Individual Marketing with Imperfect Targetability
Marketing Science
Reward Programs and Tacit Collusion
Marketing Science
Consumer Addressability and Customized Pricing
Marketing Science
Product Customization and Price Competition on the Internet
Management Science
The Role of the Management Sciences in Research on Personalization
Management Science
Decision Support Systems - Special issue: Economics and information systems
Research Note: The Influence of Recommendations and Consumer Reviews on Evaluations of Websites
Information Systems Research
On Customized Goods, Standard Goods, and Competition
Marketing Science
Personalized Pricing and Quality Differentiation
Management Science
Journal of Management Information Systems
The Market Structure for Internet Search Engines
Journal of Management Information Systems
Adoption of Internet-Based Product Customization and Pricing Strategies
Journal of Management Information Systems
Delayed multiattribute product differentiation
Decision Support Systems
Computers and Industrial Engineering
Service design of consumer data intermediary for competitive individual targeting
Decision Support Systems
Strategic Market and Customer Driven IS/IT Planning Model
International Journal of Strategic Information Technology and Applications
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We use a game-theoretic model to examine how information personalization by firms interacts with different dimensions of product differentiation (namely, horizontal and vertical differentiation). We consider the possibility that consumers attach different importance to various types of product differentiation, and report the equilibrium in terms of the "quality-fit" ratio, which measures the relative strength of preference for quality compared to preference for product fit and is a function of the cost of quality and the cost of product misfit. We also consider how different market structures (whether firms are similar or differentiated on the horizontal dimension ex ante) lead to different equilibriums when firms adopt personalization. We show that personalization by one firm leads to higher profits for both firms if product quality and misfit costs are high and the firms offer similar products ex ante. On the other hand, if firms offer differentiated products, personalization is profitable only if the effectiveness of the personalization technology is high or if both product quality and misfit costs are low. We also highlight conditions under which investments in personalization and product quality can be complements or substitutes to each other. Finally, we show that a firm can respond to a competitor's personalization by either increasing (aggressive response) or decreasing (defensive response) investments in its own quality. Our results provide insights to managers on when to invest in personalization technologies and how to adjust their investments in product quality after the firm (or its competitor) adopts personalization.