist and the higher is the repeat purchase value, it can be said that the better a firm is doing to keep customers loyal. In this paper, we use the concept of repeat purchase in an innovation and diffusion model based on  type of stochastic differential equation (SDE). Its applicability and accuracy is illustrated by means of new product sales data. Predictive validity and mean square error have been used to check the validity of the proposed model. It has been shown proposed model performs comparatively better than SDE-based Bass innovation and diffusion model.

Keywords:

Innovation and diffusion model, Stochastic Differential equations, Repeat Purchasing