Putting one-to-one marketing to work: Personalization, customization, and choice

Arora, Neeraj; Drèze, Xavier; Ghose, Anindya; Hess, James D.; Iyengar, Raghuram; Jing, Bing; Joshi, Yogesh V.; Kumar, V.; Lurie, Nicholas H.; Neslin, Scott A.; Sajeesh, S.; Su, Meng; Syam, Niladri; Thomas, Jacquelyn S.; Zhang, Z. John

doi:10.1007/s11002-008-9056-z

Cited by 338 publications

(232 citation statements)

References 67 publications

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“…When a firm offers multiple products without segmentation information, it cannot target a specific product at a specific consumer. Instead, it has to allow consumers to self-select among all products in the market, a practice called "product proliferation" (Arora et al 2008). Proliferation creates cannibalization within a firm's own product line, and the decrease in profit margins more than offsets any gain in market share.…”

Section: Firms' Second-period Decisionsmentioning

confidence: 99%

“…Firms that have adopted this strategy include Amazon, Barnes and Noble, Digg, eBay, iTunes, Netflix, and YouTube, to name a few. The main argument for behavior-based personalization is the notion of revealed preferences; since consumers' past choices reflect their tastes, firms can serve consumer needs better by modifying product offerings based on choice histories (Arora et al 2008). …”

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confidence: 99%

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The Perils of Behavior-Based Personalization

Zhang¹

2011

Marketing Science

148

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Abstract"Behavior-based personalization" has gained popularity in recent years, whereby businesses offer personalized products based on consumers' purchase histories. This paper highlights two perils of behavior-based personalization in competitive markets. First, although purchase histories reveal consumer preferences, competitive exploitation of such information damages differentiation, similar to the classic finding that behavior-based price discrimination intensifies price competition. With endogenous product design, there is yet a second peril. It emerges when forward-looking firms try to avoid the first peril by suppressing the information value of purchase histories. Ideally, if a market leader serves all consumers on day one, purchase histories contain no information about consumer preferences. However, knowing that their rivals are willing to accommodate a market leader, firms are more likely to offer a mainstream design at day one, which jeopardizes differentiation. Based on this understanding, I investigate how the perils of behavior-based personalization change under alternative market conditions, such as firms' better knowledge about their own customers, consumer loyalty and inertia, consumer self-selection, and the need for classic designs.

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Section: Firms' Second-period Decisionsmentioning

confidence: 99%

mentioning

confidence: 99%

The Perils of Behavior-Based Personalization

Zhang¹

2011

Marketing Science

148

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“…On the other hand, the 'transparent approach' in customization requires the customizer to observe customer behaviors over time, looking for predictable preferences (Gilmore and Pine, 1997). Arora et al (2008) distinguished personalization and customization regarding the party that initiates the process: personalization is firm initiated whereas customization is customer initiated. In such a perspective, customization can be attributed to an action initiated by the customer, namely customer choice.…”

Section: Mass Customization Vs Personalizationmentioning

confidence: 99%

From mass customization to product personalization in automotive industry: potentials of industry 4.0

Kabasakal¹,

Keskin²,

Ventura³

et al. 2017

Pressacademia

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Purpose-Industry 4.0 involves a paradigm shift in marketing management as well as operations management. The recent literature identifies a transformation from mass customization to mass personalization. The purpose of this study is to explore the transformation addressing the Industry 4.0 concepts and recent progress in the automotive industry. Methodology-This study is an exploratory research utilizing case study method. Interviews were carried out with one of the leading automotive brands. Data were analyzed through descriptive analysis. Findings-The case study identifies the product decisions with a focus on customization and personalization themes. Customers' involvement in design process is emphasized as well as customer data for a more customer-oriented strategy. The findings suggest that disruptive technologies provide a basis for mass-personalization strategy. Conclusion-Our case study demonstrates that automotive industry is one of the leading industries that prioritize customer preferences. The customization is achieved through numerous options supported by generic architectures. Nevertheless, personalization represents a higher degree of one-to-one marketing vision. Industry 4.0 contributes to such vision with emerging technologies that facilitate collection and analysis of customer and provide more personalized experience.

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“…Zhang (2010) addresses the issue of endogenous product lines across time in a Hotelling-style duopoly model. Fudenberg and VillasBoas (2006) and Arora et al (2008) provide a comprehensive overview of the literature in this area.…”

Section: Related Literaturementioning

confidence: 99%

Competitive Behavior-Based Price Discrimination for Software Upgrades

Mehra

Bala

Sankaranarayanan

2012

Information Systems Research

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T he introduction of product upgrades in a competitive environment is commonly observed in the software industry. When introducing a new product, a software vendor may employ behavior-based price discrimination (BBPD) by offering a discount over its market price to entice existing customers of the competitor. This type of pricing is referred to as competitive upgrade discount pricing and is possible because the vendor can use proof of purchase of a competitor's product as credible evidence to offer the discount. At the same time, the competitor may offer a discount to its own previous customers in order to induce them to buy its upgrade. We formulate a game-theoretic model involving an incumbent and entrant where both firms can offer discounts to existing customers of the incumbent. Although several equilibrium possibilities exist, we establish that an equilibrium with competitive upgrade discount pricing is observed only for a unique market structure and a corresponding unique set of prices. In this equilibrium, instead of leveraging its first mover advantage, the incumbent cedes market share to the entrant. Furthermore, the profits of both the incumbent and the entrant reduce with switching costs. This implies that the use of BBPD has product design implications because firms may influence the switching costs between their products by making appropriate compatibility decisions. In addition, lower switching costs result in reduced consumer surplus. Hence, a social planner may want to increase switching costs. The resulting policy implications are different from those prevalent in other industries such as mobile telecommunications where the regulators reduced switching costs by enforcing number portability.

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Putting one-to-one marketing to work: Personalization, customization, and choice

Cited by 338 publications

References 67 publications

The Perils of Behavior-Based Personalization

The Perils of Behavior-Based Personalization

From mass customization to product personalization in automotive industry: potentials of industry 4.0

Competitive Behavior-Based Price Discrimination for Software Upgrades

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