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Testing The Value of Customization When Do Custome
Testing The Value of Customization When Do Custome
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Keywords: mass customization, self-design, toolkits for user innovation and design, heterogeneous preferences,
segmentation
n this article, we measure the benefits customers derive Sharma 2000). Research has also found ways to reduce the
Sample 1a
•Mass-marketing newspaper
•DV = WTP/PI/ATT
Sample 1b
•Best cluster (5 clusters, LCA)
•DV = WTP/PI/ATT
Between-
Group
Sample 1c Analysis 1
Sample 1 Segmentation of •Best cluster (10 clusters, LCA)
•Preferences preference data •DV = WTP/PI/ATT
•Reference pricea
•Product involvement
•Demographics Sample 1d
•Customized newspaper
•DV = WTP/PI/ATT
Sample 1e
•Mass-marketing newspaper
Within-
•Best cluster (5 clusters, LCA)
Group
•Best cluster (10 clusters, LCA)
Analysis 1
•Customized newspaper
•DV = WTP/PI/ATT
Sample 2a
•Mass-marketing newspaper
•DV = WTP/PI/ATT
Sample 2b
•Best cluster (5 clusters)
•DV = WTP/PI/ATT Between-
Group
Sample 2c Analysis 2
Sample 2
•Preferences •Best cluster (10 clusters)
•Reference pricea •DV = WTP/PI/ATT
•Product involvement
•Demographics
Sample 2d
•Customized newspaper
•DV = WTP/PI/ATT
Sample 2e
•Mass-marketing newspaper
Within-
•Best cluster (5 clusters)
Group
•Best cluster (10 clusters)
Analysis 2
•Customized newspaper
•DV = WTP/PI/ATT
Time
TABLE 1
Mean WTP, Attitude Toward the Product (ATT), and Purchase Intention (PI) (Study 1)
Aggregated Analysis Between-Subjects Analysis Within-Subject Analysis
Total Sample Sample 1 Sample 2 Sample 1 Sample 2
WTP: ATTb: PIc: WTP: ATTb: PIc: WTP: ATTb: PIc: WTP: ATTb: PIc: WTP: ATTb: PIc:
M M M M M M M M M M M M M M M
na (SD) (SD) (SD) n (SD) (SD) (SD) n (SD) (SD) (SD) n (SD) (SD) (SD) n (SD) (SD) (SD)
Expert product 2522 .84 — — 692 .84 — — 586 .90 — — 162 .82 —- —- 149 .81 — —
(1) (.56) (.57) (.56) (.58) (.53)
Mass-marketing product 633 .88 2.73 3.09 170 .92 2.48 2.92 152 .92 2.79 3.14 162 .84 2.76 3.14 149 .83 2.93 3.18
(2) (.53) (.97) (.94) (.55) (.91) (.92) (.51) (1.07) (.98) (.53) (.88) (.92) (.52) (.96) (.92)
Segment-specific 628 .91 2.61 2.97 171 .92 2.55 2.90 146 .96 2.69 2.90 162 .89 2.52 2.98 149 .87 2.70 3.10
product assuming five (.53) (.91) (.94) (.55) (.96) (.96) (.52) (.88) (.91) (.53) (.90) (.94) (.52) (.93) (.93)
segments (3)
Segment-specific 623 .91 2.66 2.99 171 .92 2.56 2.92 141 .96 2.69 2.89 162 .89 2.60 3.06 149 .87 2.82 3.09
product assuming ten (.56) (.92) (.94) (.55) (.83) (.93) (.55) (.99) (.95) (.55) (.90) (.90) (.52) (.95) (.96)
segments (4)
Customized product (5) 638 1.00 2.30 2.66 180 1.03 2.19 2.49 147 1.07 2.39 2.68 162 .95 2.26 2.75 149 .96 2.38 2.77
(.57) (.82) (.85) (.60) (.69) (.74) (.62) (.83) (.86) (.54) (.88) (.91) (.53) (.90) (.89)
Δ(5) – (3) (H1a) p< p< p< p< p< p< p< p< p< p< p< p< p< p< p<
.01d .001d .001d .05d .001e .001d .05d .01e .05d .001d .01d .001d .001d .001d .001d
Δ(5) – (4) (H1a) p< p< p< p< p< p< p< p< p< p< p< p< p< p< p<
.001d .001d .001d .05d .001e .001d .05d .05e .05d .01d .001d .001d .001d .001d .001d
Δ(5) – (2) (H1b) p< p< p< p< p< p< p< p< p< p< p< p< p< p< p<
.001d .001d .001d .05d .01e .001d .01d .01e .001d .001d .001d .001d .001d .001d .001d
Total p< p< p< n.s.f p< p< n.s.f p < .01f p < p< p< p< p< p< p<
.001f .001f .001f .001f .001f (F = .001f .001g .001h .001i .001j .001k .001l
(F = (F = (F = (F = (F = 4.94) (F =
6.11) 28.19) 25.71) 7.61) 10.41) 6.27)
aTotal sample consists of 1278 participants from the between-subjects samples and 1244 participants from the within-subject samples (each participant in the within-subject sample counts for 4
data points).
