How Much to Tell Your Customer? – A Survey of Three Perspectives on Selling Strategies with Incompletely Specified Products

Abstract

Today’s technology facilitates selling strategies that were unthinkable only a few years ago. One increasingly popular strategy uses incompletely specified products (ICSPs). The seller retains the right to specify some details of the product or service after the sale. The selling strategies’ main advantages are an additional dimension for market segmentation and operational flexibility due to supply-side substitution possibilities. Since the strategy became popular with Priceline and Hotwire in the travel industry about two decades ago, it has increasingly been adopted by other industries with stochastic demand and limited capacity as well. At the same time, it is actively researched from the perspectives of strategic operations management, empirics, and revenue management.

This paper first describes the application of ICSPs in practice. Then, we introduce the different research communities that are active in this field and relate the terminology they use. The main part is an exhaustive review of the literature on selling ICSPs from the different perspectives. Here, we complement a tabular overview with an introduction into the community and a detailed description of each paper. Finally, possible directions for future research are outlined.

We see that strategic operations management has described advantages of ICSPs over other strategies in a variety of settings, but also identified countervailing effects. Today, empirical research is confined to hotels and airlines and largely disconnected from the other perspectives. Operational papers are ample, but mostly concerned with the availability of ICSPs. Research on operational (dynamic) pricing is surprisingly scarce.

Keywords: revenue management, channel-choice, supply-side substitution, probabilistic/opaque/flexible products, upgrades

JEL Classification: M30, M11