Journal of Services Marketing: Article Information

Journal of Services Marketing
Mass customization for financial services: an empirical study of adoption and usage behavior
Stefan Koch Duygu Inanc
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Stefan Koch Duygu Inanc , (2015),"Mass customization for financial services: an empirical study of adoption and usage
behavior", Journal of Services Marketing, Vol. 29 Iss 3 pp. 235 - 243
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Mass customization for financial services:

an empirical study of adoption and usage
behavior
Stefan Koch and Duygu Inanc
Department of Management, Bogazici University, Istanbul, Turkey

Abstract
Purpose This paper aims to report findings from an exploratory empirical study focusing on an application of mass customization in financial
services. Based on the study of configurations and usage data, the authors evaluate a series of hypotheses relating to the interplay of adoption and
usage by customers.
Design/methodology/approach The study is based on quantitative analysis of data from a Turkish bank which offers customizable credit cards,
encompassing both configurations as well as credit card usage.
Findings The results confirm that trial-and-error learning will not end with product definition, but will continue afterwards and lead to changes
in customization. Especially active usage length shows a significant positive effect on the number of changes. The effect of base category usage could
only partly be confirmed for changes, but was significant for adoption. It was also found that a series of smaller changes in a limited number of
attributes has a higher likelihood than a smaller number of changes in a large number of aspects.
Research limitations/implications The study uses data from a single financial service provider, from a specific country. In addition, anonymized
data on adoption and usage were used, thus demographic data as well as subjective measures from customers were not available.
Practical implications The results highlight the importance of specifying the correct solution space, as the authors could at least partially confirm
the negative effect of both a large number of options, as well as basing on alternatives rather than attributes on several levels. Although overall
mass customization seems less interesting than traditional credit cards, the authors discuss several positive implications for financial sector
companies from offering this option.
Originality/value The paper extends current literature in focusing for the first time on mass customization for financial services. In addition, this
is the first study using longitudinal data on adoption and modification of mass-customized solutions to analyze the long-term behavior of usage.
Keywords Empirical study, Financial services, Mass customization, Lead user theory, Toolkits, User innovation
Paper type Research paper
Introduction
The paper extends current literature in focusing for the first

time on such a mass customization initiative, and providing an
exploratory case study. In addition, this is the first study in the
mass customization literature using longitudinal data on
adoption and modification of mass-customized solutions to
analyze long-term behavior. The main research question for
our study is which people adopt such a product in this
industry, and which attributes affect characteristics of their
usage behavior over time. As the credit card customization can
be changed after initial adoption, we will especially focus on
changes made to the customization. The structure of this
paper is as follows: We start with a review of the existing
literature on mass customization, especially related to
adoption and usage, and derive our hypotheses. The literature
review is based on an extensive search through electronic
repositories including Google Scholar and ScienceDirect,
using keywords like mass customization, adoption,
acceptance and financial service with synonyms in varying
combinations. We will then detail the setting in financial
services, methodology and data gathering. In the results
section, we will present the quantitative analysis and
hypotheses testing. The paper closes with a discussion which
Mass customization has been an important topic both for

research and practice for many years now. Based on the works
of Davis (1987), Kotler (1989) and Pine (1993), it can be
defined as:
[. . .] a strategy that creates value by some form of company customer
interaction at the fabrication/assembly stage of the operations level to create
customized products with production cost and monetary price similar to
those of mass-produced-products (Kaplan and Haenlein, 2006).
In this paper, we will focus on the consumer adoption and

usage of a mass customization initiative in the financial
services sector, a customizable credit card. This case represent
an interesting case, both as an electronic mass customization
example in Turkey, and as a customizable financial service
product.
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/0887-6045.htm

29/3 (2015) 235243
Emerald Group Publishing Limited [ISSN 0887-6045]
[DOI 10.1108/JSM-04-2014-0115]
Received 1 April 2014

