Ask or Infer? Strategic Implications of Alternative Learning Approaches in Customization

48 Pages Posted: 18 Dec 2008

See all articles by Scott A. Fay

Scott A. Fay

University of Florida, Department of Marketing

Debanjan Mitra

University of Connecticut - Department of Marketing

Qiong Wang

University of Oklahoma - Division of Marketing

Date Written: November 1, 2008

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 and other customers (O-Learning). Most prior research on customization strategy focuses on a firm's marketing mix decisions, implicitly assuming away how it 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

Suggested Citation

Fay, Scott A. and Mitra, Debanjan and Wang, Qiong, Ask or Infer? Strategic Implications of Alternative Learning Approaches in Customization (November 1, 2008). Available at SSRN: https://ssrn.com/abstract=1317389 or http://dx.doi.org/10.2139/ssrn.1317389

Scott A. Fay (Contact Author)

University of Florida, Department of Marketing ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Debanjan Mitra

University of Connecticut - Department of Marketing ( email )

Storrs, CT 06269
United States

Qiong Wang

University of Oklahoma - Division of Marketing ( email )

307 West Brooks
Price College of Business
Norman, OK OK 73019
United States
405-325-2668 (Phone)

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