Online Mass Customization and the Customer Experience

1. Online Mass Customization and the Customer Experience Arnold Kamis, Bentley College Marios Koufaris, Baruch College Tziporah Stern, Baruch College NJIT - November 22, 2004

2. Mass Customization • The ability to manufacture individually customized products and services on a mass production scale without a significant cost increase. • Online examples: • NikeID • Reflect.com • Dell

3. Online interfaces • Alternative based: • Select from all possible customized product options • Attribute based: • Select from all customizable product attributes to customize product • Question based: • Answer relevant questions and have product customized for you

4. Research questions • What is the best interface? • Simple vs. Powerful • How much variety to offer? • Is more choice always good? • Who are the customers/users? • Are all users having the same experience?

5. Theoretical background • Behavioral decision-making: • Discovered Preferences (Payne et al. 1988; Coupey 1994; Fennema et al. 1995) • Rational model – Optimal choice exists • Less realistic in customer decision-making • Constructed Preferences (Payne et al. 1992; Rosenshein 2000) • No objective optimal choice • Preferences dynamically constructed • What is best decision support tool for self-customization?

6. Theoretical background • Task-technology fit model (Goodhue, 1995): • Appropriate technology for specific user tasks increases performance and satisfaction • Also important are user characteristics • What is appropriate technology (interface) for online mass customization task?

7. Study variables • Measure success of system through customer experience: • Perceived ease of use • Perceived usefulness • Perceived control • Enjoyment • Effect of the interface: alternative vs. attribute • Effect of variety: Number of possible product versions • User characteristics: Computer anxiety and computer playfulness

8. The Interface • Alternative-based: • Customers must deconstruct product into attributes and values • May inflate perceived variety (3 attributes x 5 values = 125 alternatives) • Not very interactive, just pick one from the list • Attribute-based: • Product already deconstructed • Actual variety obvious (3 attributes x 5 values = 15 choices) • Interactive, experimental, game-like • Hypothesis: Overall, online customers will experience higher (perceived control, perceived usefulness, enjoyment) with an attribute-based MC interface than with an alternative-based one

9. Variety: Is more choice always better? • Hypothesis: • Overall, enjoyment of online MC customers will follow an inverted U-shaped curve as variety increases. Source: Desmeules, 2002

10. Variety and Interface • Attribute-based interface reduces task complexity and cognitive effort • Hypotheses: • Enjoyment will start decreasing at a higher variety for users who use the attribute-based MC interface than for those who use the alternative-based one. • (Perceived ease of use, perceived control) will decrease in the alternative-based interface but will remain constant in the attribute-based interface as variety increases.

11. The User • Computer anxiety and computer playfulness will moderate the effect of interface on customer experience • Hypotheses: • Overall, the difference in (perceived control, perceived usefulness, perceived ease of use, enjoyment) between using the attribute-based and using the alternative-based interfaces will be larger for users with low computer anxiety than for those with high computer anxiety. • Overall, the difference in (perceived control, perceived usefulness, perceived ease of use, enjoyment) between using the attribute-based and using the alternative-based interfaces will be larger for users with high computer playfulness than for those with low computer playfulness.

12. Methodology • 2x2x3 factorial design • Interface: Alternative – Attribute • Product: Watch – Backpack • Variety: 8 – 54 – 150 possible product versions • Web pages created by researchers from NikeID.com and Factory121.com with no brand identifiers

16. Methodology • Baseline experience: • Subjects used all three interfaces (including a question-based one) at 54-scale to customize a candle • Then randomly assigned to one of 12 conditions • Told that they may win customized watch or backpack (incentive) • At the end, filled out survey on their experience and themselves

17. Data Analysis • 329 subjects recruited online through Zoomerang’s MarketTools • Nationally representative sample • Ran CFA with AMOS 4.0 to test validity and reliability of survey instrument • Ran ANCOVAs to test hypotheses • Covariates: Product Involvement and Web Skills

18. Results Mean differences are significant at p<0.001 Hypotheses supported: Overall, attribute-based interface provides a better customer experience than alternative-based interface.

19. Results Main effect of variety significant at p<0.01 Hypothesis supported: Enjoyment follows inverted U-shaped curve as variety increases Interaction effect of interface and variety not significant

20. Results Interaction effect of interface and variety significant at p<0.01 Hypothesis supported: Perceived control decreases as variety increases in alternative-based interface but remains constant in attribute-based interface

21. Results Interaction effect of interface and variety significant at p<0.05 Hypothesis supported: Perceived ease of use decreases as variety increases in alternative-based interface but remains constant in attribute-based interface

22. Results Categorized computer anxiety into low-medium-high and excluded medium Interaction effect of interface and computer anxiety significant at at least p<0.05 Hypotheses partially supported: Computer anxiety moderates effect of interface on (a) enjoyment and (b) perceived usefulness (but not perceived control or perceived ease of use)

23. Results Categorized computer playfulness into low-medium-high and excluded medium Interaction effect of interface and computer playfulness significant at p<0.05 for p. control and significant only at variety=150 for p. ease of use Hypotheses partially supported: Computer playfulness moderates effect of interface on (a) perceived control and (b) perceived ease of use at high variety levels (but not perceived usefulness or enjoyment)

24. Contributions • Theory/Research: • Attribute-based decision-making tool best for constructed preferences • Appropriateness of attribute-based tool increases with task complexity • Verified core ideas of TTF in context of online mass customization, including often ignored user characteristics • Reduction in cognitive effort in online user tasks may outweigh reduction in physical effort • Computer anxiety affects perceptions on outcome while computer playfulness affects perceptions on process

25. Contributions • Practice/Industry: • Increase in variety of products without appropriate tools to make decisions can have negative effect • Not all customers are the same – More powerful interface is often also more complex, overwhelming some customers • Since computer anxiety affects perceptions regarding outcome, always provide ways to backtrack or undo actions

26. Future work • Part of a larger study • Look at question-based interface • Impact on behavioral intention • Other user characteristics: personal innovativeness in IT • Suggestions for further research • Study other products, especially experiential ones with non-visual attributes • Examine variety at a more detailed level

27. Questions? Comments? Marios Koufaris Department of Statistics and Computer Information Systems Zicklin School of Business Baruch College, CUNY marios_koufaris@baruch.cuny.edu