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The product is me: Hyper-personalized consumer goods as unconventional luxury
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The product is me: Hyper-personalized consumer goods as unconventional luxury ⁎
Mark S. Rosenbauma, , Germán Contreras Ramirezb, Jeffrey Campbella, Philipp Klausc a
Department of Retailing, University of South Carolina, Columbia, SC 29208, United States of America Center for Marketing Director, Externado University, Bogota, Colombia c Department of Marketing, International University of Monaco, INSEEC Research Center, Monaco b
A R T I C LE I N FO
A B S T R A C T
Keywords: Hyper-personalization Nutrigenomics Luxury Unconventional luxury Wellness Consumer goods
This study explores hyper-personalized wellness products (e.g., facial serum, custom-prepared meals, vitamins) as unconventional luxury products. Hyper-personalized consumer goods are those in which a consumer's genetic composition, or DNA, is used in the manufacturing process. Given that hyper-personalized products emphasize high quality and uniqueness and garner premium prices, this study conceptualizes these products as representing contemporary, unconventional luxury. Three studies empirically demonstrate the extent to which consumers allocate price premiums to three different hyper-personalized consumer products in terms of functionally compared with a mass-produced equivalent. The results reveal that consumers believe that hyper-personalized products are worth premium prices, regardless of their desire to own these products. Whether hyper-personalized products are truly more beneficial to consumer well-being than their mass-produced counterparts remains unknown however. The article concludes with theoretical and research implications, as well as research directives.
1. Introduction Research on luxury goods is synonymous with investigatory studies on distinctive goods, prestigious brands, and the symbolic prowess of luxury products and brands in terms of their ability to provide consumers with a means to publicly demonstrate their wealth and status to others (Han, Nunes, & Drèze, 2010). This traditional investigatory perspective suggests that luxury goods are social markers that help consumers define themselves to others in the public realm. Kapferer and Bastien (2009, p. 314) expand on the social stratification capabilities of luxury goods, stating that the “DNA of luxury … is the symbolic desire, albeit often repressed, [of people] to belong to a superior class…. [A] nything that can be a social signifier can become a luxury.” Luxury is well apparent in human history and corresponds to the earliest history of society's elites. High-quality, intricate, and bejeweled items appearing in temples, churches, pagodas, Egyptian pyramids, and the like, were tributes to gods or other esteemed and omniscient forces (Kapferer, 2012). The desire to own and display luxury goods may even be part-and-parcel of humankind's biological narrative, as conspicuous consumption appears to be an integral part of a signaling system that is readily employed in human mating rituals to reap reproduction success
(Sundie et al., 2011). Despite the so-called DNA of luxury being closely intermingled with the origins of human history (Brun & Castelli, 2013), popular press suggests that the way consumers use luxury goods in their daily lives is changing. Chamberlain (2018) argues that the traditional “one-size-fitsall” approach employed by luxury manufacturers no longer resonates with contemporary consumers, who increasingly desire personalized luxury products and services. For example, despite the famed historical significance of the Louis Vuitton Speedy handbag (Freire, 2014), with its timeless design and iconic status (Sugimoto & Nagasawa, 2017), the company is now allowing customers to add personalized aspects such as self-selected, hand-painted letters and stripes (Borstrock, 2018). Similarly, Fendi now offers customers 120 different personalization options of its famed Kan I F bag (Arthur, 2017). Lacoste permits customers to personalize aspects of its classic polo shirt, and Ralph Lauren allows customization of some apparel styles. These are just a handful of examples of personalization options that often help purchasers of luxury goods placate any questions of product authenticity from others when they display their goods in public (Bian, Wang, Smith, & Yannopoulou, 2016). Outside the traditional luxury goods market, other high-end
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Corresponding author. E-mail addresses: [email protected] (M.S. Rosenbaum), [email protected] (G.C. Ramirez), [email protected] (J. Campbell), [email protected] (P. Klaus). https://doi.org/10.1016/j.jbusres.2019.05.017 Received 11 February 2019; Received in revised form 14 May 2019; Accepted 15 May 2019 0148-2963/ © 2019 Elsevier Inc. All rights reserved.
Please cite this article as: Mark S. Rosenbaum, et al., Journal of Business Research, https://doi.org/10.1016/j.jbusres.2019.05.017
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aspirational membership groups while avoiding perceived out-groups (Escalas & Bettman, 2003, 2005; Khalifa & Shukla, 2017). Indeed, given that luxury goods and brands help consumers signal self-identity and personal characteristics to others (Berger & Ward, 2010), luxury sales professionals now often help consumers engage in self-discovery regarding how they should intermingle luxury goods, brands, and their meanings into their personal and public identities (Wu, Cutright, & Fitzsimons, 2011). Although ample research shows the desire of consumers to display luxury goods (Joy, Belk, Wang, & Sherry, 2018), considerably less is known about a segment of consumers who are intrinsically motivated to own superior quality goods for their self-directed pleasure but also to consume them in the private realm (Truong & McColl, 2011). That is, luxury is increasingly developing into a so-called inconspicuous state in which brands are subtly displayed (e.g., minimally sized logos; Berger & Ward, 2010) or non-existent for public display, forcing consumers to derive value from luxury goods entirely in the private (vs. public) realm (Eckhardt, Belk, & Wilson, 2015). This unorthodox or unconventional view of luxury leads Eckhardt et al. (2015, p. 812) to conclude that the “inconspicuous is the new conspicuous.” Researchers have begun considering the confluence of technology (e.g., fitness tracking) with luxury retailing in consumers' pursuit of an improved quality of life (Varadarajan et al., 2010). For example, luxury is increasingly about consumers using goods and services to fashion high-quality lives, with their consumption intentions focused on improving a private sense of self rather than employing products in the public realm to reap social accolades (Truong, 2010). This change in consumer sentiment toward luxury is profound, as luxury goods have traditionally garnered brand equity by relying on rarity as a form of exclusivity (De Barnier, Falcy, & Valette-Florence, 2012; Kapferer & Laurent, 2016). Furthermore, rarity usually stems from manufacturers' limiting production or distribution or imposing continual price increases; however, affordable and convenient genomic technology permits consumer goods manufacturers to foster product rarity from an unorthodox perspective—by using customer-specific DNA in the production process (Boland, 2008). That is, some consumer goods manufacturers are using a person's DNA sequence to create products that specifically address that person's unique bodily needs by, for example, targeting supplemental and nutritional deficiencies or formulating moisturizers and serums that address the personal predisposition to wrinkles or collagen loss. By meeting consumers' needs at the molecular level, luxury has shifted from a top-down approach (i.e., corporations control luxury perceptions through manufacturing) to a bottom-up approach, in which customers give corporate entities their DNA for use in the product manufacturing process (King, 2013).
consumer goods manufacturers, particularly in the nutrition, health, and beauty industries, are also aligning their marketing strategies with personalization (Rosenbaum et al., 2017). However, unlike luxury apparel and accessories manufacturers that allow customers to manipulate certain design features as a personalization strategy, consumer goods manufactures are creating personalized products based on customers' genetic composition and charging price premiums for doing so. Rosenbaum et al. (2017) refer to the personalization of consumer goods based on a person's unique DNA, which is typically obtained through saliva, as the “hyper-personalization” of products, which retail pundits believe will soon be altering the fitness, health, and beauty industries (Cutter, 2017). The consumer health, beauty, and nutrition industries, which all encompass the wellness industry, traditionally appear in luxury research (Park & Reisinger, 2009), with advances in wellness technologies continuing to inextricably link wellness, and its related fields, with conspicuous consumption (Clarke, Azara, & Michopoulou, 2018). We argue that hyper-personalization, with its emphasis on high quality, uniqueness, and price premiums, represents unconventional luxury. Cova and Saucet (2014) conceptualize unconventional marketing as any transformational approach targeting consumers and questioning entrenched assumptions of marketing. Given the myriad sociological, economic, and marketing perspectives of luxury goods and brands, defining luxury can be challenging. However, the current research draws on Tynan, McKechnie, and Chhuon's (2010, p. 1158) definition of luxury as “high quality, expensive and non-essential products and services that appear to be rare, exclusive, prestigious, and authentic and offer high levels of symbolic and emotional/hedonic values through customer experiences.” We also extend Tynan et al.'s (2010) definition by conceptualizing hyper-personalized products as those that are also unique, prestigious, and authentic to consumers because the manufacturing process is partially based on their genetic composition. Luxury is traditionally associated with high-end apparel, accessories, jewelry/watches, crystal, automobiles, wine, and so forth (Brun & Castelli, 2013). Today, many consumer goods manufacturers, such as Habit (i.e., nutrition), Geneu (i.e., cosmetics), and Vitagene (i.e., vitamins), are purveyors of unconventional luxury goods, as they offer products to consumers that are based on their unique DNA. This research breaks original ground in marketing in two distinct ways. First, this research brings hyper-personalization into the luxury paradigm by focusing on nutrition, health, and beauty products. Second, this work demonstrates the price premiums that consumers attribute to hyper-personalized products compared with their massproduced counterparts. As such, this work provides hyper-personalized goods manufacturers with novel insights into the extent to which consumers value their products and shows that they can realize lofty profit margins by manufacturing products using consumers' DNA. We begin this paper with a discussion of hyper-personalized products and how they are altering the luxury consumer goods market. Next, we put forward research questions that bring new insights to the unconventional luxury paradigm by exploring the price premiums that consumers attribute to hyper-personalized products. We address these research questions with data gathered from a convenience sample of mall shoppers. We conclude with theoretical and managerial implications.
