The Role of the Management Sciences in Research on Personalization

We present a review of research studies that deal with personalization and synthesize current knowledge about these areas. We identify issues that we envision will be of interest to researchers working in the management sciences, taking an interdisciplinary approach that spans the areas of economics, marketing, information technology (IT), and operations research. We present a framework for personalization that allows us to identify key players in the personalization process as well as key stages of personalization. The framework enables us to examine the strategic role of personalization in the interactions between a firm and other key players in the firm's value system. We conceptualize the personalization process as consisting of three stages: (1) learning about consumer preferences, (2) matching offerings to customers, and (3) evaluation of the learning and matching processes. This review focuses on the learning stage, with an emphasis on utility-based approaches to estimate preference functions using data on customer interactions with a firm.

[1]  J. M. Villas-Boas,et al.  Endogeneity in Brand Choice Models , 1999 .

[2]  Catarina Sismeiro,et al.  A Model of Web Site Browsing Behavior Estimated on Clickstream Data , 2003 .

[3]  J. Miguel Villas-Boas.  Competing with Experience Goods , 2000 .

[4]  Pradeep K. Chintagunta,et al.  Investigating Heterogeneity in Brand Preferences in Logit Models for Panel Data , 1991 .

[5]  Ganesh Iyer,et al.  Research Note Consumer Addressability and Customized Pricing , 2002 .

[6]  Zhiqiang Zheng,et al.  Personalization from incomplete data: what you don't know can hurt , 2001, KDD '01.

[7]  Z. John Zhang,et al.  Pay to Switch or Pay to Stay: Preference-Based Price Discrimination in Markets with Switching Costs , 2000 .

[8]  Preyas S. Desai.  Quality Segmentation in Spatial Markets: When Does Cannibalization Affect Product Line Design? , 2001 .

[9]  Z. John Zhang,et al.  Individual Marketing with Imperfect Targetability , 2000 .

[10]  Wendy W. Moe,et al.  The Influence of Goal‐Directed and Experiential Activities on Online Flow Experiences , 2003 .

[11]  George Hendrikse,et al.  The Theory of Industrial Organization , 1989 .

[12]  Naufel J. Vilcassim,et al.  Modeling Purchase-Timing and Brand-Switching Behavior Incorporating Explanatory Variables and Unobserved Heterogeneity , 1991 .

[13]  Peter E. Rossi,et al.  The Value of Purchase History Data in Target Marketing , 1996 .

[14]  Allan D. Shocker,et al.  Linear programming techniques for multidimensional analysis of preferences , 1973 .

[15]  Z. John Zhang,et al.  Competitive One-to-One Promotions , 2002, Manag. Sci..

[16]  R. Rust,et al.  Customer Satisfaction, Productivity, and Profitability: Differences Between Goods and Services , 1997 .

[17]  V. Srinivasan.  Network Models for Estimating Brand-Specific Effects in Multi-Attribute Marketing Models , 1979 .

[18]  Ramayya Krishnan,et al.  Special Issue: OR/MS and E-Business: Prospects for Operations Research in the E-Business Era , 2001, Interfaces.

[19]  Gordon B. Hazen,et al.  Recursive Utility for Stochastic Trees , 1996, Oper. Res..

[20]  Pattie Maes,et al.  Learning Curve: Analysis of an Agent Pricing Strategy Under Varying Conditions , 2001 .

[21]  R. L. Keeney,et al.  Decisions with Multiple Objectives: Preferences and Value Trade-Offs , 1977, IEEE Transactions on Systems, Man, and Cybernetics.

[22]  Aviv Nevo.  Measuring Market Power in the Ready-to-Eat Cereal Industry , 1998 .

[23]  Lorin M. Hitt,et al.  Bundling with Customer Self-Selection: A Simple Approach to Bundling Low-Marginal-Cost Goods , 2005, Manag. Sci..

[24]  Frank M. Bass,et al.  An Attitude Model for the Study of Brand Preference , 1972 .

[25]  Bill Meade,et al.  Enterprise One to One: Tools for Competing in the Interactive Age , 1997 .

[26]  Stanley A. Brown.  Strategic Customer Care : An Evolutionary Approach to Increasing Customer Value and Profitability , 2000 .

[27]  V. Srinivasan,et al.  The Predictive Power of Internet‐Based Product Concept Testing Using Visual Depiction and Animation , 2000 .

[28]  R. Bucklin,et al.  Modeling Purchase Behavior at an E-Commerce Web Site: A Task-Completion Approach , 2004 .

[29]  David C. Schmittlein,et al.  Counting Your Customers: Who-Are They and What Will They Do Next? , 1987 .

[30]  Rajiv M. Dewan,et al.  Adoption of Internet-Based Product Customization and Pricing Strategies , 2000 .