Revised 8 July 2014
Accepted 13 July 2014
235
Mass customization for financial services
Volume 29 Number 3 2015 235243
also gives implications, as well as limitations and future

research.
any process benefits (Schreier, 2006) that might arise from the
act of continued or repeated customization. We therefore
formulate our first hypothesis:
Theoretical background and hypotheses
H1a. For mass customization of financial services, trial-anderror learning will not end with product definition, but
will continue afterwards and lead to changes in
customization, i.e. new configurations.
The concept of mass customization was introduced in 1987

for defining the mass production of personalized products
with less cost (Davis, 1987; Pine, 1993; Kaplan and Haenlein,
2006). In the twenty-first century, mass customization started
to be used together with online user toolkits, and both for
electronic and factory-output products, to offer customers
the opportunity to design their own products online (Franke
et al., 2008). The primary argument for users adopting mass
customization is the delivery of superior customer value.
Schreier (2006) discusses four aspects, namely, a closer fit to
individual needs, perceived uniqueness, the process of
designing per se allowing the customer to meet hedonic or
experiential needs and, finally, the pride-of-authorship
effect. Resulting from those, for example, Franke and Piller
(2004) have found, on average, a 100 per cent value increment
for self-designed watches. Kaplan and Haenlein (2006)
discuss to which kinds of products or services, mass
customization is applicable. They argue that due to the
perishability and inseparability properties of services, mass
customization could only be used for products. Otherwise, the
concept would be misleading, as it would be about delivering
a customized service in a cost-effective way not customizing a
mass product. The authors propose the term modulization for
services. They also highlight that mass customization of a
product can be considered as a service in itself. Lampel and
Mintzberg (1996) have grouped financial services with other
so-called menu industries under customized standardization.
Nowadays, mass customization as experienced by users is
most often shaped by the Internet, and the design of user
toolkits as interfaces which enable users to plan and at least
preview their product becomes important. Von Hippel and
Katz (2002) define toolkits as a technology that allows users to
design a novel product by trial-and-error experimentation,
and delivers immediate (simulated) feedback on the potential
outcome of their design ideas. A toolkit should offer users a
solution space that encompasses the designs they want to
create, be user friendly so that there is no need for much
additional training, contain libraries of commonly used
modules that the user can incorporate and, finally, ensure that
resulting designs will be producible without revisions. Toolkits
can also constitute a way to shift the innovation work to lead
users (von Hippel and Katz, 2002): Adoption and usage of a
toolkit can serve as a market research tool, and especially
changes to the toolkit by lead users can provide important
input (Prgl and Schreier, 2006).
For mass customization of a financial service, in our case a
credit card, the configuration can be changed over time. This
means that trial-and-error learning of a customer is not limited
to (simulated) toolkit feedback to come up with a product
solution closer to his unique needs (Von Hippel and Katz,
2002), but that this can be an ongoing process of
experimentation and optimization in a real-world use
environment. If therefore a configuration is available that
offers an increase in utility a customer derives from the
individualized product, a customer will switch to this. Note
that we focus only on the functional benefit here, disregarding
In addition, it can be assumed that longer periods of active

usage and thus experimentation will lead to uncovering a
higher number of improvements. We can therefore formulate
the related hypothesis:
H1b. A longer period of active use of a mass-customized
service will lead to a larger number of changes in
customization, i.e. new configurations.
Kaplan et al. (2007) have argued for more research on the
customer viewpoint, and have focused on the influence of a
customers base category consumption frequency and need
satisfaction on the decision to adopt a mass-customized
product within this category. The assumed positive effect of
base category consumption was based on the works of
Dickerson and Gentry (1983), who found that adopters
of innovations have more experience than non-adopters, as
well as Gatignon and Robertson (1985), who proposed that
new product innovators are drawn from heavy users of other
products within the same category. Also, Dellaert and
Stremersch (2005) found that consumers with high levels of
product expertise consider mass customization configurations
less complex. Kaplan et al. (2007) indeed found a significant
positive direct influence on the behavioral intention to adopt,
so the more frequently products out of the base category are
consumed or the more satisfied the customer is due to this
consumption, the higher the intention to adopt a
mass-customized product. Extending the work of Kaplan et al.
(2007) to actual adoption, as well as to continued usage, we
formulate the following two hypotheses:
H2a. Customers with a higher base category consumption
will have a higher likelihood to adopt the mass
customization option, i.e. the customized credit card
over a standard one.
H2b. Customers with a higher base category consumption
will tend to use the mass-customized product more
intensely, i.e. use their customized card more.
The reasoning for H2b is again based on Kaplan et al. (2007),
we presume that the characteristic of higher consumption is
stable for a customer, so that it will also affect ongoing usage,
not only the adoption. We also extend this line of reasoning to
changes in the configuration. As people with higher base
category consumption show higher interest in new products
and innovations (Dickerson and Gentry, 1983; Gatignon and
Robertson, 1985), it can be assumed that they continue their
search for new, innovative solutions after first configuring a
mass-customized product. Similarly, Dellaert and Stremersch
(2005) found that consumers with high levels of product
expertise consider mass customization configurations less
236
complex, thus ongoing experimentation will be less costly for