b5-point rating scale (three items; 1 = “very high,” and 5 = “very low”).
c11-point probability scale transformed to a 5-point scale, in line with the work of Juster (1966) (1 = “very high,” and 5 = “very low”).
dLeast significant difference test (one-sided).
eDunnett T3 test (one-sided).
fAnalysis of variance (ANOVA).
gRepeated measures ANOVA [F(2.57, 413.43) = 12.37].
hRepeated measures ANOVA [F(2.85, 458.17) = 16.79].
iRepeated measures ANOVA [F(3, 483) = 14.96].
jRepeated measures ANOVA [F(2.72, 402.58) = 22.48].
kRepeated measures ANOVA [F(3, 444) = 22.15].
lRepeated measures ANOVA [F(3, 444) = 18.86].
participant, we had four observations of preference fit), and thus providing robust support for our hypotheses on the
therefore we randomly drew one observation for each par- benefits of customization.
ticipant. The ordinary least squares regression shows that The setting of our study required some simplifications.
the closer the fit between the preferences expressed and the Our stimuli (the simulated newspapers) consisted of only 10
product obtained (i.e., the higher the “extent of customiza- headlines taken from a set of 90. This appeared necessary to
tion”), the higher is the benefits for customers, in support of ensure that the task remained manageable for participants.
H2 (see Table 2). In reality, most newspapers consist of approximately 100–
To test H3–H5, we used moderated regression analysis 300 articles, and the pool of possible news items is also
(Cohen et al. 2003). We averaged involvement items to considerably larger (e.g., the Austrian Press Agency
form an index (similar to Homburg and Fürst 2005) and releases approximately 600 articles, the German Press
standardized the predictor and moderator variables by mean Agency releases approximately 800, the Associated Press
centering (Frazier, Tix, and Barron 2004). We then created releases approximately 20 million words of news per day).
the product terms by multiplying the centered predictor and In addition, our stimuli did not include other content, such
moderator variables (Aiken and West 1991). as advertisements, weather forecasts, or movie schedules,
In line with H3 and H4, we find that preference insight which might also be of value to consumers (Sonnac 2000).
and the ability to express preferences moderate the benefits However, these simplifications lend our findings a con-
participants derive from customization (i.e., a closer fit servative nature because there is little room for customiza-
between preferences expressed and product characteristics tion to exhibit its specific strengths within the heavily
obtained), regardless of whether the benefits are measured restricted setting of our study. Given heterogeneous prefer-
as WTP, purchase intention, or attitude toward the product ences, participants can individualize only when there is a
(Table 2). Perhaps because preference insight and the abil- sufficiently large solution space. We conjecture that the
ity to express preferences are significantly correlated (r = benefits would be even more substantial if the experiment’s
.07, p < .001), the effects diminish somewhat in the inclu- solution space came closer to real life.