[31]  Peter E. Rossi,et al.  A Bayesian Approach to Estimating Household Parameters , 1993 .

[32]  Preyas S. Desai,et al.  “ Let Me Talk to My Manager : ” The Costs and Benefits of Haggling , 2002 .

[33]  Willem E. Saris,et al.  Computer-Assisted Interviewing , 1991 .

[34]  Don A. Dillman,et al.  Development of a Standard E-Mail Methodology: Results of an Experiment , 1998 .

[35]  Paul E. Green,et al.  Adaptive Conjoint Analysis: Some Caveats and Suggestions , 1991 .

[36]  D. McFadden.  A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration , 1989 .

[37]  Detmar W. Straub,et al.  Toward New Metrics for Net-Enhanced Organizations , 2002, Inf. Syst. Res..

[38]  M. Wedel,et al.  Market Segmentation: Conceptual and Methodological Foundations , 1997 .

[39]  Douglas B. Terry,et al.  Using collaborative filtering to weave an information tapestry , 1992, CACM.

[40]  Ambar G. Rao,et al.  New Models from Old: Forecasting Product Adoption by Hierarchical Bayes Procedures , 1990 .

[41]  Avi Goldfarb.  Analyzing Website Choice Using Clickstream Data , 2002, The Economics of the Internet and E-commerce.

[42]  Leigh McAlister,et al.  Choosing Multiple Items From A Product Class , 1978 .

[43]  Jaideep Srivastava,et al.  Automatic personalization based on Web usage mining , 2000, CACM.

[44]  Tony Lancaster,et al.  ECONOMETRIC METHODS FOR THE DURATION OF UNEMPLOYMENT , 1979 .

[45]  Peter E. Rossi,et al.  An exact likelihood analysis of the multinomial probit model , 1994 .

[46]  Kamran Moinzadeh,et al.  Optimal Order Processing Policies for E- commerce Servers , 2002 .

[47]  Michel Wedel,et al.  A Latent Class Poisson Regression Model for Heterogeneous Count Data , 1993 .

[48]  Lode Li.  Information Sharing in a Supply Chain with Horizontal Competition , 2002, Manag. Sci..

[49]  Steven T. Berry.  Estimating Discrete-Choice Models of Product Differentiation , 1994 .

[50]  R. M. Johnson,et al.  A simple method for pairwise monotone regression , 1975 .

[51]  Ward Edwards,et al.  How to Use Multiattribute Utility Measurement for Social Decisionmaking , 1977, IEEE Transactions on Systems, Man, and Cybernetics.

[52]  Ralph L. Keeney,et al.  Multiplicative Utility Functions , 1974, Oper. Res..

[53]  Wendell R. Smith.  Product Differentiation and Market Segmentation as Alternative Marketing Strategies , 1956 .

[54]  Marvin A. Sirbu,et al.  Optimal bundling strategy for digital information goods: network delivery of articles and subscriptions , 1999 .

[55]  M. Fishbein.  An Investigation of the Relationships between Beliefs about an Object and the Attitude toward that Object , 1963 .

[56]  Erik Brynjolfsson,et al.  Consumer Decision-Making at an Internet Shopbot , 2001 .

[57]  Hau L. Lee,et al.  Information sharing in a supply chain , 2000, Int. J. Manuf. Technol. Manag..

[58]  J. Heckman,et al.  A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data , 1984 .

[59]  Dan Horsky,et al.  Estimation of Attribute Weights from Preference Comparisons , 1984 .

[60]  Michael A. Smith,et al.  Virtual subjects: Using the Internet as an alternative source of subjects and research environment , 1997 .

[61]  Sherwin Rosen.  Studies in Labor Markets , 1981 .

[62]  Christopher L. Tucci,et al.  Internet Business Models and Strategies: Text and Cases , 2002 .

[63]  Hemant K. Bhargava,et al.  Second-degree price discrimination for information goods under nonlinear utility functions , 2001, Proceedings of the 34th Annual Hawaii International Conference on System Sciences.

[64]  P. K. Kannan,et al.  The customer economics of internet privacy , 2002 .

[65]  John R. Hauser,et al.  Premarket Forecasting of Really-New Products , 1996 .

[66]  A. Montgomery.  Applying Quantitative Marketing Techniques to the Internet , 2000 .

[67]  Bruce E. Barrett,et al.  Decision quality using ranked attribute weights , 1996 .

[68]  R. Kapuściński,et al.  Value of Information in Capacitated Supply Chains , 1999 .

[69]  J. Berger.  Statistical Decision Theory and Bayesian Analysis , 1988 .

[70]  Kenneth C. Laudon,et al.  Markets and privacy , 1993, CACM.

[71]  Vithala R. Rao,et al.  Conjoint Measurement- for Quantifying Judgmental Data , 1971 .

