Enabling individualized recommendations and dynamic pricing of value-added services through willingness-to-pay data

K. Backhaus, J. Becker, D. Beverungen, M. Frohs, O. Müller, M. Weddeling, R. Knackstedt, M. Steiner, Electronic Markets (2010) 131--146.

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Journal Article | English
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Abstract
When managing their growing service portfolio, many manufacturers in B2B markets face two significant problems: They fail to communicate the value of their service offerings and they lack the capability to generate profits with value-added services. To tackle these two issues, we have built and evaluated a collaborative filtering recommender system which (a) makes individualized recommendations of potentially interesting value-added services when customers express interest in a particular physical product and also (b) leverages estimations of a customer’s willingness to pay to allow for a dynamic pricing of those services and the incorporation of profitability considerations into the recommendation process. The recommender system is based on an adapted conjoint analysis method combined with a stepwise componential segmentation algorithm to collect individualized preference and willingness-to-pay data. Compared to other state-of-the-art approaches, our system requires significantly less customer input before making a recommendation, does not suffer from the usual sparseness of data and cold-start problems of collaborative filtering systems, and, as is shown in an empirical evaluation with a sample of 428 customers in the machine tool market, does not diminish the predictive accuracy of the recommendations offered.
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Journal Title
Electronic Markets
Issue
2
Page
131--146
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Backhaus K, Becker J, Beverungen D, et al. Enabling individualized recommendations and dynamic pricing of value-added services through willingness-to-pay data. Electronic Markets. 2010;(2):131--146.
Backhaus, K., Becker, J., Beverungen, D., Frohs, M., Müller, O., Weddeling, M., … Steiner, M. (2010). Enabling individualized recommendations and dynamic pricing of value-added services through willingness-to-pay data. Electronic Markets, (2), 131--146.
@article{Backhaus_Becker_Beverungen_Frohs_Müller_Weddeling_Knackstedt_Steiner_2010, title={Enabling individualized recommendations and dynamic pricing of value-added services through willingness-to-pay data}, number={2}, journal={Electronic Markets}, author={Backhaus, Klaus and Becker, Jörg and Beverungen, Daniel and Frohs, Margarethe and Müller, Oliver and Weddeling, Matthias and Knackstedt, Ralf and Steiner, Michael}, year={2010}, pages={131--146} }
Backhaus, Klaus, Jörg Becker, Daniel Beverungen, Margarethe Frohs, Oliver Müller, Matthias Weddeling, Ralf Knackstedt, and Michael Steiner. “Enabling Individualized Recommendations and Dynamic Pricing of Value-Added Services through Willingness-to-Pay Data.” Electronic Markets, no. 2 (2010): 131--146.
K. Backhaus et al., “Enabling individualized recommendations and dynamic pricing of value-added services through willingness-to-pay data,” Electronic Markets, no. 2, pp. 131--146, 2010.
Backhaus, Klaus, et al. “Enabling Individualized Recommendations and Dynamic Pricing of Value-Added Services through Willingness-to-Pay Data.” Electronic Markets, no. 2, 2010, pp. 131--146.

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