sive model. However, they are still visible. Only product Another aspect worth discussing is that we provided
involvement failed to show a significant moderator effect, each participant in the subsamples with the optimum seg-
which refutes H5. ment—that is, the segment that we knew came closest to his
or her preferences (assuming these preferences did not
Discussion of Study 1 change). Again, this is unrealistic because some assign-
ments of customers to segments would be erroneous in real
We found that customization newspapers deliver clear bene- life. This can be regarded as a “subsidy” to the segmenta-
fits for a representative sample of customers because of tion strategy and lends even more credibility to our finding
improved preference fit. We also found that the benefits that customized products generate higher benefits for cus-
from customization are affected by the person’s insight into tomers than segment-specific products.
his or her own preferences and ability to express them. We A research design such as ours involves the concrete
failed to confirm the impact of product involvement. Thus, risk of on-stage effects (Podsakoff et al. 2003). Participants
the question arises whether this is a general finding that were first asked about their level of interest in the 90 head-
requires an in-depth discussion of potential reasons or lines; then, they were asked to evaluate simulated news-
whether it results from the peculiarities of the method used papers comprising selections of the headlines they had pre-
or the market chosen. We offer a method-related explana- viously rated. It is possible that at least some participants
tion: Newspapers are a media product, and they essentially were motivated by the desire to appear consistent and thus
consist of information. When measuring product involve- tried to adjust their evaluations to match their previous
ment, we asked participants about the relevance of the answers. We reduced this problem by making it impossible
physical product—printed papers people peruse in the to return to the headline evaluations after they had been
morning. In the other part of the experiment, we heavily entered. Theoretically, participants could have kept some of
emphasized the informational aspect of newspapers, opera- their answers in mind. Therefore, we drew two samples
tionalizing newspapers as a bundle of ten pieces of informa- with different periods between the measurement of prefer-
tion (the headlines). Given the many ways information can ences and the measurement of reactions to stimuli. If the
be obtained—for example, on the Internet—it may well be desire to appear consistent played a role at all, the effects in
that a person is highly interested in new information but at Sample 2 should be clearer than in Sample 1. However, the
the same time reports a low level of involvement in (physi- patterns in the findings are nearly identical in both samples,
cal) newspapers. Therefore, we hypothesize that the lack of suggesting that on-stage effects are unlikely to have
support for H5 in the newspaper market may be due to our affected our findings.
operationalization. Our second study is intended to shed A more critical aspect of this study is the operationali-
more light on this particular issue. zation of “preference insight” and “ability to express prefer-
In general, the findings are based on four independent ences.” Although both variables can be considered latent
data sets (within-subject versus between-subjects design constructs, we employed a relatively simple measurement.
and short-time versus long-time delta between preference The length of the questionnaire precluded a more detailed
measurement and the measurement of reaction to stimuli). operationalization. This raises questions regarding the
This constitutes a relatively rigorous analysis scheme, and extent to which the findings with regard to moderating
we obtained almost identical patterns in the four settings, effects hold when a different measurement is used.