2.1. Defining hyper-personalization Although marketing literature often uses the terms “personalization” and “customization” interchangeably, these two concepts are quite different (Miceli, Ricotta, & Costabile, 2007; Sunikka & Bragge, 2012). Personalization refers to the interaction of customer and supplier inputs during the manufacturing process, such as when a customer puts his or her initials on a purchased Vuitton handbag or a Gucci customer selects finite options to add to a tote. By contrast, customization refers to consumers' ability to modify and, thus, to individually create a supplier's products or services depending on their individual desires (Da Silveira, Borenstein, & Fogliatto, 2001). In the consumer goods domain, customization allows a customer to filter a set of objects or choices provided by an organization (e.g., upgrades during new home construction), while personalization results in a supplier creating a specific good or service for a customer (e.g., a personalized yacht). Hyper-personalization appears to be the next step in connectivity between customers and suppliers, encompassing both customization and personalization options. The interaction of customers and
2. Hyper-personalization as unconventional luxury Luxury investigatory studies typically draw on factors such product quality, brand and class status, price, or perceived exclusivity and attempt to empirically or descriptively relate them to consumers' behaviors, attitudes, and overall consumption experiences (Han et al., 2010; Yeoman, 2011). The luxury paradigm includes consumers' purchase of luxury goods as a way to help them create and sustain a public identity (Belk, 1988; Kastanakis & Balabanis, 2012), as the ownership of luxury goods represents a means for consumers to foster affiliations with 2
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nutrition, and vitamins:
organizations during the manufacturing process is no longer based only on customers' informational inputs but also on their providing suppliers with their unique biological markers, including hair, saliva, or blood, for use in the product manufacturing process to fashion “personalizedat-one” goods (Rosenbaum et al., 2017; Subramanyan, 2014). For example, although the personalized nutrition manufacturer Habit uses consumer DNA to design individual nutrition plans, these plans are not necessarily truly customized, in that other consumers may be given a similar nutritional plan. Therefore, the term “hyper-personalized” captures a new type of personalization via DNA sequencing, while acknowledging that manufacturers may recommend similar products to consumers who share common biological markers. To date, most of the hyper-personalized products in the marketplace are in the wellness domain. A possible reason for this is that many hyper-personalized products may be filling a void caused by people shifting away from visiting a medical doctor for an annual physical to proactively monitoring their own health to take more control of their well-being (Peake, Kerr, & Sullivan, 2018). Hyper-personalized wellness products, such as custom-prepared meals and vitamins, may simply be a response to health-monitoring trends (Pantzar & Ruckenstein, 2015). Alternately, hyper-personalized wellness products may simply represent an attempt by consumers to actively participate in the manufacturing process of items they believe are integral to their health or beauty. Thus, some consumers may simply be purchasing and consuming items that they perceive to be of superior quality to massproduced versions, thereby enhancing their self-concept. This discussion leads us to question whether hyper-personalized consumer goods represent luxury goods. On the one hand, perhaps hyper-personalization is marketing hype, as consumers are increasingly viewing customization and personalization opportunities in the marketplace as prerequisite for business. For example, consumers increasingly expect customized media content and personalized shopping options (Cho & Fiorito, 2009; Donnelly & Wright, 2017). In addition, they are increasingly willing to provide organizations that they trust with their sensitive data (Martin & Murphy, 2017), to the point of giving companies their DNA. On the other hand, luxury experts suggest that authentic luxury goods cannot be mass produced (Kapferer & Laurent, 2016), and hyperpersonalized products represent the converse of mass production. Additionally, contemporary researchers suggest that luxury is inextricably linked to “desire of excellent quality, sustainable creativity, ultimate excellence, and meaningfulness…” (Cristini, Kauppinen-Räisänen, Barthod-Prothade, & Woodside, 2017, p. 105). Thus, product uniqueness has the potential to propel hyper-personalized products to luxury status as a consumer's DNA may yield products of excellent quality, which are creative, purposefully excellent, and meaningful based upon one's genetic narrative. Yet a deciding factor may be the extent to which consumers are willing to pay price premiums for hyper-personalized products compared with mass-produced versions. Indeed, price premiums are a fundamental aspect, albeit not the only one, of determining whether a consumer good represents a luxury item, especially when lower-cost substitutes that work equally well or better than the higherpriced version are readily available in the marketplace (Han et al., 2010; Li, Li, & Kambele, 2012).
RQ1: Are consumers interested in purchasing hyper-personalized wellness products such as (a) facial serum, (b) custom-prepared meals, and (c) vitamins? RQ2: Do consumers attribute price premiums to hyper-personalized wellness products such as (a) facial serum, (b) custom-prepared meals, and (c) vitamins when compared with their mass-produced counterparts? 3. Experimental studies 3.1. Study 1 One hundred participants (Mage = 27.40, SDage = 8.02; age range: 18–53 years) took part in this study. We recruited participants from a convenience sample of shoppers at a high-end mall at various times during operational hours. The mall features luxury stores and boutiques and is located in an exclusive section of a large Latin American city. Each participant received a small tote bag from the mall for taking part in the study. The sample consisted of 50 Latino women and 50 Latino men. In terms of the participants' income, Colombia maintains a socioeconomic stratification system which divides all cities in the country into high- and low-income neighborhoods; the system classifies residential locales on a scale from 1 (lowest-income area) to 6 (highestincome area, International Federation for Housing and Planning, 2019). Therefore, in Study 1, 1 participant was in strata 1 (1%); 17 were in strata (17%); 46 (46%) were in strata 3; 28 (28%) were in strata 4; 5 (5%) were in strata 5, and 3 (3%) did not respond to the question. We randomly selected 50 participants (25 men and 25 women) to read an informational pamphlet about a facial serum (see Fig. 1). We then randomly selected another 50 participants (25 men and 25 women) and asked them to read a pamphlet about the same facial serum; however, in this case, the customer needed to provide the company with a saliva swab and mail in the swab and then would receive a hyper-personalized serum based on his or her DNA. The informational pamphlet also featured a small logo of a DNA strand and a tagline that read, “unique for your DNA.” In this study, 50 participants fell into the control and experimental group respectively, resulting in 80% power, the minimum suggested for an ordinary study (Cohen, 1988; UCSF, 2017). 3.2. Measures We measured a participant's willingness to purchase the facial serum with four statements adapted from Dodds, Monroe, and Grewal (1991). Each participant rated his or her degree of agreement (1 = “strongly disagree,” 7 = “strongly agree”) with the four statements: “If I was going to purchase this kind of serum, I would consider buying this product in particular”; “If I were shopping for this serum, the likelihood I would purchase this brand is high”; “My willingness to buy this serum would be high if I were shopping for this type of product”; and The probability I would consider buying this product is high. To determine the extent of price premiums between the hyperpersonalized and mass-produced facial serums, we drew on the Van Westendorp's Price Sensitivity Meter (Khandker & Joshi, 2018). This meter constructs a range of acceptable prices that consumers would consider when purchasing a given product by asking four questions:
2.2. Research questions The goal of this research is to explore whether hyper-personalized products represent “unconventional” luxury goods by investigating the extent to which consumers are willing to pay a so-called equity premium (Aït-Sahalia, Parker, & Yogo, 2004), which represents the premium price charged by a luxury product compared with its mass-produced counterpart. Given the dearth of research on hyper-personalized products, the goal of this research is to engage in an exploratory study on price premiums. More specifically, this research empirically asks the following questions by exploring hyper-personalized cosmetics,
1. At what price would you begin to think the item is too expensive to consider purchasing? 2. At what price would you begin to think the item is so inexpensive that you would question the quality and not consider purchasing it? 3. At what price would you begin to think the item is getting expensive, but you still might consider purchasing it? 4. At what price would you think the item is a bargain – a great buy for 3
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4
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Fig. 1. Experimental stimuli: Hyper-personalized and mass-produced product informational sheets.
Table 1 Means and standard deviations of pricing options. Mass-produced Facial serum I would consider purchasing this kind of product. The likelihood that I would purchase this brand is high. My willingness to buy this product would be high if I were shopping for this type of product. The probability I would consider buying this product is high. Price sensitivity analysis At what price would you begin to think the item is too expensive to consider? At what price would you begin to think the item is so inexpensive that you would question the quality and not consider it? At what price would you begin to think the item is getting expensive but you still might consider it? At what price is the product a bargain? Meal plan I would consider purchasing this kind of product. The likelihood that I would purchase this brand is high. My willingness to buy this product would be high if I were shopping for this type of product. The probability I would consider buying this product is high. Price sensitivity analysis At what price would you begin to think the item is too expensive to consider? At what price would you begin to think the item is so inexpensive that you would question the quality and not consider it? At what price would you begin to think the item is getting expensive but you still might consider it? At what price is the product a bargain? Vitamin package I would consider purchasing this kind of product. The likelihood that I would purchase this brand is high. My willingness to buy this product would be high if I were shopping for this type of product. The probability I would consider buying this product is high. Price sensitivity analysis At what price would you begin to think the item is too expensive to consider? At what price would you begin to think the item is so inexpensive that you would question the quality and not consider it? At what price would you begin to think the item is getting expensive but you still might consider it? At what price is the product a bargain?