[72]  Rajiv M. Dewan,et al.  One-to-one marketing on the internet , 1999, ICIS.

[73]  Alan L. Montgomery,et al.  Special Issue: OR/MS and E-Business: Applying Quantitative Marketing Techniques to the Internet , 2001, Interfaces.

[74]  Carl F. Mela,et al.  E-Customization , 2003 .

[75]  Vijay Mahajan,et al.  A Conjoint Model for Measuring Self- and Cross-Price/Demand Relationships , 1982 .

[76]  Yoram Wind,et al.  Preference Measurement of Item Collections , 1972 .

[77]  Füsun F. Gönül,et al.  Modeling Multiple Sources of Heterogeneity in Multinomial Logit Models: Methodological and Managerial Issues , 1993 .

[78]  G. Huber,et al.  A study of self‐explicated utility models , 1970 .

[79]  J. Heckman,et al.  Models for the Analysis of Labor Force Dynamics , 1982 .

[80]  Aviv Nevo.  MEASURING MARKET POWER USING DISCRETE CHOICE MODELS OF DEMAND: AN APPLICATION TO THE READY-TO-EAT CEREAL INDUSTRY , 1997 .

[81]  Detmar W. Straub,et al.  Measuring e-Commerce in Net-Enabled Organizations: An Introduction to the Special Issue , 2002, Inf. Syst. Res..

[82]  S. DesaiPreyas.  Quality Segmentation in Spatial Markets , 2001 .

[83]  Jordan J. Louviere,et al.  Design and Analysis of Simulated Consumer Choice or Allocation Experiments: An Approach Based on Aggregate Data , 1983 .

[84]  Adrian F. M. Smith,et al.  Sampling-Based Approaches to Calculating Marginal Densities , 1990 .

[85]  Nir Vulkan,et al.  Electronic Commerce and Competitive First-Degree Price Discrimination , 2000 .

[86]  Christopher A. Sims,et al.  Advances in Econometrics , 1996 .

[87]  P. K. Kannan,et al.  Dynamic Pricing on the Internet: Importance and Implications for Consumer Behavior , 2001, Int. J. Electron. Commer..

[88]  Sunil Gupta,et al.  Stochastic Models of Interpurchase Time with Time-Dependent Covariates , 1991 .

[89]  Yossi Matias,et al.  Scheduling space‐sharing for internet advertising , 2002 .

[90]  K. Moorthy.  Market Segmentation, Self-Selection, and Product Line Design , 1984 .

[91]  T. Saaty.  Axiomatic foundation of the analytic hierarchy process , 1986 .

[92]  Stephen E. Margolis,et al.  Network externality : an uncommon tragedy , 1994 .

[93]  D. Winterfeldt,et al.  Comparison of weighting judgments in multiattribute utility measurement , 1991 .

[94]  Rajiv M. Dewan,et al.  Achieving first-mover advantage through product customization on the Internet , 2000, ICIS.

[95]  Wagner A. Kamakura,et al.  Understanding Brand Competition Using Micro and Macro Scanner Data , 1994 .

[96]  J. Hagel,et al.  Net gain: Expanding markets through virtual communities , 1999 .

[97]  Donald R. Lehmann,et al.  The Importance of Differential Weights in Multiple Attribute Models of Consumer Attitude , 1973 .

[98]  D.,et al.  Regression Models and Life-Tables , 2022 .

[99]  C. Narasimhan.  A Price Discrimination Theory of Coupons , 1984 .

[100]  A. Adam.  Whatever happened to information systems ethics? Caught between the devil and the deep blue sea , 2004 .

[101]  J. Heckman.  Heterogeneity and State Dependence , 1981 .

[102]  H. Varian,et al.  The Economics Of Information Technology , 2004 .

[103]  A. Rangaswamy,et al.  Consumer Choice Behavior in Online and Traditional Supermarkets: The Effects of Brand Name, Price, , 2000 .

[104]  P. Lenk,et al.  Hierarchical Bayes Conjoint Analysis: Recovery of Partworth Heterogeneity from Reduced Experimental Designs , 1996 .

[105]  B. Leupen,et al.  Design and analysis , 1997 .

[106]  Dale A. Stirling,et al.  Information rules , 2003, SGMD.

[107]  S. Salant.  When is Inducing Self-Selection Suboptimal for a Monopolist? , 1989 .

[108]  R. Kohli,et al.  Internet Recommendation Systems , 2000 .

[109]  Richard M. Johnson.  Comment on “Adaptive Conjoint Analysis: Some Caveats and Suggestions”7 , 1991 .

[110]  Peter S. Fader,et al.  Forecasting Repeat Sales at CDNOW: A Case Study , 2001, Interfaces.

[111]  Naufel J. Vilcassim,et al.  Investigating Household Purchase Timing Decisions: A Conditional Hazard Function Approach , 1991 .

