Ask or infer? Strategic implications of alternative learning approaches in customization

Scott Fay, Deb Mitra and Qiong Wang

International Journal of Research in Marketing, 2009, vol. 26, issue 2, 136-152

Abstract: Learning about a customer's preferences is a critical first step in the customization process. Broadly, firms adopt two alternative learning approaches: (1) ask, i.e., solicit preference information directly from the customer (S-Learning), or (2) infer, i.e., deduce preference information based on past observations of the customer as well as those of other customers (O-Learning). Most existing research on customization strategy focuses on a firm's marketing mix decisions, implicitly assuming away how the firm learns about customers. We contribute to this literature by examining how a firm's use of a specific learning approach impacts competition, particularly its rival's choice of learning approach. We find that O-Learning provides a credible signal for relaxing price competition, while S-Learning does not. Further, S-Learning by a firm creates a disincentive for rivals to also invest in S-Learning. We survey business customers and find significant evidence supporting our theory. We conclude with several managerial implications of our theory including how a firm can optimally select its learning strategy in order to impact its competitive environment.

Keywords: Customization; Personalization; Learning; Competitive strategy; Customer relationship management (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ijrema:v:26:y:2009:i:2:p:136-152

DOI: 10.1016/j.ijresmar.2008.12.003

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