5.58 5.36 5.34 5.40
(1.26)⁎ (1.17)⁎ (1.44)⁎ (1.26)⁎
$49.39 ($45.71) $ 5.54 ($10.08)⁎⁎⁎ $ 29.64 ($34.14)⁎⁎ $ 17.35 ($28.14)⁎⁎ 3.34 3.06 2.96 3.04
(0.72) (0.77) (0.76) (0.76)
$84.36 ($18.53)⁎⁎⁎ $40.99 ($8.26)⁎⁎⁎ $109.48 ($16.03)⁎⁎⁎ $59.06 ($10.84)⁎⁎⁎ 4.65 4.61 4.71 4.57
(1.55) (1.29) (1.32) (1.29)
$42.20 ($5.51)⁎ 7.90 ($1.18)⁎ $27.28 ($6.08)⁎ $13.98 ($2.74)⁎⁎
Hyper-personalized
4.74 4.22 4.38 4.06
(1.35) (1.45) (1.51) (1.72)
$ 59.40 ($43.88) $ 12.57 (29.45) $ 46.62 ($53.68) $ 23.84 ($25.37) 3.46 3.08 2.78 3.04
(0.86) (0.72) (1.02) (1.05)
$102.74 ($10.80) $ 47.68 ($8.51) $125.74 ($12.75) $72.61 ($9.58) 5.12 4.84 5.00 4.98 $56.21 $10.57 $45.33 $23.43
(1.17) (1.11) (1.25) (1.33) ($5.51) ($1.18) ($6.08) ($2.74)
⁎⁎⁎ ⁎⁎ ⁎
p < .001. p < .01. p < .05.
both the mass-produced and hyper-personalized facial serum products significantly differed. The Mann–Whitney U test is optimal to the independent-samples t-test when the normality assumption is violated and the non-normal distribution is heavily skewed (Green & Salkind, 2011). The test result that addresses the question about the price at which a participant would begin to think the facial serum is too expensive to consider purchasing was not significant (z = 1.62, ns). The data show that the average price at which the participants considered the massproduced formula serum too expensive to purchase was slightly under $50 (M = $49.39), compared with the hyper-personalized price, which was almost $10 higher (M = $59.40). Although the price difference did not significantly differ, on average, the participants valued the hyperpersonalized facial serum nearly $10 above the mass-produced formula before deeming the price too expensive to consider purchasing, which indicates a 20% price premium. The results of the test that addresses the question about the price at which a participant would begin to think that the facial serum is so inexpensive that he or she would question the quality and not consider purchasing it was significant (z = 3.86, p < .001). The participants attributed a price of slightly more than $5 (M = $5.54) to the massproduced facial serum and a price of nearly $13 ($12.57) to the hyperpersonalized version. In other words, participants credited a price premium of 127% to the hyper-personalized facial serum, before they began questioning the serum's quality. The result of the third test, which addresses the question about the price at which a participant would begin to reason that the facial serum is getting expensive but still might consider purchasing it, was
the money? We converted the prices into U.S. dollars at the daily exchange rate for ease of reading. Last, the participants provided their gender and date of birth. 3.3. Results for facial serum A one-way multivariate analysis of variance (MANOVA) tested the effect of hyper-personalization versus mass production on four dependent variables that evaluated a participant's willingness to purchase the facial serum. We found significant differences between the mass-produced and hyper-personalized products on the dependent measures (Wilks's Λ = F(4, 95) = 5.57, p < .001, η2 = 0.19). Table 1 contains the means and the standard deviations of the dependent variables for the serum types. We conducted analyses of variance (ANOVAs) on the dependent variable as follow-up tests to the MANOVA. Using the Bonferroni method, we tested each ANOVA at the 0.0125 level (0.05/4). The ANOVAs on each of four “willingness-to-purchase” statements were significant: “I would consider purchasing” (F(1, 98) = 10.30, p < .01, η2 = 0.10), “likelihood I would purchase” (F(1, 98) = 18.72, p < .01, η2 = 0.16), “I would be willing to buy” (F(1, 98) = 10.60, p < .01, η2 = 0.10), and “I probably would buy” (F(1, 98) = 19.74, p < .001, η2 = 0.17). Overall, the informants expressed a preference for buying the mass-produced facial serum over the hyper-personalized version. We conducted four Mann–Whitney U tests to evaluate whether the average acceptable prices that participants would consider paying for 5
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Thus, participants attributed a 23% premium to the hyper-personalized meals.
significant (z = 2.93, p < .01). That is, participants attributed a price of $30 (M = $29.64) to the mass-produced facial serum and $16 more to the hyper-personalized version ($46.62) as the top of their price acceptability range. Thus, participants attributed a 57% price premium to the hyper-personalized facial serum. The result of the fourth test, which addresses the question about the price at which a participant would begin to think that the facial serum is a bargain was significant (z = 2.93, p < .01). The participants considered a price of $17 (M = $17.35) for the mass-produced serum a bargain but considered the hyper-personalized version a bargain at $24 (M = $23.84). Thus, participants attributed a 37% price premium to the hyper-personalized facial serum.
3.5. Study 3 One hundred participants (Mage = 24.91, SDage = 9.09; age range: 18–55 years) took part in this study. We recruited participants from a convenience sample of shoppers at the same mall as in Studies 1 and 2. Each participant received a tote bag for taking part in the study. The sample consisted of 50 Latino women and 50 Latino men. 1 (1%) participant was from strata 1; 9 (9%) were from strata 2; 58 (58%) were from strata 3; 21 (21%) were from strata 4; 8 (8%) were from strata 5, and 3 (3%) were from strata 6. We randomly selected 50 participants (25 men and 25 women) to read an informational pamphlet about vitamins (e.g., nutritional supplements) (see Fig. 1). We randomly selected another 50 participants (25 men and 25 women) and asked them to read a pamphlet about the same vitamins; however, in this case, the customer needed to provide the company with a saliva swab and mail in the swab and then would receive hyper-personalized vitamins based on his or her DNA. This informational pamphlet also featured a small logo of a DNA strand and a tagline that read, “unique for your DNA.” Study 3 used the same measures as in Studies 1 and 2. A one-way MANOVA tested the effect of hyper-personalization versus mass-production on four dependent variables that evaluated a participant's willingness to purchase vitamins. The results revealed that there were no significant differences between the mass-produced and hyper-personalized version of the vitamins on any of the dependent measures. Overall, the participants were equally enthusiastic about purchasing both versions of vitamins. The test result that addresses the price at which a participant would begin to think that the vitamins are too expensive to consider purchasing was significant (z = 2.69, p < .05). The data show that the average price at which the participants considered the mass-produced vitamins too expensive to purchase was slightly more than $40 (M = $42.20), compared with the hyper-personalized price, which was approximately $14 higher (M = $56.21). Therefore, participants allocated a 33% price premium to the hyper-personalized vitamins before deeming them too expensive. The results of the test that addresses the price at which a participant would begin to think that the vitamins are so inexpensive that he or she would question the quality and not consider purchasing them, was significant (z = 2.43, p < .05). The participants attributed a price of approximately $8 (M = $7.90) to the mass-produced vitamins and a price of nearly $11 ($10.57) to the hyper-personalized version. In other words, participants attributed a price premium of 34% to the hyperpersonalized vitamins. The result of the third test, which addresses the price at which a participant would begin to think that the vitamins are getting expensive but still might consider purchasing them, was significant (z = 2.50, p < .05). Participants attributed a price of $27 (M = $27.28) to the vitamins and $18 more to the hyper-personalized version (M = 45.33) as the top of their price acceptability range. Thus, participants attributed a 66% price premium to the hyper-personalized vitamins. The result of the fourth test, which addresses the price at which a participant would think that the vitamins are a bargain, was significant (z = 2.07, p < .01). The participants considered a price of $14 (M = $13.98) for the mass-produced vitamins a bargain but considered the hyper-personalized version a bargain at $23 (M = $23.43). Participants attributed a 67% price premium to the hyper-personalized vitamins.
3.4. Study 2 One hundred participants (Mage = 26.52, SDage = 4.79; age range: 19–37 years) participated in this study. We recruited participants from a convenience sample of shoppers at the same mall as in Study 1. Each participant received a tote bag from the mall for participating in the study. The sample consisted of 50 Latino women and 50 Latino men. 27 (27%) of the participants were from strata 2; 48 (48%) were from strata 3, and 25 (25%) were from strata 4. We randomly selected 50 participants (25 men and 25 women) to read an informational pamphlet about five home-delivered meals (see Fig. 1). We randomly selected another 50 participants (25 men and 25 women) and asked them to read a pamphlet about the same five meals; however, in this case, the customer needed to provide the company with a saliva swab and mail in the swab and then would receive hyperpersonalized meals based on his or her DNA. The informational pamphlet also featured a logo of a DNA strand and a tagline that read, “unique for your DNA.” Study 2 used the same measures as in Study 1. A one-way MANOVA tested the effect of hyper-personalization versus mass production on four dependent variables that evaluated a participant's willingness to purchase five custom-prepared meals. The results revealed that there were no significant differences between the mass-produced and hyper-personalized version of the meal plan on any of the dependent measures. The test result that addresses the price at which a participant would begin to contemplate that the meal plan is too expensive to consider purchasing was significant (z = 2.07, p < .001). The data show that the average price at which the participants considered the mass-produced meal plan too expensive to purchase was under $85 (M = $84.36), compared with the hyper-personalized price, which was $20 higher (M = $102.74). Therefore, despite their reluctance to purchase the five meals, participants allocated a 22% price premium to the hyper-personalized meals. The results of the test that addresses the price at which a participant would begin to think that the meal plan is so inexpensive that he or she would question the quality and not consider purchasing it was significant (z = 2.43, p < .001). The participants attributed a price of slightly more than $40 (M = $40.99) to the mass-produced meals and a price increase of nearly $8 ($47.68) to the hyper-personalized version. Therefore, participants attributed a price premium of 16% to the hyperpersonalized meal plan before they question quality. The result of the third test, which addresses the price that a participant would begin to think that the meal plan is getting expensive but still might consider purchasing it, was significant (z = 2.55, p < .001). Participants ascribed a price of $109 (M = $109) to the meal plan and $16 more to the hyper-personalized version ($125.74) as the top of their price acceptability range. In other words, participants attributed a 15% price premium to the hyper-personalized meals. The result of the fourth test, which addresses the price at which a participant would begin to think that the five meals is a bargain, was significant (z = 2.69, p < .001). The participants considered a price of $59 (M = $59.06) for the mass-produced meals a bargain but considered the hyper-personalized version a bargain at $72 (M = $72.61).