them. We therefore formulate our hypothesis:
a small number of card attributes at a single time as compared

to changing several. Also, psychologists have demonstrated
that small changes are preferred to large changes (Weick,
1984), and also most innovative processes are incremental and
build on accumulation. We therefore formulate the following
hypotheses:
H2c. Customers with a higher base category consumption

will tend to change their card configuration more often.
Besides the positive effects of mass customization for

customers, the term mass confusion has been established for
associated drawbacks. Piller et al. (2005) identified three
different problem categories from the customers perspective:
1 the burden of choice, external complexity caused by
excess variety (Franke and Piller, 2004; Huffman and
Kahn, 1998) with users being overwhelmed by the
number of options;
2 matching needs with product specifications, as customers
might lack the knowledge and skills to make a fitting
selection (Huffman and Kahn, 1998); and
3 an information gap regarding the behavior of the
manufacturer (Franke and Piller, 2004).
H3a. Mass customization options based on attributes will be

more likely to be adopted than those on alternatives.
H3b. A larger number of options will decrease the
attractiveness of a mass customization option.
H3c. A series of changes to a small number of attributes of a
configuration will place less cognitive load on
customers than a smaller number of changes in a large
number of aspects, and therefore will have a higher
likelihood to be used.
Setting and methodology
Huffman and Kahn (1998) also found that attribute-based

decisions, in which customers provide a preference rating for
different levels of a single attribute, lead to higher customer
satisfaction than alternative-based ones. Dellaert and
Dabholkar (2009) showed that the range of mass
customization options and providing complementary on-line
services enhance perceptions of product outcome, control and
enjoyment, and thus intention to use. On the other hand,
increasing the range of options can increase the perceived
complexity of the process. Dellaert and Stremersch (2005)
showed that product utility increases mass customization
utility, while complexity has a negative effect. The extent to
which customers can customize a product increases utility but
also complexity.
Bardakci and Whitelock (2004) also list the need for
customers to invest time in specifying their preferences as an
inconvenience of mass customization. They found that a high
number of products available in the market hinders the
decision process of consumers and thus is an advantage of
mass customization, in addition to the opportunity for price
adjustments (Bardakci and Whitelock, 2004). In a follow-up,
Bardakci and Whitelock (2005) analyzed the Turkish
environment, and found more respondents willing to pay a
price premium compared to the UK, and also keen on
updating the features of their car over time. A main reason was
the possibility to disable unwanted aspects or functionalities to
stay within budgetary constraints.
In line with the presented literature, we propose that mass
confusion will be present in financial services as well. The
configuration toolkit offers several possible ways of coming up
with a customized credit card. Based on the work of Huffman
and Kahn (1998), those avenues that are based on attributes
should lead to less mass confusion and therefore a higher
adoption. Similarly, the number of options, or extent of scope
(Schreier, 2006), is assumed to have a negative effect due to
the resulting mental burden (Franke and Piller, 2004; Dellaert
and Stremersch, 2005; Dellaert and Dabholkar, 2009;
Huffman and Kahn, 1998). In addition, we propose that the
effect of burden of choice as an aspect of bounded rationality
(March, 1978) will also affect changes to configurations. It
should therefore be less of a cognitive load to make changes to
Mass customization has as yet not been adopted widely in

