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Network-based analyses have effectively understood customer preferences through interactions between customers and products, particularly for tailored product design. However, research applying this analysis to diverse customers with varied preferences is limited. This paper introduces a market-segmented network modeling approach, guided by customer preference, to explore heterogeneity in customers’ two-stage decision-making process: consideration-then-choice. In heterogeneous markets, customers with similar characteristics or purchasing similar products can exhibit different decision-making processes. Therefore, this method segments customers based on preferences rather than just characteristics, allowing for more accurate choice modeling. Using joint correspondence analysis, we identify associations between customer attributes and preferred products, characterizing market segments through clustering. We then build individual bipartite customer–product networks and apply the exponential random graph model to compare the product features influencing customer considerations and choices in various market segments. Using a US household vacuum cleaner survey, our method detected different customer preferences for the same product attribute at different decision-making stages. The market-segmentation model outperforms the non-segmented benchmark in prediction, highlighting its accuracy in predicting varied customer behaviors. This study underscores the vital role of preference-guided segmentation in product design, illustrating how understanding customer preferences at different decision stages can inform and refine design strategies, ensuring products align with diverse market needs.
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A network-based discrete choice model for decision-based design
Abstract Customer preference modelling has been widely used to aid engineering design decisions on the selection and configuration of design attributes. Recently, network analysis approaches, such as the exponential random graph model (ERGM), have been increasingly used in this field. While the ERGM-based approach has the new capability of modelling the effects of interactions and interdependencies (e.g., social relationships among customers) on customers’ decisions via network structures (e.g., using triangles to model peer influence), existing research can only model customers’ consideration decisions, and it cannot predict individual customer’s choices, as what the traditional utility-based discrete choice models (DCMs) do. However, the ability to make choice predictions is essential to predicting market demand, which forms the basis of decision-based design (DBD). This paper fills this gap by developing a novel ERGM-based approach for choice prediction. This is the first time that a network-based model can explicitly compute the probability of an alternative being chosen from a choice set. Using a large-scale customer-revealed choice database, this research studies the customer preferences estimated from the ERGM-based choice models with and without network structures and evaluates their predictive performance of market demand, benchmarking the multinomial logit (MNL) model, a traditional DCM. The results show that the proposed ERGM-based choice modelling achieves higher accuracy in predicting both individual choice behaviours and market share ranking than the MNL model, which is mathematically equivalent to ERGM when no network structures are included. The insights obtained from this study further extend the DBD framework by allowing explicit modelling of interactions among entities (i.e., customers and products) using network representations.
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- PAR ID:
- 10416556
- Date Published:
- Journal Name:
- Design Science
- Volume:
- 9
- ISSN:
- 2053-4701
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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- Free Publicly Accessible Full Text
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Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1017/dsj.2023.4