TABLE 2
Moderated Multiple Regression Results (Study 1)
Model 2: Main Effects Model 3: Main Effects Model 4: Main Effects
and Interaction with and Interaction with Ability and Interaction with Model 5: Main Effects
Model 1: Main Effects Only Preference Insight to Express Preferences Product Involvement and All Interactions
Dependent Variables Dependent Variables Dependent Variables Dependent Variables Dependent Variables
WTP ATT PI WTP ATT PI WTP ATT PI WTP ATT PI WTP ATT PI
Independent Variables
Preference fit .131*** .202*** .207*** .109*** .171*** .187*** .128*** .200*** .202*** .129*** .203*** .206*** .109*** .171*** .187***
Preference insight .011 .087** .037* .026 .108*** .051* .007 .084** .028 .012 .087** .038† .026 .108*** .051*
Ability to express
preferences –.026 .033† –.024 –.026 .034† –.023 –.026 .033† –.023 –.025 .032 –.023 –.025 .007 –.023
Product involvement .244*** .257*** .335*** .245*** .258*** .336*** .246*** .258*** .339*** .248*** .254*** .337*** .251*** .255*** .339***
Control Variables
Age –.076** –.102*** –.088*** –.074** –.099*** –.086*** –.077** –.103*** –.089*** –.077** –.101*** –.089*** –.075** –.102*** –.086***
Sex .063* –.013 .038† .064** –.011 .039† .061* –.014 .035† .064** –.014 .038† .065** –.013 .040*
Household size .049* .024 .023 .048* .024 .023 .048* .024 .023 .051* .023 .025 .050* .024 .024
Income –.011 .025 .081** –.014 .021 .078** –.008 .027 .086*** –.010 .025 .081** –.013 .025 .079**
Interactions
Preference fit ×
preference insight — — — .065* .091** .051* — — — — — — .059* .095*** .057*
Preference fit × ability to
express preferences — — — — — — .049* .034† .097*** — — — .042† .007 .035†
Preference fit × product
involvement — — — — — — — — — .032 –.024 .017 .023 –.033 .008
R2 .082*** .108*** .160*** .085*** .114*** .163*** .082*** .109*** .169*** .083*** .109*** .161*** .088*** .115 .164***
ΔR2 — — — .003* .006** .003* .002* .001† .009*** .001 .001 .001 .006* .007** .004*
†p < .1 (one-sided).
*p < .05 (one-sided).
**p < .01 (one-sided).
***p < .001 (one-sided).
Note: Standardized coefficients are shown; n = 1589; ATT = attitude toward the product, and PI = purchase intention.
Moreover, the generalizability of our findings is a weak Customized product. For all the product categories, we
point in this study. Newspapers are frequently purchased, simulated a mass customization toolkit that enabled partici-
low-cost products with a large number of potential variants. pants to customize the product. We designed the toolkits so
They are hedonic (rather than utilitarian) products that are that participants could choose the most preferred parameter
consumed in private (Knox and Walker 2001). The question value for the product dimensions that were used to describe
arises whether our findings also hold for products that sys- the standard product (Figure 2). The toolkit designs were
tematically differ from newspapers. Therefore, we con- based on a pilot study in which we thoroughly analyzed 53
ducted a second study to complement the results of Study 1. existing mass customization toolkits on the Web and inter-
viewed three market experts to make the design as realistic
Study 2: Generalization Across as possible. Participants were informed that the technical
Other Markets quality of the standard product and the customized product
was identical.
The rationale underlying Study 2 is different from that of
Study 1. We confronted each participant with two stimuli: a Measurement
standard product in the relevant product category and a
(simulated) customization configurator that would enable Preference insight. The participants’ degree of aware-
the participant to tailor the respective product to his or her ness of their own preferences regarding the specific product
specific preferences. Then, we measured the delta of benefit category was measured on the basis of extant literature
each participant associated with the two products and his or (Kramer 2007; Simonson 2005). The items read “Regarding
her resulting WTP as dependent variables. This means that [fountain pens], I know exactly what I want”; “When I pur-
a demand artifact (Sawyer 1975) might be present in Study chase a [fountain pen], I usually know quite soon what I
2; that is, participants might in part react to their interpreta- prefer”; and “When I purchase a [fountain pen], I find it
tion of the experiment’s purpose.2 Unlike in Study 1, par- easy to choose among different alternatives” (1 = “high
ticipants could be distracted from the purpose of the study agreement,” and 7 = “low agreement”; Cronbach’s α = .83).
only to a certain degree, and the design of the study does Ability to express preferences. We measured this latent
not allow for a time delta, which would provoke forgetting construct on the basis of relevant literature (Kramer 2007;
effects. We discuss the implications of the potential demand Simonson 2005) and used the following items: “It would be
artifact in the “Methodological Limitations” section.
easy for me to describe what an ideal [fountain pen] should
The independent variables measured subsequently were
look like”; “It would be no problem for me to name those
“preference insight,” “ability to express preferences,” and
attributes of a [fountain pen] which are most important to
“product involvement,” each of which we measured as a
latent construct. The study was conducted independently in me”; “I could easily explain to someone else what kind of
the product categories of fountain pens, kitchens, skis, and [fountain pen] I like best”; and “If I had three minutes’ time
breakfast cereals. These products differ in terms of price to explain to someone else what I like and what I dislike,
level, hedonic value, and privacy of consumption. We also this person could theoretically choose a [fountain pen] for
repeated the analysis in the newspaper category to deter- me that would meet my requirements” (1 = “high agree-
mine the extent to which the different methods used in ment,” and 7 = “low agreement”; Cronbach’s α = .89).