4. Conclusion About a decade ago, academic research began to realize that personalized consumer goods, due to the emergence of nutrigenomics and 6
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intimacy, privacy, and exclusivity by assuming a “life mate” role (Graffigna & Gambetti, 2015, p. 605). Indeed, hyper-personalization may permit organizations to build long-term relationships with their customers and to command premium prices from them. Therefore, we speculate that consumers goods companies will continue to jump on the ‘hyper-personalization’ bandwagon as new product development becomes customized for individual customers.
nutrigenetics, would result in radical innovations in food consumption, as consumers would be able to receive personalized dietary recommendations based on their own genetic variation (Fenech et al., 2011; Heiskanen et al., 2007). A decade later, hyper-personalization is now becoming a reality in consumer goods industries (Rosenbaum et al., 2017); however, the results presented here show that consumer enthusiasm toward these products remains indifferent. That is, middleof-the-road consumers seem to be on the sidelines concerning their willingness to purchase hyper-personalized products. The data presented here link hyper-personalization to the unconventional luxury paradigm by revealing the extent to which consumers attribute price premiums to hyper-personalized wellness products, including facial serums, custom-prepared meals, and vitamins. The reason that we use the term “unconventional” is that luxury research emphasizes consumer goods that are purchased for public prestige, or for consumers to exhibit their wealth, status, and power to others (Kastanakis & Balabanis, 2014; Truong, Simmons, McColl, & Kitchen, 2008). Our study demonstrates that hyper-personalized products can command premium prices and, by their very nature, represent exclusivity and quality by incorporating a consumer's DNA in the manufacturing process. Given that luxury is generally defined as containing aspects of exclusivity and high quality (Li et al., 2012), we believe that hyper-personalized products are representative of unconventional luxury. Indeed, we draw on Cristini et al. (2017) who put forth that luxury products are no longer defined as branded products for display but rather as goods and services that exude quality, creativity, excellence, and meaningfulness. We believe that product hyper-personalization based upon one's DNA meets these new luxury criteria.
4.2. Theoretical implications We encourage researchers to explore hyper-personalization as a form of conspicuous consumption. Perhaps “Veblen effects” (Bagwell & Bernheim, 1996, p. 349) exist, such that owners of hyper-personalized products not only exhibit a willingness to pay a higher price for a functionally equivalent good but also do so in a manner that advertises their wealth and social status. Owners of hyper-personalized goods may engage in word of mouth or promote their usage of goods via social media to win social accolades (Parguel, Delécolle, & Valette-Florence, 2016). Other hyper-personalized product owners may simply be intrinsically motivated to own the high-quality products (Shao, Grace, & Ross, 2019), such as those made with their own genetic material. We encourage researchers to explore whether consumers are driven to purchase hyper-personalized products as a type of “effort in value cocreation activities” (Sweeney, Danaher, & McColl-Kennedy, 2015, p. 318)—that is, a means by which consumers take part in managing their health (Deloitte, 2016). We also encourage researchers to examine whether consumers perceive the purported health aspects of hyperpersonalized products, which derive from a consumer's genetic composition, and whether this drives consumption.
4.1. Managerial implications 4.3. Research limitations In this study, we tested the extent to which consumers consider hyper-personalized goods a luxury, based upon their propensity to price hyper-personalized products. The results reveal that even when consumers fail to exhibit a willingness to purchase a hyper-personalized consumer good they are still likely to apply price premiums to the hyper-personalized version of the good over its mass-produced version. This finding implies that hyper-personalized products share a characteristic that is common in luxury products, such as fine wines. That is, a consumer's acceptance of a good or willingness to purchase the good does not influence their perception of a price premium attached to the good (Sjostrom, Corsi, & Lockshin, 2016). Although scientific research on consumer acceptance of hyper-personalized products is scant, de Vrieze et al. (2009) find that consumers will accept nutrigenomics in food products if they can see a true added benefit. A decade later, the value of hyper-personalized consumer goods as compared with their mass-produced counterpart remains unclear. Both academic researchers (Pavlidis, Patrinos, & Katsila, 2015) and consumer advocates (Meltzer-Warren, 2018) suggest that DNA-based nutrition is a promising but evolving science. Boland (2008, p. 56) suggests that increasing consumers' awareness of their individuality is driving the personalized nutrition industry, as nutrigenomics appeals to sophisticated consumers and “allows them to feel empowered and distinguished from the crowd.” However, Bowen, Battuello, and Raats (2005, p. 676) claim that home use of genetic testing is contemporary “snake oil,” comparable to unorthodox and unethical con artists who exploit an unsuspecting public by selling fake cures (Gandhi, 2013), as there is little oversight and regulation regarding the use of consumers' genetic material, a point that continues to remain true (Rosenbaum et al., 2017). Thus, hyper-personalization may represent nothing more than contemporary snake oil as it remains unknown whether genomics truly enhance a consumer's physiological well-being more than a mass-produced counterpart. However, hyper-personalization may represent a means for a consumers-goods manufacturer to establish a deep and authentic relationship with its customers by crafting a sense of
In terms of research limitations, we used an information pamphlet, but it is possible that ownership would have a greater influence a consumer's propensity to pay a price premium for hyper-personalized products. In addition, the experiments may have been enhanced to resemble more realistic marketplace conditions had we provided participants with sample products which they could then evaluate with their senses (Citrin, Stem, Spangenberg, & Clark, 2003). Further, we could have conducted qualitative inquiries, such as asking participants to provide one to two sentence insights regarding their pricing decisions, after gathering experimental data to offer managers, and academics alike, additional perspectives and sensitivity regarding the quantitative findings (Zeithaml, Bitner, & Gremler, 2018). That is, after consumers use a hyper-personalized product, the extent to which they allocate a price premium to the product may differ from that of a hypothetical product. Additionally, the study assumed that an informational pamphlet provided a participant enough information about facial serum, home meals, and vitamins. It is entirely possible that a participant lacked awareness regarding these products prior to their participating study. Furthermore, the sample was based upon mall shoppers in Latin America. Although we noted the universal affinity with luxury products, the study might have been subject to a cultural artifact. As a result, we also encourage researchers to explore consumer behaviors toward hyper-personalized consumer goods in various contexts. Despite these limitations, this research represents one of the first empirical investigations that explores hyper-personalized consumer goods as unconventional luxury. References Aït-Sahalia, Y., Parker, J., & Yogo, M. (2004). Luxury goods and the equity premium. Journal of Finance, 59(6), 2959–3004. Arthur, R. (2017). Customized luxury: Fendi turns to digital for Bespoke handbag launch. Retrieved from Forbeshttps://www.forbes.com/sites/rachelarthur/2017/11/29/ customized-luxury-fendi-farfetch/#581b22051c1d. Bagwell, L. S., & Bernheim, B. D. (1996). Veblen effects in a theory of conspicuous
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Germán Contreras Ramirez is the Director of the Marketing Center at the Externado University in Colombia. Ramirez has a Master of Science in Marketing from Monash University (Australia) and a Master's in Research from the University of ESAN (Peru). He is currently a doctoral candidate from Carlos III University (Spain). Jeffrey Campbell is an associate professor of retailing at The University of South Carolina. Campbell also serves as a visiting instructor at The University of Aruba. Campbell received his Ph.D. in retail, hospitality, and tourism from the University of Tennessee, Knoxville, with a minor in marketing. Previously, he completed his M.B.A. from the University of Texas at Arlington and his B.S. from the Valparaiso University in business administration with a concentration in human resources management.
Mark S. Rosenbaum is professor and chair of the Department of Retailing at the University of South Carolina. Rosenbaum also holds visiting scholar positions at Externado University (Bogota, Colombia) and at the American Hotel Academy (Brasov, Romania); he is also a research faculty fellow at the Center for Services Leadership at the W.P. Carey School of Business, Arizona State University. Rosenbaum received his B.S. from Indiana University, MBA from the University of Illinois at Chicago, M.A. from New York University, M.S. from San Diego State University, and Ph.D. from Arizona State University. Prior to his work at the University of South Carolina, Rosenbaum was the Kohl's Professor of Retailing at Northern Illinois University and an assistant professor at the University of Hawaii, Manoa. Before entering academia, Rosenbaum worked in the fine jewelry industry and luxury retailing industry.
Philipp Klaus is Professor of Customer Experience and Marketing Strategy at IUM Monaco, INSEEC Research Center, Visiting Fellow at Cranfield University SOM and holds multiple visiting professorships around the globe. His areas of expertise include customer experience strategy and management, customer experience quality, marketing strategy, the influence of marketing activities on consumer behavior and the financial performance of organizations.
