THE VALUE OF ENHANCED CUSTOMISATION IN THE EXISTENCE OF CONSUMER PREFERENCES HETEROGENEITY

摘要

This paper presents a formal approach to evaluate the value of enhancing product customisation in the market environment characterised by heterogeneous consumer preferences. Different from most of the existing studies that tend to associate the degree of customisation with the number of product variety, here we use a different concept suggesting that the degree of customisation is determined by how far consumers are involved along the value chain. That is, a higher degree of customisation is achieved when consumers are involved further upstream the value chain. The novelty of our approach stems from the integration of both marketing and operation-related factors that makes us possible: to consider trade-offs between customisation and lead times and manufacturing costs; and to analyse how these trade-offs should be addressed in a heterogeneous market wherein a group of consumers are highly concerned about customisation whilst the other group is more concerned about price and or lead time. Through numerical examples, we show how the interplay between marketing- and operation-related factors affects firm's decision on choosing the right customisation level.