Studies 1 and 2 result in similar findings and in how far a Product involvement. We measured product involve-
different measurement of product involvement alters our ment, with a new focus on involvement in news (instead of
findings with regard to H5. newspapers as a physical product), using a reduced version
Experimental Stimuli of Zaichkowsky’s (1985) personal involvement inventory
scale. To save space in the questionnaire, we selected three
Standard product. In the case of newspapers, we defined five-point semantic differential scales. The participants
the standard product in the same way as in Study 1; that is, were asked to complete the short statement “For me, always
we asked experts to determine headlines that were most having the latest news is….” The scales were anchored at
appealing to newspaper readers from a new set of 90 ran-
“important” versus “unimportant,” “useless” versus “use-
domly selected headlines. In the other product categories,
ful,” and “essential” versus “nonessential.” A Cronbach’s
we selected one standard market product from a set of five
alpha of .87 across all samples (product categories) indi-
popular offerings that we collected with the help of market
experts. The basis of the selection was a pilot study in cates a sufficient level of reliability in this construct. In
which we asked 31 participants which of the five products addition, we measured participants’ involvement in news-
they liked best. In general, the standard product was intro- papers in the same way as in Study 1 (“For me, a newspaper
duced with the lines “Here you see a [fountain pen] which is …”), using the same three five-point semantic differential
fits the preferences and requirements of most consumers scales. Cronbach’s alpha is .84, which points to high relia-
quite well” and described along the most relevant dimen- bility in the measurement. The questions regarding involve-
sions (Figure 2). ment in news and newspapers were placed consecutively to
make it more clear that the objects were different (see
Oppenheim 2000). The two constructs are correlated (.52;
2We are indebted to one of the anonymous reviewers for point- p < .001), which does not come as a surprise because news-
ing out this important issue. papers are indeed bundles of news.
Presentation of Standard Product (Left) and Mass-Customization Configurator (Right) (e.g., Study 2)
ΔBenefit. We measured the additional benefit associated questionnaire that was adapted to one of the five product
with a customized product (compared with the standard categories and had been randomly assigned. A total of 1039
product) as a latent construct. We adapted the five items participants answered the questionnaire completely, for a
from Schreier (2006): “Compared to the standard [fountain response rate of 15.3%. Again, comparisons of early and
pen], the customized [fountain pen] would …” (1) “better late respondents showed no significant differences, indicat-
satisfy my requirements,” (2) “better meet my personal ing the absence of response bias (Armstrong and Overton
preferences,” (3) “more likely be the best solution for me,” 1977).
(4) “more likely be what I really want,” and (5) “more likely
fit my image of a perfect [fountain pen].” We measured Findings
them on a seven-point scale (1 = “high agreement,” and 7 = Difference test. We first measured the extent to which
“low agreement”; Cronbach’s α = .96). the customized products provided higher benefits than stan-
To ascertain the validity of the four latent constructs, we dard products, as we conjectured in H1. We reproduced the
employed exploratory factor analysis and confirmatory fac- findings of Study 1 for the newspaper market (ΔWTP =
tor analysis. The former led to four extracted factors that 36%, p < .001) and found a stable pattern in the product
together explained 79% of the overall variance, which categories of kitchens (ΔWTP = 37%, p < .001), fountain
points to the unidimensionality of the constructs. The latter pens (ΔWTP = 40%, p < .001), skis (ΔWTP = 34%, p <
delivered satisfactory overall fit statistics (goodness-of-fit .001), and breakfast cereals (ΔWTP = 50%, p < .001). Thus,
index = .964, adjusted goodness-of-fit index = .949, com- H1 was confirmed in any case (see Table 3). Regardless of
parative fit index = .982, incremental fit index = .982, and the product category, customization appears to increase the
root mean square error of approximation = .048). All factor benefit a customer derives from a product, though the
loadings were positive and significant, indicating a sound degree to which this increased differs between categories.
