A Repeat Purchase Diffusion Model: Bayesian Estimation and Control (Classic Reprint)

Excerpt from A Repeat Purchase Diffusion Model: Bayesian Estimation and Control

This paper develops a model and an associated estimation procedure to forecast and control the rate of sales for a new product. A repeat-purchase diffusion model is developed, incorporating the effect of marketing variables as well as a word-of-mouth effect. Bayesian estimation, with priors developed from past products, is used to update the parameters of the model. The procedure, shown to predict better and give more stable parameter estimates than classical procedures, is used to develop marketing policies for new product introduction.

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