financial sector products, although financial services
constitute an important service category (Oliveira and von
Hippel, 2011), and the roles of both user innovation (Oliveira
and von Hippel, 2011) and user involvement (Alam, 2002), as
well as customerization (Wind, 2001), have been discussed in
this context. There is very limited research on this setting for
mass customization according to our literature search.
Papathanassious (2004) has found high interest in mass
customization in the financial sector in a survey, especially as
this sector is characterized by dynamically changing customer
needs, high heterogeneity and quite fast technological
changes, plus is information-intensive. Winter (2001) has
described both a product-oriented and a process-oriented
approach to individualization of financial services. Wright
(2002) highlights that new distribution and processing
technologies on the supply side and changes in consumer
attitudes to banking on the demand side have driven the global
branding of retail financial services, because strong brands
have the established customer and distributor franchise
needed, and because global brands are a means for consumers
to identify reassuring and trustworthy products and services in
this context.
The bank considered in our study was pioneering the first
credit card in the world that offers customization to its users.
Interest rate, annual card fee, installment properties,
rewarding mechanisms and visual aspects of the card can be
customized by the customers. For this task, a toolkit is
available to Web users who are applying online. This toolkit
supports all customizable properties of the product and users
have a chance to play with the parameters, and the effects of
their changes on the product are reported and visualized if
applicable.
There are several ways for the users to create their
customized credit card. In the first alternative, users are
offered to customize main variables, including the visual of the
card, reward/installment rate, interest rate, annual payment
and sectors/firms of interest. They can also choose a campaign
for which they can then customize several variables. These
campaigns are Select Sector to change the sector in which
they can gain extra rewards or installments, Select Firms to
237
select three firms for this, Highest Expense to get extra

installment/reward in the highest expenses, Momentary
Campaign and No Campaign for full customization. As a
second alternative, there are several optimized packages for
the main card variables available: Extra bonus/installment
package (Extra Bonus), both reward and installment
packages and minimum payments package according to
financial parameters. On the other hand, there are sector
packages such as communication (Communication),
transportation (Travel), etc. which provide advantages in
those sectors. Finally, a recommendation system is available
which tries to identify the users preferences by asking
questions such as do you usually pay the all of your card debt,
or some of it?. The multiple-choice answers are then mapped
to the ready-to-use packages and the most appropriate
package is proposed. The credit card is then initialized with
the chosen parameters and delivered to the customer. The
customer is able to change the parameters using Internet
banking afterwards.
The research presented here can be characterized as an
exploratory case study, the aim was to analyze the adoption
and usage of the product by looking at the life cycle of credit
cards. Therefore, a study of the toolkit interface was not
enough, detailed card history including usage data was
necessary. We used, as Franke and Piller (2003) recommend,
observed data instead of self-reported measures. Therefore,
contact was established with the bank, especially the
marketing department and the technology subsidiary
maintaining the IT systems. The confidentiality of customer
information was a major discussion point, and subsequently
all data have been strictly anonymized for all analyses.
At the start, several interview sessions with different
employees familiar with the credit card were held about the
card itself and the application process. The main goal was to
determine the available and relevant data. The technology
subsidiary and marketing department approved access to the
customization properties and customer choices during and
after the application process, as well as to the data on credit
card usage, after confidentiality of customers and the
underlying card pricing model, which is considered relevant
for competition, was assured. After the data have been
retrieved from the production system through a database
query, they were imported into a new separate database set up
for performing queries and analyses on the data. The data
were checked both by the bank as well as the researchers for
duplicates and extreme or impossible values. The analyses
were done using both database queries for descriptive statistics
and a statistical package.
To be able to analyze the amount of data retrieved, some
form of sampling out of all existing cards was necessary. For
this study, all (approved) applications for a customized credit
card entered during the second half of 2008 were selected, and
their progress and usage was tracked until the end of 2009.
During the selected period of six months, there were 11,590
approved applications for a customized credit card. These
applications and the resulting credit cards with their usage
history therefore form the complete data set for the empirical
study. One factor that contributed to this decision was that
there had been major changes in card packages and structure
in 2007, which would have made any comparisons
problematic. A period of at least one year was deemed long

enough to analyze a customers adoption and usage behavior.
In addition, more recent data were not made available due to
privacy and competition concerns. In the following analyses,
the initial credit card configuration, all changes to the
configuration, the configuration at the end of 2009, statement
summary amounts for all monthly statements during 2009 and
overall yearly transaction volumes and amounts of all credit
card types offered by the bank are used.
Analysis and results