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Journal of Business Research journal homepage: www.elsevier.com/locate/jbusres
The product is me: Hyper-personalized consumer goods as unconventional luxury ⁎
Mark S. Rosenbauma, , Germán Contreras Ramirezb, Jeffrey Campbella, Philipp Klausc a
Department of Retailing, University of South Carolina, Columbia, SC 29208, United States of America Center for Marketing Director, Externado University, Bogota, Colombia c Department of Marketing, International University of Monaco, INSEEC Research Center, Monaco b
A R T I C LE I N FO
A B S T R A C T
Keywords: Hyper-personalization Nutrigenomics Luxury Unconventional luxury Wellness Consumer goods
This study explores hyper-personalized wellness products (e.g., facial serum, custom-prepared meals, vitamins) as unconventional luxury products. Hyper-personalized consumer goods are those in which a consumer's genetic composition, or DNA, is used in the manufacturing process. Given that hyper-personalized products emphasize high quality and uniqueness and garner premium prices, this study conceptualizes these products as representing contemporary, unconventional luxury. Three studies empirically demonstrate the extent to which consumers allocate price premiums to three different hyper-personalized consumer products in terms of functionally compared with a mass-produced equivalent. The results reveal that consumers believe that hyper-personalized products are worth premium prices, regardless of their desire to own these products. Whether hyper-personalized products are truly more beneficial to consumer well-being than their mass-produced counterparts remains unknown however. The article concludes with theoretical and research implications, as well as research directives.
1. Introduction Research on luxury goods is synonymous with investigatory studies on distinctive goods, prestigious brands, and the symbolic prowess of luxury products and brands in terms of their ability to provide consumers with a means to publicly demonstrate their wealth and status to others (Han, Nunes, & Drèze, 2010). This traditional investigatory perspective suggests that luxury goods are social markers that help consumers define themselves to others in the public realm. Kapferer and Bastien (2009, p. 314) expand on the social stratification capabilities of luxury goods, stating that the “DNA of luxury … is the symbolic desire, albeit often repressed, [of people] to belong to a superior class…. [A] nything that can be a social signifier can become a luxury.” Luxury is well apparent in human history and corresponds to the earliest history of society's elites. High-quality, intricate, and bejeweled items appearing in temples, churches, pagodas, Egyptian pyramids, and the like, were tributes to gods or other esteemed and omniscient forces (Kapferer, 2012). The desire to own and display luxury goods may even be part-and-parcel of humankind's biological narrative, as conspicuous consumption appears to be an integral part of a signaling system that is readily employed in human mating rituals to reap reproduction success
(Sundie et al., 2011). Despite the so-called DNA of luxury being closely intermingled with the origins of human history (Brun & Castelli, 2013), popular press suggests that the way consumers use luxury goods in their daily lives is changing. Chamberlain (2018) argues that the traditional “one-size-fitsall” approach employed by luxury manufacturers no longer resonates with contemporary consumers, who increasingly desire personalized luxury products and services. For example, despite the famed historical significance of the Louis Vuitton Speedy handbag (Freire, 2014), with its timeless design and iconic status (Sugimoto & Nagasawa, 2017), the company is now allowing customers to add personalized aspects such as self-selected, hand-painted letters and stripes (Borstrock, 2018). Similarly, Fendi now offers customers 120 different personalization options of its famed Kan I F bag (Arthur, 2017). Lacoste permits customers to personalize aspects of its classic polo shirt, and Ralph Lauren allows customization of some apparel styles. These are just a handful of examples of personalization options that often help purchasers of luxury goods placate any questions of product authenticity from others when they display their goods in public (Bian, Wang, Smith, & Yannopoulou, 2016). Outside the traditional luxury goods market, other high-end
⁎
Corresponding author. E-mail addresses: [email protected] (M.S. Rosenbaum), [email protected] (G.C. Ramirez), [email protected] (J. Campbell), [email protected] (P. Klaus). https://doi.org/10.1016/j.jbusres.2019.05.017 Received 11 February 2019; Received in revised form 14 May 2019; Accepted 15 May 2019 0148-2963/ © 2019 Elsevier Inc. All rights reserved.
Please cite this article as: Mark S. Rosenbaum, et al., Journal of Business Research, https://doi.org/10.1016/j.jbusres.2019.05.017
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aspirational membership groups while avoiding perceived out-groups (Escalas & Bettman, 2003, 2005; Khalifa & Shukla, 2017). Indeed, given that luxury goods and brands help consumers signal self-identity and personal characteristics to others (Berger & Ward, 2010), luxury sales professionals now often help consumers engage in self-discovery regarding how they should intermingle luxury goods, brands, and their meanings into their personal and public identities (Wu, Cutright, & Fitzsimons, 2011). Although ample research shows the desire of consumers to display luxury goods (Joy, Belk, Wang, & Sherry, 2018), considerably less is known about a segment of consumers who are intrinsically motivated to own superior quality goods for their self-directed pleasure but also to consume them in the private realm (Truong & McColl, 2011). That is, luxury is increasingly developing into a so-called inconspicuous state in which brands are subtly displayed (e.g., minimally sized logos; Berger & Ward, 2010) or non-existent for public display, forcing consumers to derive value from luxury goods entirely in the private (vs. public) realm (Eckhardt, Belk, & Wilson, 2015). This unorthodox or unconventional view of luxury leads Eckhardt et al. (2015, p. 812) to conclude that the “inconspicuous is the new conspicuous.” Researchers have begun considering the confluence of technology (e.g., fitness tracking) with luxury retailing in consumers' pursuit of an improved quality of life (Varadarajan et al., 2010). For example, luxury is increasingly about consumers using goods and services to fashion high-quality lives, with their consumption intentions focused on improving a private sense of self rather than employing products in the public realm to reap social accolades (Truong, 2010). This change in consumer sentiment toward luxury is profound, as luxury goods have traditionally garnered brand equity by relying on rarity as a form of exclusivity (De Barnier, Falcy, & Valette-Florence, 2012; Kapferer & Laurent, 2016). Furthermore, rarity usually stems from manufacturers' limiting production or distribution or imposing continual price increases; however, affordable and convenient genomic technology permits consumer goods manufacturers to foster product rarity from an unorthodox perspective—by using customer-specific DNA in the production process (Boland, 2008). That is, some consumer goods manufacturers are using a person's DNA sequence to create products that specifically address that person's unique bodily needs by, for example, targeting supplemental and nutritional deficiencies or formulating moisturizers and serums that address the personal predisposition to wrinkles or collagen loss. By meeting consumers' needs at the molecular level, luxury has shifted from a top-down approach (i.e., corporations control luxury perceptions through manufacturing) to a bottom-up approach, in which customers give corporate entities their DNA for use in the product manufacturing process (King, 2013).
consumer goods manufacturers, particularly in the nutrition, health, and beauty industries, are also aligning their marketing strategies with personalization (Rosenbaum et al., 2017). However, unlike luxury apparel and accessories manufacturers that allow customers to manipulate certain design features as a personalization strategy, consumer goods manufactures are creating personalized products based on customers' genetic composition and charging price premiums for doing so. Rosenbaum et al. (2017) refer to the personalization of consumer goods based on a person's unique DNA, which is typically obtained through saliva, as the “hyper-personalization” of products, which retail pundits believe will soon be altering the fitness, health, and beauty industries (Cutter, 2017). The consumer health, beauty, and nutrition industries, which all encompass the wellness industry, traditionally appear in luxury research (Park & Reisinger, 2009), with advances in wellness technologies continuing to inextricably link wellness, and its related fields, with conspicuous consumption (Clarke, Azara, & Michopoulou, 2018). We argue that hyper-personalization, with its emphasis on high quality, uniqueness, and price premiums, represents unconventional luxury. Cova and Saucet (2014) conceptualize unconventional marketing as any transformational approach targeting consumers and questioning entrenched assumptions of marketing. Given the myriad sociological, economic, and marketing perspectives of luxury goods and brands, defining luxury can be challenging. However, the current research draws on Tynan, McKechnie, and Chhuon's (2010, p. 1158) definition of luxury as “high quality, expensive and non-essential products and services that appear to be rare, exclusive, prestigious, and authentic and offer high levels of symbolic and emotional/hedonic values through customer experiences.” We also extend Tynan et al.'s (2010) definition by conceptualizing hyper-personalized products as those that are also unique, prestigious, and authentic to consumers because the manufacturing process is partially based on their genetic composition. Luxury is traditionally associated with high-end apparel, accessories, jewelry/watches, crystal, automobiles, wine, and so forth (Brun & Castelli, 2013). Today, many consumer goods manufacturers, such as Habit (i.e., nutrition), Geneu (i.e., cosmetics), and Vitagene (i.e., vitamins), are purveyors of unconventional luxury goods, as they offer products to consumers that are based on their unique DNA. This research breaks original ground in marketing in two distinct ways. First, this research brings hyper-personalization into the luxury paradigm by focusing on nutrition, health, and beauty products. Second, this work demonstrates the price premiums that consumers attribute to hyper-personalized products compared with their massproduced counterparts. As such, this work provides hyper-personalized goods manufacturers with novel insights into the extent to which consumers value their products and shows that they can realize lofty profit margins by manufacturing products using consumers' DNA. We begin this paper with a discussion of hyper-personalized products and how they are altering the luxury consumer goods market. Next, we put forward research questions that bring new insights to the unconventional luxury paradigm by exploring the price premiums that consumers attribute to hyper-personalized products. We address these research questions with data gathered from a convenience sample of mall shoppers. We conclude with theoretical and managerial implications.