degree of convergent validity (detailed results of the confir-
matory factor analysis are available from the authors on Dependency analysis. We used structural equation mod-
request). eling to test H2–H5 (Figure 3) and tested the extent to which
the constructs of “preference insight,” “ability to express
ΔWTP. The second dependent variable was the intra- preferences,” and “product involvement” affect the addi-
individual difference between WTP for the customized tional benefit participants derive from customization. We
product and WTP for the standard product. In both cases, set the latent construct of ΔBenefit as the first-order depen-
we measured WTP using the open-ended contingent valua- dent variable and ΔWTP as the second-order dependent
tion approach (“How much would you be willing to pay for variable. We then estimated six structural equation models
[your self-designed] [fountain pen]?”) (Jones 1975). We (one for each product category and one overall model).
then calculated the delta as WTP (customized product) less When first examining the results in the newspaper cate-
WTP (standard product). gory, we again confirm the results of Study 1. In addition,
when measured as latent constructs, preference insight and
Questionnaire and Samples the ability to express preferences affect the benefits partici-
As in Study 1, we obtained the data from self-administered pants derive from customization. Product involvement has a
online questionnaires. A random representative sample significant impact, which, unlike Study 1, confirms H5. In
comprising 6775 participants was drawn from Austria’s line with our conjecture, we find that if we take product
leading online panel (provided by MindTake New Media involvement as measured in Study 1 (i.e., involvement in
Consulting), and they were contacted through e-mail, with newspapers as a physical product), the path between prod-
an initial reminder after three days and a second reminder uct involvement and ΔBenefit becomes insignificant (.037,
after seven days. Each member of the sample received a p = .329), while the other paths remain stable (preference
TABLE 3
Mean WTP for Standard and Customized Products (Study 2)
Newspaper Fountain Pen Kitchen Skis Cereal
M (SD) M (SD) M (SD) M (SD) M (SD)
Mass-marketing .75 42.21 2481.80 211.82 2.11
product (1) (.52) (27.54) (954.22) (107.51) (.84)
Customized 1.02 59.12 3406.76 282.85 3.16
product (2) (.66) (39.57) (1369.04) (147.67) (1.08)
% benefit gain 36%, p < .001a 40%, p < .001a 37%, p < .001a 34%, p < .001a 50%, p < .001a p < .05b
(t = –7.23) (t = –10.25) (t = –15.04) (t = –11.72) (t = –10.42) (F = 2.812)
N 231 200 198 201 209
at-test comparing WTP for the standard and customized product within each product category.
bANOVA comparing the relative deltas in WTP across the product categories.
Notes: WTP for each product is reported in euros.
Model Fit
χ2 145,321 161,061 134,399 170,966 190,995 321,525
d.f. 98 98 98 98 98 98
χ2/d.f. 1483 1660 1371 1708 1949 3281
GFI/AGFI .929/.901 .908/.872 .924/.894 .904/.867 .901/.863 .962/.947
IFI/CFI .973/.973 .975/.974 .979/.979 .972/.972 .957/.957 .980/.980
RMSEA .046 .057 .043 .061 .068 .047
N 231 200 198 201 209 1039
Rival Models
1. With fixed regression weights
Δd.f. — — — — — +060.000***
Δχ2 — — — — — +144.531***
2. Without preference insight → ΔBenefit path
Δd.f. +1.00** +1.00*** +1.00*** +1.00*** +1.00*** —
Δχ2 +3.51** +7.59*** +3.80*** +3.37*** +3.31*** —
3. Without ability to express preferences → ΔBenefit path
Δd.f. +1.00** +1.00*** +1.00*** +1.00*** +1.00*** —
Testing the Value of Customization / 117