MC or MP: Enterprise Decision-Making Considering Brand Effect and Product Line Cost

Abstract

With the continuous improvement of information technology and production technology, mass customization (MC) strategy has been more and more widely used. MC can cater to consumers' preferences to the greatest extent, seize market share, and charge higher prices. As a result, more and more enterprises have chosen MC strategy, and some of them (such as DELL) have achieved great success. However, MC is not always a perfect strategy due to its high technical costs, management costs, material costs and the delay cost of MC to consumers. Therefore, weighing the pros and cons of MC to make the most suitable strategy has become an urgent problem for enterprises. Based on the traditional MC decision-making model, on the one hand, we introduce the brand effect to analyze the impact of the implementation of MC strategy on consumer utility from the perspective of brand value; on the other hand, we introduce product line cost to quantitatively measure the enterprise cost premium brought by the degree of customization of the MC. The following findings, that is, the decision-making situation of enterprises under different internal and external circumstances, as well as the optimal pricing and customization degree (MC only) under different strategies (MP or MC) are obtained, which are: (i) if enterprises have relatively high negative brand effects, they should resolutely refrain from adopting MC strategy; (ii) the enterprise will choose the MC strategy only when the product line cost is low enough, and the increase of consumer retention price will increase the possibility of MC strategy adopted; (iii) in the same situation, enterprises with positive brand effects are more likely to adopt the MC strategy than those with negative brand effects, and it can also charge higher optimal prices under the MC strategy.