2.1. Defining hyper-personalization Although marketing literature often uses the terms “personalization” and “customization” interchangeably, these two concepts are quite different (Miceli, Ricotta, & Costabile, 2007; Sunikka & Bragge, 2012). Personalization refers to the interaction of customer and supplier inputs during the manufacturing process, such as when a customer puts his or her initials on a purchased Vuitton handbag or a Gucci customer selects finite options to add to a tote. By contrast, customization refers to consumers' ability to modify and, thus, to individually create a supplier's products or services depending on their individual desires (Da Silveira, Borenstein, & Fogliatto, 2001). In the consumer goods domain, customization allows a customer to filter a set of objects or choices provided by an organization (e.g., upgrades during new home construction), while personalization results in a supplier creating a specific good or service for a customer (e.g., a personalized yacht). Hyper-personalization appears to be the next step in connectivity between customers and suppliers, encompassing both customization and personalization options. The interaction of customers and
2. Hyper-personalization as unconventional luxury Luxury investigatory studies typically draw on factors such product quality, brand and class status, price, or perceived exclusivity and attempt to empirically or descriptively relate them to consumers' behaviors, attitudes, and overall consumption experiences (Han et al., 2010; Yeoman, 2011). The luxury paradigm includes consumers' purchase of luxury goods as a way to help them create and sustain a public identity (Belk, 1988; Kastanakis & Balabanis, 2012), as the ownership of luxury goods represents a means for consumers to foster affiliations with 2
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nutrition, and vitamins:
organizations during the manufacturing process is no longer based only on customers' informational inputs but also on their providing suppliers with their unique biological markers, including hair, saliva, or blood, for use in the product manufacturing process to fashion “personalizedat-one” goods (Rosenbaum et al., 2017; Subramanyan, 2014). For example, although the personalized nutrition manufacturer Habit uses consumer DNA to design individual nutrition plans, these plans are not necessarily truly customized, in that other consumers may be given a similar nutritional plan. Therefore, the term “hyper-personalized” captures a new type of personalization via DNA sequencing, while acknowledging that manufacturers may recommend similar products to consumers who share common biological markers. To date, most of the hyper-personalized products in the marketplace are in the wellness domain. A possible reason for this is that many hyper-personalized products may be filling a void caused by people shifting away from visiting a medical doctor for an annual physical to proactively monitoring their own health to take more control of their well-being (Peake, Kerr, & Sullivan, 2018). Hyper-personalized wellness products, such as custom-prepared meals and vitamins, may simply be a response to health-monitoring trends (Pantzar & Ruckenstein, 2015). Alternately, hyper-personalized wellness products may simply represent an attempt by consumers to actively participate in the manufacturing process of items they believe are integral to their health or beauty. Thus, some consumers may simply be purchasing and consuming items that they perceive to be of superior quality to massproduced versions, thereby enhancing their self-concept. This discussion leads us to question whether hyper-personalized consumer goods represent luxury goods. On the one hand, perhaps hyper-personalization is marketing hype, as consumers are increasingly viewing customization and personalization opportunities in the marketplace as prerequisite for business. For example, consumers increasingly expect customized media content and personalized shopping options (Cho & Fiorito, 2009; Donnelly & Wright, 2017). In addition, they are increasingly willing to provide organizations that they trust with their sensitive data (Martin & Murphy, 2017), to the point of giving companies their DNA. On the other hand, luxury experts suggest that authentic luxury goods cannot be mass produced (Kapferer & Laurent, 2016), and hyperpersonalized products represent the converse of mass production. Additionally, contemporary researchers suggest that luxury is inextricably linked to “desire of excellent quality, sustainable creativity, ultimate excellence, and meaningfulness…” (Cristini, Kauppinen-Räisänen, Barthod-Prothade, & Woodside, 2017, p. 105). Thus, product uniqueness has the potential to propel hyper-personalized products to luxury status as a consumer's DNA may yield products of excellent quality, which are creative, purposefully excellent, and meaningful based upon one's genetic narrative. Yet a deciding factor may be the extent to which consumers are willing to pay price premiums for hyper-personalized products compared with mass-produced versions. Indeed, price premiums are a fundamental aspect, albeit not the only one, of determining whether a consumer good represents a luxury item, especially when lower-cost substitutes that work equally well or better than the higherpriced version are readily available in the marketplace (Han et al., 2010; Li, Li, & Kambele, 2012).
RQ1: Are consumers interested in purchasing hyper-personalized wellness products such as (a) facial serum, (b) custom-prepared meals, and (c) vitamins? RQ2: Do consumers attribute price premiums to hyper-personalized wellness products such as (a) facial serum, (b) custom-prepared meals, and (c) vitamins when compared with their mass-produced counterparts? 3. Experimental studies 3.1. Study 1 One hundred participants (Mage = 27.40, SDage = 8.02; age range: 18–53 years) took part in this study. We recruited participants from a convenience sample of shoppers at a high-end mall at various times during operational hours. The mall features luxury stores and boutiques and is located in an exclusive section of a large Latin American city. Each participant received a small tote bag from the mall for taking part in the study. The sample consisted of 50 Latino women and 50 Latino men. In terms of the participants' income, Colombia maintains a socioeconomic stratification system which divides all cities in the country into high- and low-income neighborhoods; the system classifies residential locales on a scale from 1 (lowest-income area) to 6 (highestincome area, International Federation for Housing and Planning, 2019). Therefore, in Study 1, 1 participant was in strata 1 (1%); 17 were in strata (17%); 46 (46%) were in strata 3; 28 (28%) were in strata 4; 5 (5%) were in strata 5, and 3 (3%) did not respond to the question. We randomly selected 50 participants (25 men and 25 women) to read an informational pamphlet about a facial serum (see Fig. 1). We then randomly selected another 50 participants (25 men and 25 women) and asked them to read a pamphlet about the same facial serum; however, in this case, the customer needed to provide the company with a saliva swab and mail in the swab and then would receive a hyper-personalized serum based on his or her DNA. The informational pamphlet also featured a small logo of a DNA strand and a tagline that read, “unique for your DNA.” In this study, 50 participants fell into the control and experimental group respectively, resulting in 80% power, the minimum suggested for an ordinary study (Cohen, 1988; UCSF, 2017). 3.2. Measures We measured a participant's willingness to purchase the facial serum with four statements adapted from Dodds, Monroe, and Grewal (1991). Each participant rated his or her degree of agreement (1 = “strongly disagree,” 7 = “strongly agree”) with the four statements: “If I was going to purchase this kind of serum, I would consider buying this product in particular”; “If I were shopping for this serum, the likelihood I would purchase this brand is high”; “My willingness to buy this serum would be high if I were shopping for this type of product”; and The probability I would consider buying this product is high. To determine the extent of price premiums between the hyperpersonalized and mass-produced facial serums, we drew on the Van Westendorp's Price Sensitivity Meter (Khandker & Joshi, 2018). This meter constructs a range of acceptable prices that consumers would consider when purchasing a given product by asking four questions:
2.2. Research questions The goal of this research is to explore whether hyper-personalized products represent “unconventional” luxury goods by investigating the extent to which consumers are willing to pay a so-called equity premium (Aït-Sahalia, Parker, & Yogo, 2004), which represents the premium price charged by a luxury product compared with its mass-produced counterpart. Given the dearth of research on hyper-personalized products, the goal of this research is to engage in an exploratory study on price premiums. More specifically, this research empirically asks the following questions by exploring hyper-personalized cosmetics,
1. At what price would you begin to think the item is too expensive to consider purchasing? 2. At what price would you begin to think the item is so inexpensive that you would question the quality and not consider purchasing it? 3. At what price would you begin to think the item is getting expensive, but you still might consider purchasing it? 4. At what price would you think the item is a bargain – a great buy for 3
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4
(caption on next page)
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Fig. 1. Experimental stimuli: Hyper-personalized and mass-produced product informational sheets.
Table 1 Means and standard deviations of pricing options. Mass-produced Facial serum I would consider purchasing this kind of product. The likelihood that I would purchase this brand is high. My willingness to buy this product would be high if I were shopping for this type of product. The probability I would consider buying this product is high. Price sensitivity analysis At what price would you begin to think the item is too expensive to consider? At what price would you begin to think the item is so inexpensive that you would question the quality and not consider it? At what price would you begin to think the item is getting expensive but you still might consider it? At what price is the product a bargain? Meal plan I would consider purchasing this kind of product. The likelihood that I would purchase this brand is high. My willingness to buy this product would be high if I were shopping for this type of product. The probability I would consider buying this product is high. Price sensitivity analysis At what price would you begin to think the item is too expensive to consider? At what price would you begin to think the item is so inexpensive that you would question the quality and not consider it? At what price would you begin to think the item is getting expensive but you still might consider it? At what price is the product a bargain? Vitamin package I would consider purchasing this kind of product. The likelihood that I would purchase this brand is high. My willingness to buy this product would be high if I were shopping for this type of product. The probability I would consider buying this product is high. Price sensitivity analysis At what price would you begin to think the item is too expensive to consider? At what price would you begin to think the item is so inexpensive that you would question the quality and not consider it? At what price would you begin to think the item is getting expensive but you still might consider it? At what price is the product a bargain?
