Industry Data & Market Research

Strategic Planning with the Bass Diffusion Model - Product Adoption and Innovation Framework

Bass Diffusion Model - Product Adoption and Innovation is a technique that enables better strategic planning in business.

The Bass Diffusion Model is one of the most widely used and influental tools for predicting product demand. Based on empirical evidence, it provides mathematical formula for estimating future trends in the adoption of new innovations.

The model has been shown to work with almost all new product introductions, regardless of pricing and advertising decisions. This means that decision variable can shift the Bass curve in time, but that the shape of the curve is always similar. Strategic Planning Bass Diffusion Model

The model is defined as follows:
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This reads: 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.

In the above equation, t represents time from product launch and is assumed to be non-negative.

The three Bass Model parameters (coefficients) that define the Bass Model for a specific product are:
  • M -- the potential market (the ultimate number of adopters),
  • p -- coefficient of innovation and
  • q -- coefficient of imitation.

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