Measuring Marketing

Chapter 38 New Product Purchase Rate

Measurement Need

New product development requires time, money, and people resources, and success is never guaranteed, so being able to estimate the potential for success for a proposed new product is crucial to the final investment decision.

Solution

The new product purchase rate formula, also known as a diffusion or penetration model, helps estimate the potential for success of a new product by projecting the possible penetration rate for the new offering.

The new product purchase ratei is determined by the following formula:

$q_t=r\times q{\left(1-r\right)}^{t-1}$

Where

qt = % of total households expected to try product in period t

r = rate of penetration of untapped potential

q = % of total households expected ...