The Bass Diffusion Model Explained

The Bass diffusion describes the process of how new products get adopted as an interaction between users and potential users. The Bass model is conletely determined by 3 parameters; Advertising Effect, Worf-of-Mouth Effect, and the Ultimate Market Potential.

The Bass model is in the class of S-Curve models (depending on the parameters the bass curve may not be S shaped but typically is).

The values for Advertising Effect should be between 0 and 1. The average value of the Advertising Effect has been found to be 0.03, and is often less than 0.01

The values for Word-of-Mouth Effect should be between 0 and 1. The average value of the Word-of-Mouth has been found to be 0.38, with a typical range between 0.3 and 0.5

The Advertising Effect parameter influences the early growth rate.  Basically the higher the Advertising Effect the greater the initial growth rate. This refelct what could be call the Madison Avenue strategy with large advertising expenditures.

The Word-of-Mouth Effect tend to affect later growth rate after the number of subscribers has reached a tipping point.