without the consent of the authors. Suggestions or feedback should be forwarded to the corresponding

Abstract not found

This paper is an invited chapter to appear in Retail Supply Chain Management, Eds. N. Agrawal and S. A.

This study analyzes the value created by so-called ‘‘toolkits for user innovation and design,’ ’ a new method of integrating customers into new product development and design. Toolkits allow customers to create their own product, which in turn is produced by the manufacturer. In the present study, questions asked were (1) if customers actually make use of the solution space offered by toolkits, and, if so, (2) how much value the self-design actually creates. In this study, a relatively simple, design-focused toolkit was used for a set of four experiments with a total of 717 participants, 267 of whom actually created their own watches. The heterogeneity of the resulting design solutions was calculated using the entropy concept, and willingness to pay (WTP) was measured by the contingent valuation method and Vickrey auctions. Entropy coefficients showed that self-designed watches vary quite widely. On the other hand, significant patterns still are visible despite this high level of entropy, meaning that customer preferences are highly heterogeneous and diverse in style but not completely random. It also was found that consumers are willing to pay a considerable price premium. Their WTP for a self-designed watch exceeds the WTP for standard watches by far, even for the best-selling standard watches of the same technical quality. On average, a 100 % value increment was found for watches designed by users with the help of the toolkit. Taken together, these findings suggest that the toolkit’s ability to allow customers to customize products to suit their individual preferences creates value for them in a business-to-consumer (B2C) setting even when only a simple toolkit is employed. Alternative explanations, implications, and necessary future research are discussed.

Context can influence decisions. This malleability of choice is usually invoked as evidence that people do not maximize stable preference orderings. In a market equilibrium, however, context conveys payoff-relevant information to consumers. Consequently, these consumers rationally violate naïve formulations of standard choice theoretic principles. I identify informational asymmetries under which apparently anomalous behaviors, namely the compromise effect and choice overload, arise as market equilibria. Firms respond to consumers’ contextual inference; in case of the compromise effect, a firm may introduce premium loss leaders (expensive goods of overly high quality that increase the demand for other goods). (JEL D11, D83, M31) Numerous studies demonstrate that seemingly irrelevant factors influence people’s decisions. Perhaps the best known examples of such influence are context effects. A consumer exhibits a context effect if her choice between two alternatives systematically depends on the presence of other options. An extensive literature demonstrates context effects in laboratory settings. One of the most widely studied context effects is the compromise effect (Itamar Simonson 1989), 1 which refers to the finding that people tend to choose the middle option. More precisely, when three alternatives are available, the middle alternative is chosen more often than when it is paired with only one other option. Figure 1 shows the compromise effect obtained by Simonson (1989). This tendency to avoid extreme options has been credited with affecting decisions ranging from the demand for wine (Daniel L. McFadden 1999) to voting (Kaisa Herne 1997) and investing (Shlomo Benartzi and Richard H. Thaler 2002). Even more telling of the importance bestowed on the compromise effect is its didactic use in books such as 101 Ways to Increase Sales (Dirk

The main task of mass customization is the integration of individual customers into the manufacturer's system of value creation. This purpose can be supported by information technology, like for instance configurator tools. With such tools customers are enabled to virtually assemble a product, often facing problems like lack of knowledge or uncertainties about proper configuration. The idea of this contribution is to overcome such problems by enhancing configurator tools with community functionalities. The paper discusses how communities can influence and support customers and it draws a first framework for a collaborative configurator tool, which enables customers to help each other.

Introduction 1 The Customer Centric Enterprise ................................................ 3 Mitchell M. Tseng and Frank T. Piller Part II: Mass Customization and Personalization ........................................ 17 Key Strategies for Customer Centric Enterprises 2 Examination of Mass Customization Through Field Evidence............................................................................... 19 Bart MacCarthy, Philip G. Brabazon and Johanna Bramham 3 The Many Faces of Personalization ............................................ 35 An integrative economic overview of mass customization and personalization Kai Riemer and Carsten Totz 4 Economic Evaluation of Mini-Plants for Mass Customization ..................................................................... 51 A decentralized setting of customer-centric production units Ralf Reichwald, Frank T. Piller, Stephan Jaeger and Stefan Zanner 5 Customer Driven Manufacturing Versus Mass Customization ...........

While the competitive advantage of mass customization has been widely substantiated in management theory since more than a decade, its implementation in business can be observed just within the last years. In this paper we demonstrate how modern Internet technologies and possibilities of e-business work as success factors for mass customization. Especially, we deploy how intermediaries can add new value to mass customization based business models in electronic commerce. Mass Customization and Electronic Commerce The objective of mass customization is to deliver goods and services for a (relatively) large market which exactly meet the needs of every individual customer with regard to certain product characteristics at costs roughly corresponding to those of standard mass produced goods. Mass customization shall give an answer to smart customers (Glazer, 1999) demanding more and more individualized and personalized products. Explanations may be found in the tendency towards an experie...

This paper studies the assortment planning problem with multiple merchandise categories and basket shopping consumers (i.e., consumers who desire to purchase from multiple categories). We present a duopoly model in which retailers choose prices and variety level in each category and consumers make their store choice between retail stores and a no-purchase alternative based on their utilities from each category. The common practice of category management (CM) is an example of a decentralized regime for controlling assortment because each category manager is responsible for maximizing his or her assigned category’s profit. Alternatively, a retailer can make category decisions across the store with a centralized regime. We show that CM never finds the optimal solution and provides both less variety and higher prices than optimal. In a numerical study, we demonstrate that profit loss due to CM can be significant. Finally, we propose a decentralized regime that uses basket profits, a new metric, rather than accounting profits. Basket profits are easily evaluated using point-of-sale data, and the proposed method produces near-optimal solutions. Key words: game theory; assortment planning; optimization

The main goal of this paper is to provide a key metrics system for variety steering in mass customization. We distinguish between objective and subjective customer needs. The subjective needs are the individually realized and articulated requirements, whereas the objective needs are the real ones perceived by a fictive neutral perspective. We show that variety in mass customization has to be orientated on the objective needs. In order to help mass customizers better evaluate the degree to which they can fulfill the objective needs as well as their internal complexity level, we have developed a key metrics system model. We also present a conceptual application showing how to use this model to support decision making related to the introduction or reduction of product variants.