[112]  R. Fildes.  Journal of the Royal Statistical Society (B): Gary K. Grunwald, Adrian E. Raftery and Peter Guttorp, 1993, “Time series of continuous proportions”, 55, 103–116.☆ , 1993 .

[113]  John R. Hauser,et al.  Information Acceleration: Validation and Lessons from the Field , 1997 .

[114]  C. C. Waid,et al.  An Experimental Comparison of Different Approaches to Determining Weights in Additive Utility Models , 1982 .

[115]  Erik Brynjolfsson,et al.  Frictionless Commerce? A Comparison of Internet and Conventional Retailers , 2000 .

[116]  Paul E. Green,et al.  Conjoint Analysis in Marketing: New Developments with Implications for Research and Practice , 1990 .

[117]  Andrew B. Whinston,et al.  Dynamic profiling of consumers for customized offerings over the Internet: a model and analysis , 2001, Decis. Support Syst..

[118]  M. Spence.  Multi-product quantity-dependent prices and profitability constraints , 1980 .

[119]  Gary J. Russell,et al.  A Probabilistic Choice Model for Market Segmentation and Elasticity Structure , 1989 .

[120]  Benedict G. C. Dellaert,et al.  Consumer-Producer Interaction: A Strategic Analysis of the Market for Customized Products , 2001 .

[121]  A. Ehrenberg.  The Pattern of Consumer Purchases , 1959 .

[122]  Greg M. Allenby,et al.  Modeling Household Purchase Behavior with Logistic Normal Regression , 1994 .

[123]  Sunil Gupta,et al.  Choice and the Internet: From Clickstream to Research Stream , 2002 .

[124]  Stan J. Liebowitz,et al.  The Fable of the Keys , 1990, The Journal of Law and Economics.

[125]  P. Farquhar.  State of the Art—Utility Assessment Methods , 1984 .

[126]  Rakesh K. Sarin,et al.  Measurable Multiattribute Value Functions , 1979, Oper. Res..

[127]  David C. Schmittlein,et al.  Generalizing the NBD Model for Customer Purchases: What Are the Implications and Is It Worth the Effort? , 1988 .

[128]  Hing-Man Leung,et al.  Intertemporal Price Discrimination , 2000 .

[129]  Rabikar Chatterjee,et al.  Joint Segmentation on Distinct Interdependent Bases with Categorical Data , 1996 .

[130]  C. Shapiro,et al.  Optimal Contracts with Lock-In , 1987 .

[131]  William L. Wilkie,et al.  Issues in Marketing's use of Multi-Attribute Attitude Models , 1973 .

[132]  Allan D. Shocker,et al.  A Consumer-Based Methodology for the Identification of New Product Ideas , 1974 .

[133]  Richard T. Carson,et al.  Experimental analysis of choice , 1991 .

[134]  Dick R. Wittink,et al.  Building models for marketing decisions: past, present and future , 2000 .

[135]  Vijay Mahajan,et al.  The Economic Leverage of the Virtual Community , 2001, Int. J. Electron. Commer..

[136]  Wendy W. Moe,et al.  Capturing evolving visit behavior in clickstream data , 2004 .

[137]  Yannis Bakos,et al.  Bundling Information Goods: Pricing, Profits and Efficiency , 1998 .

[138]  Christopher S. Tang,et al.  The Value of Information Sharing in a Two-Level Supply Chain , 2000 .

[139]  T. Levitt,et al.  Marketing success through differentiation of anything , 1980 .

[140]  Peter R. Dickson,et al.  On-line Market Research , 2001, Int. J. Electron. Commer..

[141]  Amit Bhatnagar,et al.  Identifying Locations for Targeted Advertising on the Internet , 2001, Int. J. Electron. Commer..

[142]  F. B. Vernadat,et al.  Decisions with Multiple Objectives: Preferences and Value Tradeoffs , 1994 .

[143]  A. Shaked,et al.  Relaxing price competition through product differentiation , 1982 .

[144]  A. C. Pigou.  Economics of welfare , 1920 .

[145]  Z. John Zhang,et al.  Competitive Coupon Targeting , 1995 .

[146]  D. Fudenberg,et al.  Customer Poaching and Brand Switching , 2000 .

[147]  Andrew B. Whinston,et al.  Radically New Product Introduction Using On-line Auctions , 2001, Int. J. Electron. Commer..

[148]  Paul E. Green,et al.  Individualized hybrid models for conjoint analysis , 1996 .

[149]  George Norman.  The Economics of Price Discrimination , 1985 .

[150]  A. Parasuraman,et al.  Communication and Control Processes in the Delivery of Service Quality , 1988, Journal of Marketing.

[151]  Hal R. Varian,et al.  Differential Pricing and Efficiency , 1996, First Monday.