Inhomogenous Marketing Mix Diffusion

In this article we extend the Marketing Mix Diffusion (MMD) model to inhomogenous networks (i.e. complex networks of arbitrary topology). The (Homogenous) MMD model is an innovation diffusion model, similar to the Bass model, which includes four decision variables (the 4Ps of Marketing: Product, Price, Place, Promotion). We introduce the Inhomogenous MMD (IMMD) model and we conduct two separate experiments: one based on simulation and another one relying on empirical evidence. The simulation study compares the behavior of the IMMD model with the classic Bass diffusion model. Results suggest that the classic Bass model is able to represent the IMMD curves quite well in most cases. The IMMD is more general and capable of representing extreme scenarios. The empirical study focuses on the geographic diffusion of mobile broadband technology in Japan, combining adoption data with a spatial network of municipalities. The in-sample performance of the model is comparable to the existing methods, which suggests a good explanatory power of the IMMD model.