Selecting a Customization Strategy Under Competition: Mass Customization, Targeted Mass Customization, and Product Proliferation

Abstract

Abstract-Customization requires not only an implementation of proper manufacturing systems but also a proper strategy regarding when firms should offer customized products and what the nature of customization should be. This paper questions 1) whether customization is better than no customization, and, if so, 2) what kind of customization strategy firms should adopt under competition. We find that customization is not optimal when the cost of soliciting customer preference information is sufficiently high. When competing firms choose to customize, we show that firms target only certain customer segments with customized products. We also find that the optimal customization strategy may require firms to offer only a few discrete product varieties. Despite the concern that customization may initiate price wars because customization reduces product differentiation, we find that customization does not escalate the price competition, because aggressive price competition exacerbates cannibalization. Although customers within the product line of a firm are charged higher prices, we show that on average customers are better off when firms adopt customization. However, unless the customization is quite cheap, when firms choose to customize, we find that firms cannot generate more profits than when firms offer only a single product.

Integrated Product and Channel Decision in Mass Customization

“…They find that the firms choose the same customization level unless the gap between the two consumer segments is sufficiently large. Cavusoglu et al [6] consider two symmetric firms that are determining their customization and pricing strategies and model the product space, which represents all possible variations of a specific product, and uniform distribution of customer preferences, along a unit circle. They find that mass customization is not always the best strategy even if customization technology is very cheap and that the optimal customization strategy may require firms to offer only a few discrete product varieties.…”

An Economic Study of the Effect of Android Platform Fragmentation on Security Updates

“…Here, we focus on security issues resulting from Android customization rather than security-related cost of AOSP explicitly. We have considered quadratic functions for the cost terms, which is a common assumption for modeling customization costs, e.g., see [4] and [6]. The quadratic cost function captures the fact that the cost of customization increases as the customization increases.…”

“…Using a dataset about over 20,000 Android devices, they showed that on average over 87% of the devices are exposed to at least one of 11 known critical (and previously patched) vulnerabilities. 4 The Android ecosystem fragmentation and the associated security problems have caused consumer protection agencies to intervene in the marketplace. In 2013, the Federal Trade Commission (FTC) charged a leading vendor because it "failed to employ reasonable and appropriate security practices in the design and customization of the software on its mobile devices" [8].…”

A Determination Method of Optimal Customization Degree of Logistics Service Supply Chain with Mass Customization Service

“…This paper is also motivated by the existing literature shortages. From the literature research, on the one hand, most 2 Discrete Dynamics in Nature and Society of the research on mass customization degree is for qualitative analysis (e.g., da Silveira et al [5]; Bardakci and Whitelock [6]; Cavusoglu et al [7]). Though some scholars have turned to quantitative research (e.g., Lian and Ji [8]; Sami Spahi [9]; Xu et al [10]), generally the conclusion is about the relationship between customization degree and a certain influence factor which does not give the exact customization degree.…”