How to Incorporate the Effect of External Influence?

Diffusion models have been used traditionally in marketing for capturing the lifecycle dynamics of a new product, for forecasting the demand for a new product, and as a decision aid in making pre-launch, launch and post-launch strategic choices. Since their entrance into marketing, diffusion models have become increasingly complex. This complexity has been driven by the need to enhance the forecasting capability of these models and to improve their usefulness as a decision-making tool for managers. One of the challenges of diffusion modeling is to incorporate external influences in models, most notably the influence of marketing mix variables. This paper offers a framework for systematizing diffusion models in marketing, with a special emphasis on the role of marketing mix variables. Different models are compared and their advantages and disadvantages discussed. Suggestions for further research are also offered.