# Figure 4.10 Exercise: The Bass Diffusion Model of market development Exploring how a population of potential customers is developed by the combined effects.

## Presentation on theme: "Figure 4.10 Exercise: The Bass Diffusion Model of market development Exploring how a population of potential customers is developed by the combined effects."— Presentation transcript:

Figure 4.10 Exercise: The Bass Diffusion Model of market development Exploring how a population of potential customers is developed by the combined effects of advertising and word-of-mouth. This exercise supports part of Figure 4.10 in chapter 4 of the textbook ‘Strategic Management Dynamics’ by Kim Warren, from J Wiley & Sons, 2008. www.wiley.com/go/smd. See www.strategydynamics.com/smdresources for the related course.www.wiley.com/go/smdwww.strategydynamics.com/smdresources STRATEGIC MANAGEMENT DYNAMICS Kim Warren

© Copyright Kim Warren, 2008. All rights reserved. Running the model … Click ‘  ’ to run all 36 months at once or ‘  | ’ to step through one year on each click. You must stop the model ‘  ’ before you can make any changes. Click ‘  ’ to run all 36 months at once or ‘  | ’ to step through one year on each click. You must stop the model ‘  ’ before you can make any changes. In this section at left, change the rate of advertising spend and customers’ behaviour. This chart displays the monthly profit, reflecting the product’s sales and a range of other assumptions. Current values for each variable are also displayed whenever the model is paused. Charts display the number of potential and active customers, the customer win-rate, and total sales each month. Charts display the sources of new customers, the number of potential and active customers, and total customer win-rate.

© Copyright Kim Warren, 2008. All rights reserved. Managing the number of customers won and lost … This variable and its small time-chart controls the rate of advertising spend each month over the 36 months of the product launch. This variable sets the fraction of contacts between active and potential customers that results in the winning of a new customer. [set this only a the start of the simulation] See next pages for how to change the values of these variables. This variable sets the fraction of customers seeing your advertising who start buying the product. [set this only a the start of the simulation]