How to adopt mass customization strategy: Understanding the role of consumers’ perceived brand value

Abstract

How to make a suitable decision by balancing the benefits and costs of Mass customization (MC) has been widely discussed by scholars. While with the development of information and production technology, some traditional factors that affect firms’ MC decisions have significantly changed. Meanwhile, consumers’ brand recognition is playing an increasingly important role in consumers’ purchase decisions. Motivated by the new conditions, we develop an analytical model to investigate how a firm’s MC decisions are affected by consumers’ perceived brand value and customization cost. The solution of the benchmark model shows that (i) if brand loss outweighs maximal travel cost, the firm generally abandons MC even if MC is costless; (ii) the firm is more likely to adopt MC when the impact of MC on perceived brand value is positive; (iii) a higher customization level may not imply a higher price, but the firm always obtains higher profit with the increase of customization level, and (iv) the implementation of MC may derive an economically inefficient situation. As an extension, we consider a scenario where consumers have heterogeneous attitudes toward the impact of MC on brand value and find that: (i) the main conclusions in the benchmark model are still valid; and (ii) consumers’ heterogeneous attitudes toward brand value can benefit themselves.