The diffusion of a new service: Combining service consideration and brand choice

Vardit Landsman*, Moshe Givon

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

20 Scopus citations

Abstract

We propose an individual-level model of a two-stage service diffusion process. In the first stage, customers decide whether to "consider" joining the service. This (Consideration) stage is modeled by a hazard model. Customers who decide to consider the service move on to the Choice stage, wherein they choose among the service alternatives and an outside No Choice option. This stage is modeled by a conditional Multinomial Logit model. The service provider does not observe the transition in the first stage of potential customers who have yet to choose a brand. Such potential customers may have started to consider joining the service, yet chose the outside alternative in each period thereafter. One of the main contributions of the model is its ability to distinguish between these two non-adopter types. We estimated the model using data on the adoption process of newly introduced service plans offered by a commercial bank. We employed the hierarchical Bayes Monte Carlo Markov Chain procedure to estimate individual as well as population parameters. The empirical results indicate that the model outperforms competing models in breadth of analysis, model fit, and prediction accuracy.

Original languageEnglish
Pages (from-to)91-121
Number of pages31
JournalQuantitative Marketing and Economics
Volume8
Issue number1
DOIs
StatePublished - Mar 2010

Keywords

  • Bayesian analysis
  • Brand choice
  • Diffusions

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