How to design personalization in a context of customer retention: Who personalizes what and to what extent?

Personalization is a strategic tool for product or service differentiation, especially when competition is keen in the market. Many personalization strategies have been developed and realized with this in mind. Little is known about the impact of different personalization strategies, regarding different personalization dimensions on customer retention, however. This has resulted in a lack of consensus on how best to design personalization strategies. To address the related issues, this study identifies the dimensions of personalization, and investigates the effect of each dimension on customer retention. It does so by implementing actual personalization systems corresponding to two factorial design experiments involving 372 participants. Multiple analysis of covariance reveals the effectiveness of each dimension and interactions among them. This study consequently proposes the optimal combination of personalization dimensions that leads to customer satisfaction and loyalty. (C) 2011 Elsevier B.V. All rights reserved.