Consumer Decision Decision-Making Making in Mass Customization Systems Prof. Dr. Andreas Herrmann
RoCC Management Insight Series No.11 Publisher: Profile Unit Responsible Corporate Competitiveness University of St.Gallen (HSG) August 2011
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Consumer Decision-Making in Mass Customization Systems What is the managerial challenge?
Summary Managerial Challenge
• • • • •
Mass Customization Systems Device for Design and Order Natural Entry Door Key Tools Consumer Choice Behavior
What is the central insight? • • • • •
Defaults Anker and Reference Point Choice of Consumer Predefined Attribute or Level Choice Behavior
Central Insight Application & Scope Research Basis Previous Work &
How and where can it be applied?
Source of Authority
• • • • •
Software Tools Without cost Additional Variables No Market Research Economic Effect
What research have you conducted? • Empirical • Amount of Items Selected • New Exiting Ideas • Comprehensive Qualitative Analyses • Improvement Impro ement of Mass C Customization stomi ation
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Summary
Managerial Challenge Central Insight Application & Scope Research Basis Previous Work & Source of Authority
Managerial Challenge • More and more companies set mass customization systems in place. It is estimated, that more than 400'000 product configurators have been implemented worldwide. • In some markets more than 60% of the customers use such devices for designing and ordering products or for collecting and evaluating product information. • Almost all of these mass customization systems are designed from a technological g p perspective. p Sales intelligence g is only y in a very y few of them implemented by the manufacturers or dealers. • It is expected that in the future these devices will become the natural entry door to the various assortments of the companies. p Even in the service industry y it is expected that product configurators will become key tools. • The managerial challenge based on all these developments is to integrate the intelligence of sales people into such systems and make them appealing to consumers. Such devices should reflect consumer choice behavior and respond accordingly.
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Central Insight • Defaults play an important role in mass customization systems. They are considered as "anker"- or reference-points p and affect consumer choices.
Summary
• The order in which product attributes and the respective levels are presented determines the choices of the consumers. When making g up p to 60 decisions in a mass customization system many people deplete and select the predefined attribute or level.
Managerial Challenge
Central Insight Application & Scope Research Basis Previous Work & Source of Authority
• Many people consider defaults as endorsement by the manufacturer or dealer. Therefore this pre-specifications determine the choice behavior of the consumers. There are various ways to present price information. Cumulative price information instead of attributes or levels based price information help companies to move people the better equipped products. products
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Practical Application • Insights about consumer choice behavior can be easily implemented into software tools E.g. tools. E g defaults can be manipulated without any costs. costs
Summary Managerial Challenge Central Insight
Application & Scope Research Basis
• The economic effect of changes in the structure of a mass customization system can be measured directly. directly In all these devices the actually bought product can be easily related to specific consumer. Beyond economic measures many mass customization systems offer a lot of additional information about mouse clicks, reaction time, and click streams streams. These additional variables can be used to trace a comprehensive picture about the behavior of each consumer.
Previous Work & Source of Authority
• Such systems provide a lot of useful information which normally needs to be collected (for a considerable amount of money) by traditional market research. So in the future these systems can partly replace traditional market research.
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Research Basis • Our research is empirical. In some cases we replicate the product configurators of collaboration partners and do manipulations to investigate consumer behavior.
Summary Managerial Challenge
• These changes in the structure of the mass customization system can be directly attributed to outcome variables such as sales,, reaction time,, or amount of items selected.
Central Insight Application pp & Scope p
Research Basis
• We build on behavioral theories which p provide a lot of new and exiting g ideas in which direction these systems can be developed.
Previous Work & Source of Authority
• Comprehensive qualitative analyses allow us to derive general statements about consumer behavior. These insights can be used to improve the mass customization system continuously.
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Contact • The author will gladly respond to any inquiries: − Prof. o Dr. Andreas d eas Herrmann e a
[email protected] a d eas e a @u sg c
FCI-HSG C SG
• Further p publications: − Order in Product Customization Decisions: Evidence from Field Experiments, Journal of Political Economy, 2010 − Choice Goal Attainment and Decision and Consumption Satisfaction, Journal of Marketing Research, 2007 • Further training programs: − Executive MBA, University of St. Gallen − MBA, MBA University of St. St Gallen Profile Unit Responsible Corporate Competitiveness University of St. Gallen Dufourstrasse 40a CH-9000 St. Gallen Telefon +41 71 224 39 04 Fax +41 71 243 23 55 www rocc unisg ch www.rocc.unisg.ch
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