5.58 5.36 5.34 5.40
(1.26)⁎ (1.17)⁎ (1.44)⁎ (1.26)⁎
$49.39 ($45.71) $ 5.54 ($10.08)⁎⁎⁎ $ 29.64 ($34.14)⁎⁎ $ 17.35 ($28.14)⁎⁎ 3.34 3.06 2.96 3.04
(0.72) (0.77) (0.76) (0.76)
$84.36 ($18.53)⁎⁎⁎ $40.99 ($8.26)⁎⁎⁎ $109.48 ($16.03)⁎⁎⁎ $59.06 ($10.84)⁎⁎⁎ 4.65 4.61 4.71 4.57
(1.55) (1.29) (1.32) (1.29)
$42.20 ($5.51)⁎ 7.90 ($1.18)⁎ $27.28 ($6.08)⁎ $13.98 ($2.74)⁎⁎
Hyper-personalized
4.74 4.22 4.38 4.06
(1.35) (1.45) (1.51) (1.72)
$ 59.40 ($43.88) $ 12.57 (29.45) $ 46.62 ($53.68) $ 23.84 ($25.37) 3.46 3.08 2.78 3.04
(0.86) (0.72) (1.02) (1.05)
$102.74 ($10.80) $ 47.68 ($8.51) $125.74 ($12.75) $72.61 ($9.58) 5.12 4.84 5.00 4.98 $56.21 $10.57 $45.33 $23.43
(1.17) (1.11) (1.25) (1.33) ($5.51) ($1.18) ($6.08) ($2.74)
⁎⁎⁎ ⁎⁎ ⁎
p < .001. p < .01. p < .05.
both the mass-produced and hyper-personalized facial serum products significantly differed. The Mann–Whitney U test is optimal to the independent-samples t-test when the normality assumption is violated and the non-normal distribution is heavily skewed (Green & Salkind, 2011). The test result that addresses the question about the price at which a participant would begin to think the facial serum is too expensive to consider purchasing was not significant (z = 1.62, ns). The data show that the average price at which the participants considered the massproduced formula serum too expensive to purchase was slightly under $50 (M = $49.39), compared with the hyper-personalized price, which was almost $10 higher (M = $59.40). Although the price difference did not significantly differ, on average, the participants valued the hyperpersonalized facial serum nearly $10 above the mass-produced formula before deeming the price too expensive to consider purchasing, which indicates a 20% price premium. The results of the test that addresses the question about the price at which a participant would begin to think that the facial serum is so inexpensive that he or she would question the quality and not consider purchasing it was significant (z = 3.86, p < .001). The participants attributed a price of slightly more than $5 (M = $5.54) to the massproduced facial serum and a price of nearly $13 ($12.57) to the hyperpersonalized version. In other words, participants credited a price premium of 127% to the hyper-personalized facial serum, before they began questioning the serum's quality. The result of the third test, which addresses the question about the price at which a participant would begin to reason that the facial serum is getting expensive but still might consider purchasing it, was
the money? We converted the prices into U.S. dollars at the daily exchange rate for ease of reading. Last, the participants provided their gender and date of birth. 3.3. Results for facial serum A one-way multivariate analysis of variance (MANOVA) tested the effect of hyper-personalization versus mass production on four dependent variables that evaluated a participant's willingness to purchase the facial serum. We found significant differences between the mass-produced and hyper-personalized products on the dependent measures (Wilks's Λ = F(4, 95) = 5.57, p < .001, η2 = 0.19). Table 1 contains the means and the standard deviations of the dependent variables for the serum types. We conducted analyses of variance (ANOVAs) on the dependent variable as follow-up tests to the MANOVA. Using the Bonferroni method, we tested each ANOVA at the 0.0125 level (0.05/4). The ANOVAs on each of four “willingness-to-purchase” statements were significant: “I would consider purchasing” (F(1, 98) = 10.30, p < .01, η2 = 0.10), “likelihood I would purchase” (F(1, 98) = 18.72, p < .01, η2 = 0.16), “I would be willing to buy” (F(1, 98) = 10.60, p < .01, η2 = 0.10), and “I probably would buy” (F(1, 98) = 19.74, p < .001, η2 = 0.17). Overall, the informants expressed a preference for buying the mass-produced facial serum over the hyper-personalized version. We conducted four Mann–Whitney U tests to evaluate whether the average acceptable prices that participants would consider paying for 5
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Thus, participants attributed a 23% premium to the hyper-personalized meals.
significant (z = 2.93, p < .01). That is, participants attributed a price of $30 (M = $29.64) to the mass-produced facial serum and $16 more to the hyper-personalized version ($46.62) as the top of their price acceptability range. Thus, participants attributed a 57% price premium to the hyper-personalized facial serum. The result of the fourth test, which addresses the question about the price at which a participant would begin to think that the facial serum is a bargain was significant (z = 2.93, p < .01). The participants considered a price of $17 (M = $17.35) for the mass-produced serum a bargain but considered the hyper-personalized version a bargain at $24 (M = $23.84). Thus, participants attributed a 37% price premium to the hyper-personalized facial serum.
3.5. Study 3 One hundred participants (Mage = 24.91, SDage = 9.09; age range: 18–55 years) took part in this study. We recruited participants from a convenience sample of shoppers at the same mall as in Studies 1 and 2. Each participant received a tote bag for taking part in the study. The sample consisted of 50 Latino women and 50 Latino men. 1 (1%) participant was from strata 1; 9 (9%) were from strata 2; 58 (58%) were from strata 3; 21 (21%) were from strata 4; 8 (8%) were from strata 5, and 3 (3%) were from strata 6. We randomly selected 50 participants (25 men and 25 women) to read an informational pamphlet about vitamins (e.g., nutritional supplements) (see Fig. 1). We randomly selected another 50 participants (25 men and 25 women) and asked them to read a pamphlet about the same vitamins; however, in this case, the customer needed to provide the company with a saliva swab and mail in the swab and then would receive hyper-personalized vitamins based on his or her DNA. This informational pamphlet also featured a small logo of a DNA strand and a tagline that read, “unique for your DNA.” Study 3 used the same measures as in Studies 1 and 2. A one-way MANOVA tested the effect of hyper-personalization versus mass-production on four dependent variables that evaluated a participant's willingness to purchase vitamins. The results revealed that there were no significant differences between the mass-produced and hyper-personalized version of the vitamins on any of the dependent measures. Overall, the participants were equally enthusiastic about purchasing both versions of vitamins. The test result that addresses the price at which a participant would begin to think that the vitamins are too expensive to consider purchasing was significant (z = 2.69, p < .05). The data show that the average price at which the participants considered the mass-produced vitamins too expensive to purchase was slightly more than $40 (M = $42.20), compared with the hyper-personalized price, which was approximately $14 higher (M = $56.21). Therefore, participants allocated a 33% price premium to the hyper-personalized vitamins before deeming them too expensive. The results of the test that addresses the price at which a participant would begin to think that the vitamins are so inexpensive that he or she would question the quality and not consider purchasing them, was significant (z = 2.43, p < .05). The participants attributed a price of approximately $8 (M = $7.90) to the mass-produced vitamins and a price of nearly $11 ($10.57) to the hyper-personalized version. In other words, participants attributed a price premium of 34% to the hyperpersonalized vitamins. The result of the third test, which addresses the price at which a participant would begin to think that the vitamins are getting expensive but still might consider purchasing them, was significant (z = 2.50, p < .05). Participants attributed a price of $27 (M = $27.28) to the vitamins and $18 more to the hyper-personalized version (M = 45.33) as the top of their price acceptability range. Thus, participants attributed a 66% price premium to the hyper-personalized vitamins. The result of the fourth test, which addresses the price at which a participant would think that the vitamins are a bargain, was significant (z = 2.07, p < .01). The participants considered a price of $14 (M = $13.98) for the mass-produced vitamins a bargain but considered the hyper-personalized version a bargain at $23 (M = $23.43). Participants attributed a 67% price premium to the hyper-personalized vitamins.
3.4. Study 2 One hundred participants (Mage = 26.52, SDage = 4.79; age range: 19–37 years) participated in this study. We recruited participants from a convenience sample of shoppers at the same mall as in Study 1. Each participant received a tote bag from the mall for participating in the study. The sample consisted of 50 Latino women and 50 Latino men. 27 (27%) of the participants were from strata 2; 48 (48%) were from strata 3, and 25 (25%) were from strata 4. We randomly selected 50 participants (25 men and 25 women) to read an informational pamphlet about five home-delivered meals (see Fig. 1). We randomly selected another 50 participants (25 men and 25 women) and asked them to read a pamphlet about the same five meals; however, in this case, the customer needed to provide the company with a saliva swab and mail in the swab and then would receive hyperpersonalized meals based on his or her DNA. The informational pamphlet also featured a logo of a DNA strand and a tagline that read, “unique for your DNA.” Study 2 used the same measures as in Study 1. A one-way MANOVA tested the effect of hyper-personalization versus mass production on four dependent variables that evaluated a participant's willingness to purchase five custom-prepared meals. The results revealed that there were no significant differences between the mass-produced and hyper-personalized version of the meal plan on any of the dependent measures. The test result that addresses the price at which a participant would begin to contemplate that the meal plan is too expensive to consider purchasing was significant (z = 2.07, p < .001). The data show that the average price at which the participants considered the mass-produced meal plan too expensive to purchase was under $85 (M = $84.36), compared with the hyper-personalized price, which was $20 higher (M = $102.74). Therefore, despite their reluctance to purchase the five meals, participants allocated a 22% price premium to the hyper-personalized meals. The results of the test that addresses the price at which a participant would begin to think that the meal plan is so inexpensive that he or she would question the quality and not consider purchasing it was significant (z = 2.43, p < .001). The participants attributed a price of slightly more than $40 (M = $40.99) to the mass-produced meals and a price increase of nearly $8 ($47.68) to the hyper-personalized version. Therefore, participants attributed a price premium of 16% to the hyperpersonalized meal plan before they question quality. The result of the third test, which addresses the price that a participant would begin to think that the meal plan is getting expensive but still might consider purchasing it, was significant (z = 2.55, p < .001). Participants ascribed a price of $109 (M = $109) to the meal plan and $16 more to the hyper-personalized version ($125.74) as the top of their price acceptability range. In other words, participants attributed a 15% price premium to the hyper-personalized meals. The result of the fourth test, which addresses the price at which a participant would begin to think that the five meals is a bargain, was significant (z = 2.69, p < .001). The participants considered a price of $59 (M = $59.06) for the mass-produced meals a bargain but considered the hyper-personalized version a bargain at $72 (M = $72.61).
