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Mass customization for financial services: an empirical study of adoption and usage behavior
Stefan Koch Duygu Inanc
Article information:
To cite this document:
Stefan Koch Duygu Inanc , (2015),"Mass customization for financial services: an empirical study of adoption and usage
behavior", Journal of Services Marketing, Vol. 29 Iss 3 pp. 235 - 243
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http://dx.doi.org/10.1108/JSM-04-2014-0115
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Introduction
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235
any process benefits (Schreier, 2006) that might arise from the
act of continued or repeated customization. We therefore
formulate our first hypothesis:
H1a. For mass customization of financial services, trial-anderror learning will not end with product definition, but
will continue afterwards and lead to changes in
customization, i.e. new configurations.
3,500
3,000
2,500
2,000
1,500
1,000
500
Limit Maximum Amount
Package Number
0
Spending Cmt Number
Longitudinal analysis
We will now turn to the analysis of the events and usage of a
customized card after creation. The first aspect is the amount
of changes made to existing cards during the observed period.
Overall 4,675 cards of the 11,590 total showed a difference in
at least one major aspect between approval and the end of our
time window. Any in-between changes are not accounted for
in this analysis, e.g. if a card had reverted to the prior package,
no change would be recorded. Although not all cards have
been changed, we certainly find that customers do actually
engage in trial-and-error learning after initial configuration.
This confirms H1a.
We also analyze which attributes of a card have been more
prone to change (Figure 1), and the amount of changes
(Figure 2). When a comparison between the application data
and the present attributes of a card is made, it is found that
3,202 cards among 11,590 have a different plus reward/bonus
rate. This can also be interpreted as an aspect of H3a, as
changes in an attribute are much more common than in an
alternative, i.e. change in package. We can also analyze the
number of attributes changed for a card, and we find that most
cards have a change in one aspect only (Figure 2). This
provides first (partial) support for H3c, as complete changes of
0
1
3,00,000.00
2,50,000.00
2,00,000.00
1,50,000.00
1,00,000.00
50,000.00
0.00
0
10 20 30 40 50 60 70 80 90 100
50,000.00
0.08 (0.08)
9.92 (0.00)
240
19.007 (0.00)
0.07 (0.07)
25.63 (0.00)
189.708 (0.12)
16.196 (0.00)
0.08 (0.07)
14.08 (0.00)
Variable
0.223 (0.01)
1.115 (0.00)
0.000 (0.98)
0.003 (0.73)
0.006 (0.27)
0.032 (0.48)
0.33 (0.32)
26.01 (0.00)
241
1.442 (0.00)
0.31 (0.31)
145.4 (0.00)
0.223 (0.01)
1.394 (0.00)
0.32 (0.32)
77.16 (0.00)
Implications
Financial products are not the outcomes of a manufacturing
process as in traditional mass customization, but constitute, in
many cases, long-term services. Differentiation through
creating alternatives can constitute a competitive advantage to
banks. There were many credit cards with different targeting
offered to the customer, but a mass-customized credit card
constituted a new complementary offering. Kotha (1995) has
described a company active both in mass production and mass
customization. This is similar to the case here, and can provide
a competitive advantage. Kotha (1995) described that
competitors have been forced to offer mass customization as
well, probably leading to a change in industry conditions,
which is not yet visible for our case. The author also noted that
competing in two segments might lead to problems stemming
from different priorities, mostly relating this to production
aspects (Kotha, 1995). This is not a factor in our case, but
marketing aspects are, as both initiatives basically compete for
the same budgets.
A second aspect of offering a toolkit to customize a financial
service beyond as a marketing strategy can be to learn about
customer preferences. Our analysis has shown very different
adoption rates for different packages, as well as the ability to
gather data about changing behavior and relationships to card
usage. This can provide important feedback to product
development. Prgl and Schreier (2006) also found that
sometimes leading-edge users do not merely content
themselves with the official toolkits, and either develop their
own or provide ideas. In addition, individual user designs are
not only attractive to the creators themselves but can also be in
high demand among other users. This means that providing a
toolkit for customization can be a way of getting ideas for new
product development, or even to identify lead users (von
Hippel and Katz, 2002; Prgl and Schreier, 2006). Also Alam
(2002) discusses user involvement in new service
development, using cases from the financial services
business-to-business sector. He reports that user involvement
can help companies to achieve more superior and
differentiated services. Oliveira and von Hippel (2011) have
also focused on banking services, and found that in the
majority of cases, users self-provided a novel service before
any bank offered it.
The results of this study also confirm the difficulties of
designing an appropriate toolkit and solution space, as
packages that specify a card too narrowly already are not
highly adopted. On the other hand, also a too wide solution
space, e.g. encompassing every single possible shop for
selecting benefits, proves problematic. We also found evidence
for extremely targeted customization, cards created for
providing maximum benefits for limited applications like a
wedding. Those incur high transaction volumes in a short
time, and are seldomly changed. It should be noted that the
pricing for customized cards is problematic for the bank in our
case study. As a solution to clearly existing mass confusion
problems, an online community to allow customers to discuss
the customization process, share creations and support each
other (Franke et al., 2008; Piller et al., 2005) would be an
interesting solution and increase the popularity of the card.
The bank in our study is reluctant to do so, as the pricing and
their experience shows that there are some sweet spots in
References
Alam, I. (2002), An exploratory investigation of user
involvement in new service development, Journal of the
Academy of Marketing Science, Vol. 30 No. 3, pp. 250-261.
Bardakci, A. and Whitelock, J. (2004), How ready are
customers for mass customisation? An exploratory
investigation, European Journal of Marketing, Vol. 38
Nos 11/12, pp. 1396-1416.
242
Corresponding author
Stefan Koch can be contacted at: stefan.koch@boun.edu.tr
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