A game-theoretical analysis of mass customization strategy on conspicuous products

Conspicuous brands have started to offer mass customization services, which enables consumers to customize their exclusive products by making aesthetic decisions such as color and fabric. However, less attention has been paid to the mass customization of conspicuous products, which could lead to unsuitable product decisions and pricing strategy, and then bring financial risks to the brand. Different from mainstream products, consumers of conspicuous products care not only about product quality, but also about its added value. Based on the conspicuous consumption behavior of consumers (exclusivity and conformity), this paper proposes a Hotelling model of conspicuous products' mass customization using a rational expectation framework, and investigate different mass customization strategies in both monopoly and duopoly markets. The results show that the increase of conformity reduces the pricing of both the standard and mass-customized products, while the increase of exclusivity raises the pricing of the both products. By comparing equilibrium results in different market environments, we also find whether the mass customization strategy is profitable is related to product cost. This paper reveals how the introduction of mass customization affects brand decision-making in monopolistic and duopolistic markets and analyzes the importance of considering consumers' conspicuous consumption behavior in pricing. The findings provide a theoretical basis and practical guidance for conspicuous brands to develop more suitable mass customization strategies.