4. Conclusion About a decade ago, academic research began to realize that personalized consumer goods, due to the emergence of nutrigenomics and 6
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intimacy, privacy, and exclusivity by assuming a “life mate” role (Graffigna & Gambetti, 2015, p. 605). Indeed, hyper-personalization may permit organizations to build long-term relationships with their customers and to command premium prices from them. Therefore, we speculate that consumers goods companies will continue to jump on the ‘hyper-personalization’ bandwagon as new product development becomes customized for individual customers.
nutrigenetics, would result in radical innovations in food consumption, as consumers would be able to receive personalized dietary recommendations based on their own genetic variation (Fenech et al., 2011; Heiskanen et al., 2007). A decade later, hyper-personalization is now becoming a reality in consumer goods industries (Rosenbaum et al., 2017); however, the results presented here show that consumer enthusiasm toward these products remains indifferent. That is, middleof-the-road consumers seem to be on the sidelines concerning their willingness to purchase hyper-personalized products. The data presented here link hyper-personalization to the unconventional luxury paradigm by revealing the extent to which consumers attribute price premiums to hyper-personalized wellness products, including facial serums, custom-prepared meals, and vitamins. The reason that we use the term “unconventional” is that luxury research emphasizes consumer goods that are purchased for public prestige, or for consumers to exhibit their wealth, status, and power to others (Kastanakis & Balabanis, 2014; Truong, Simmons, McColl, & Kitchen, 2008). Our study demonstrates that hyper-personalized products can command premium prices and, by their very nature, represent exclusivity and quality by incorporating a consumer's DNA in the manufacturing process. Given that luxury is generally defined as containing aspects of exclusivity and high quality (Li et al., 2012), we believe that hyper-personalized products are representative of unconventional luxury. Indeed, we draw on Cristini et al. (2017) who put forth that luxury products are no longer defined as branded products for display but rather as goods and services that exude quality, creativity, excellence, and meaningfulness. We believe that product hyper-personalization based upon one's DNA meets these new luxury criteria.
4.2. Theoretical implications We encourage researchers to explore hyper-personalization as a form of conspicuous consumption. Perhaps “Veblen effects” (Bagwell & Bernheim, 1996, p. 349) exist, such that owners of hyper-personalized products not only exhibit a willingness to pay a higher price for a functionally equivalent good but also do so in a manner that advertises their wealth and social status. Owners of hyper-personalized goods may engage in word of mouth or promote their usage of goods via social media to win social accolades (Parguel, Delécolle, & Valette-Florence, 2016). Other hyper-personalized product owners may simply be intrinsically motivated to own the high-quality products (Shao, Grace, & Ross, 2019), such as those made with their own genetic material. We encourage researchers to explore whether consumers are driven to purchase hyper-personalized products as a type of “effort in value cocreation activities” (Sweeney, Danaher, & McColl-Kennedy, 2015, p. 318)—that is, a means by which consumers take part in managing their health (Deloitte, 2016). We also encourage researchers to examine whether consumers perceive the purported health aspects of hyperpersonalized products, which derive from a consumer's genetic composition, and whether this drives consumption.
4.1. Managerial implications 4.3. Research limitations In this study, we tested the extent to which consumers consider hyper-personalized goods a luxury, based upon their propensity to price hyper-personalized products. The results reveal that even when consumers fail to exhibit a willingness to purchase a hyper-personalized consumer good they are still likely to apply price premiums to the hyper-personalized version of the good over its mass-produced version. This finding implies that hyper-personalized products share a characteristic that is common in luxury products, such as fine wines. That is, a consumer's acceptance of a good or willingness to purchase the good does not influence their perception of a price premium attached to the good (Sjostrom, Corsi, & Lockshin, 2016). Although scientific research on consumer acceptance of hyper-personalized products is scant, de Vrieze et al. (2009) find that consumers will accept nutrigenomics in food products if they can see a true added benefit. A decade later, the value of hyper-personalized consumer goods as compared with their mass-produced counterpart remains unclear. Both academic researchers (Pavlidis, Patrinos, & Katsila, 2015) and consumer advocates (Meltzer-Warren, 2018) suggest that DNA-based nutrition is a promising but evolving science. Boland (2008, p. 56) suggests that increasing consumers' awareness of their individuality is driving the personalized nutrition industry, as nutrigenomics appeals to sophisticated consumers and “allows them to feel empowered and distinguished from the crowd.” However, Bowen, Battuello, and Raats (2005, p. 676) claim that home use of genetic testing is contemporary “snake oil,” comparable to unorthodox and unethical con artists who exploit an unsuspecting public by selling fake cures (Gandhi, 2013), as there is little oversight and regulation regarding the use of consumers' genetic material, a point that continues to remain true (Rosenbaum et al., 2017). Thus, hyper-personalization may represent nothing more than contemporary snake oil as it remains unknown whether genomics truly enhance a consumer's physiological well-being more than a mass-produced counterpart. However, hyper-personalization may represent a means for a consumers-goods manufacturer to establish a deep and authentic relationship with its customers by crafting a sense of
In terms of research limitations, we used an information pamphlet, but it is possible that ownership would have a greater influence a consumer's propensity to pay a price premium for hyper-personalized products. In addition, the experiments may have been enhanced to resemble more realistic marketplace conditions had we provided participants with sample products which they could then evaluate with their senses (Citrin, Stem, Spangenberg, & Clark, 2003). Further, we could have conducted qualitative inquiries, such as asking participants to provide one to two sentence insights regarding their pricing decisions, after gathering experimental data to offer managers, and academics alike, additional perspectives and sensitivity regarding the quantitative findings (Zeithaml, Bitner, & Gremler, 2018). That is, after consumers use a hyper-personalized product, the extent to which they allocate a price premium to the product may differ from that of a hypothetical product. Additionally, the study assumed that an informational pamphlet provided a participant enough information about facial serum, home meals, and vitamins. It is entirely possible that a participant lacked awareness regarding these products prior to their participating study. Furthermore, the sample was based upon mall shoppers in Latin America. Although we noted the universal affinity with luxury products, the study might have been subject to a cultural artifact. As a result, we also encourage researchers to explore consumer behaviors toward hyper-personalized consumer goods in various contexts. Despite these limitations, this research represents one of the first empirical investigations that explores hyper-personalized consumer goods as unconventional luxury. References Aït-Sahalia, Y., Parker, J., & Yogo, M. (2004). Luxury goods and the equity premium. Journal of Finance, 59(6), 2959–3004. Arthur, R. (2017). Customized luxury: Fendi turns to digital for Bespoke handbag launch. Retrieved from Forbeshttps://www.forbes.com/sites/rachelarthur/2017/11/29/ customized-luxury-fendi-farfetch/#581b22051c1d. Bagwell, L. S., & Bernheim, B. D. (1996). Veblen effects in a theory of conspicuous
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Germán Contreras Ramirez is the Director of the Marketing Center at the Externado University in Colombia. Ramirez has a Master of Science in Marketing from Monash University (Australia) and a Master's in Research from the University of ESAN (Peru). He is currently a doctoral candidate from Carlos III University (Spain). Jeffrey Campbell is an associate professor of retailing at The University of South Carolina. Campbell also serves as a visiting instructor at The University of Aruba. Campbell received his Ph.D. in retail, hospitality, and tourism from the University of Tennessee, Knoxville, with a minor in marketing. Previously, he completed his M.B.A. from the University of Texas at Arlington and his B.S. from the Valparaiso University in business administration with a concentration in human resources management.
Mark S. Rosenbaum is professor and chair of the Department of Retailing at the University of South Carolina. Rosenbaum also holds visiting scholar positions at Externado University (Bogota, Colombia) and at the American Hotel Academy (Brasov, Romania); he is also a research faculty fellow at the Center for Services Leadership at the W.P. Carey School of Business, Arizona State University. Rosenbaum received his B.S. from Indiana University, MBA from the University of Illinois at Chicago, M.A. from New York University, M.S. from San Diego State University, and Ph.D. from Arizona State University. Prior to his work at the University of South Carolina, Rosenbaum was the Kohl's Professor of Retailing at Northern Illinois University and an assistant professor at the University of Hawaii, Manoa. Before entering academia, Rosenbaum worked in the fine jewelry industry and luxury retailing industry.
Philipp Klaus is Professor of Customer Experience and Marketing Strategy at IUM Monaco, INSEEC Research Center, Visiting Fellow at Cranfield University SOM and holds multiple visiting professorships around the globe. His areas of expertise include customer experience strategy and management, customer experience quality, marketing strategy, the influence of marketing activities on consumer behavior and the financial performance of organizations.
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