BASS, a Sales Growth Model
The BASS Model
The BASS model was first developed in 1969 by Frank Bass. It is a sales growth model that predicts future product class sales for a durable good, using historical product sales levels. Managerial estimates of initial probability of trial (the probability that a purchase will be made early in the introductory phase of the product life cycle) and of imitation or diffusion rate (reflecting the influence of positive word-of-mouth communication) are also required. Given these estimates, the sales of the product class at time t are estimated by the model as:
s(t) = p(0)m + [q-p(0)]Y(t) – (q/m) [Y(t)2],
where p and q are the initial trial probability and diffusion rate parameters, m is the number of potential buyers, and Y(t) is the total (cumulative) number of purchases by time t.
The Bass diffusion curve works on the principle that the growth rate of the market will follow a diffusion curve similar in shape to the product life cycle. Future sales can be predicted as a function of the sales histories of the products in the product class. The initial cumulative rate of diffusion (growth in cumulative sales) is based on the rate of acceptance of the product by innovators. Following the early purchases by innovators, the growth rate accelerates due to word-of-mouth influence and the increase in the number of products in use. As more members of the total potential market acquire the product (that is, cumulative sales approach market potential), the growth rate slows. The rate of diffusion is accelerated or retarded by the price evolution of the product.
INPUT
Market Size (000s)—This is the estimate of the total market potential in thousands of customers. This is the number of initial purchasers only and does not include repeat purchases. In other words, it is the number of potential buyers who might become users of your product over time regardless of how many times they purchase the product. This projection is based on the
The BASS model was first developed in 1969 by Frank Bass. It is a sales growth model that predicts future product class sales for a durable good, using historical product sales levels. Managerial estimates of initial probability of trial (the probability that a purchase will be made early in the introductory phase of the product life cycle) and of imitation or diffusion rate (reflecting the influence of positive word-of-mouth communication) are also required. Given these estimates, the sales of the product class at time t are estimated by the model as:
s(t) = p(0)m + [q-p(0)]Y(t) – (q/m) [Y(t)2],
where p and q are the initial trial probability and diffusion rate parameters, m is the number of potential buyers, and Y(t) is the total (cumulative) number of purchases by time t.
The Bass diffusion curve works on the principle that the growth rate of the market will follow a diffusion curve similar in shape to the product life cycle. Future sales can be predicted as a function of the sales histories of the products in the product class. The initial cumulative rate of diffusion (growth in cumulative sales) is based on the rate of acceptance of the product by innovators. Following the early purchases by innovators, the growth rate accelerates due to word-of-mouth influence and the increase in the number of products in use. As more members of the total potential market acquire the product (that is, cumulative sales approach market potential), the growth rate slows. The rate of diffusion is accelerated or retarded by the price evolution of the product.
INPUT
Market Size (000s)—This is the estimate of the total market potential in thousands of customers. This is the number of initial purchasers only and does not include repeat purchases. In other words, it is the number of potential buyers who might become users of your product over time regardless of how many times they purchase the product. This projection is based on the