This study examines customization as a coordination problem in transactions with business customers. Marketing research has investigated challenges associated with customized offers from the customer side; however, scant research has examined the supplier's challenges and their performance implications. The authors distinguish between project revenues and costs to reveal a fundamental dilemma that suppliers face during customization. Analyses of dyadic survey data collected from a software supplier and its business customers, as well as objective revenue and cost data, reveal a tension between project revenues and costs. The outcomes of customization depend on factors that relieve the coordination problem, such as customer demand ambiguity, customer participation, product modularity, project team technological capability, and relational embeddedness. These findings provide a basis to assess the value of customization as a tool to implement a customer-oriented business-to-business marketing strategy.

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