Adoption and initial configurations
We first retrieved the total volumes for normal and customized
credit cards. In 2009, total volume was 3,552,550,626
Turkish Lira (TL), about 2,368,367,000 USD at 2009
exchange rate, from 23,400,213 transactions, compared
to 29,558,237,666 TL (19,705,492,000 USD) from
433,417,897 transactions for the traditional credit card line of
the same bank. In total volume, the customized credit card
therefore is much smaller than the traditional offering. On the
other hand, mean transaction volume is significantly higher at
151 TL compared to 68 TL (p 0.01). This confirms our
H2a, customers with a higher base category consumption have
a higher likelihood to adopt the mass customization option.
Next, we focus on the initial selections of customers when
adopting the mass customization option to evaluate H3a and
H3b. Two different package types can be distinguished,
predefined or customized. In the first case, no further
customization beyond selecting the package takes place; for
the other packages, the user has several options. From these
initial choices, it is interesting to see that although
customizable packages are chosen slightly more often than the
predefined packages (with 51.3 per cent vs 48.7 per cent), the
difference is not significant (chi-squared test statistic, p
0.01). With regard to pricing and conditions, none is
noticeably more advantageous than the other. Possible reasons
for this distribution are a user interface that could make
further customization too cumbersome, or a well-thought
design of predefined packages that capture a huge part of
possible segments and customization elements of interest. On
the other hand, both motivational aspects like enjoyment and
unserved heterogeneity make customized packages at least
equally successful. The full customization package without
any campaign selection is actually the most often chosen
package and at the same time represents the highest level of
customization. This provides a first support for H3a, as the
customization in that case is based on attributes and not a
selection of alternatives.
If the choice of packages is more closely analyzed, as
explained No Campaign is most often chosen (17.36 per
cent). In this offer, the users are allowed to determine the extra
bonus rate, late payment interest rate and the card fee results
from these choices. Card fees range between 16 TL and 117
TL depending on the interest rate and extra bonus ratios. For
the predefined packages, the maximum card fee is 60 TL.
Users can select up to 1 per cent extra bonus in every
transaction they pay for, but predefined packages are limited
at this point. Users can also decrease interest rate down to
2.68 per cent. No such predefined package combination is
offered. The fact that this customization is chosen most often
238
Figure 1 Number of cards showing a change in a certain property

between creation and end of observed period
hints at the fact that the customization flexibility is important

to this group of customers. This provides additional support
for H3a.
Furthermore, packages focused on additional rewards or
installments follow in frequency with Extra Bonus (16.56
per cent), Select Sector (14.07 per cent) and Highest
Expense (12.49 per cent). Sector-targeted predefined
packages on the other hand are very undesirable in contrast to
flexible sector selection, clothing being most successful with
2.29 per cent. Sector selection also enables customers to select
sectors other than the predefined ones, and from time to time,
multiple sector selections can be made. The popular packages
show that offering extra bonus or installment is the most
preferred property in customization.
With regard to the least often chosen campaigns, two of
them are predefined packages with targeted segments only,
Travel (0.28 per cent) and Communications (0.40 per
cent), in addition to Firm Selection (0.79 per cent). There
are several different products on the market with more
specified and advantageous travel options than these
campaigns, one also from the same bank. So these campaigns
may be affected by cannibalization effects. On the other hand,
the Firm Selection package seems to be the most complex
customization offered, in which users search for firms in the
interface, select three specific firms and finally determine
whether they want to gain extra bonus or extra installment
from these, as well as the possible minimum limits for such a
gain. In that case, an overwhelming amount of possibilities,
coupled with the maximum limit of three choices, seems to
have negative effects. This provides support both to H3a and
H3b, as this option is based on alternatives, and provides a
very large number of options as well. We can also derive
additional support for both hypotheses from the generally low
uptake of the mass customization option, as within the mass
customization, the first step is alternative-based package
selection with a relatively large number of options.
3,500
3,000
2,500
2,000
1,500
1,000
500
Limit Maximum Amount
Limit Minimum Amount
Plus Installments Number
Package Number
Plus Reward Rate
0
Spending Cmt Number
Figure 2 Number of changes in a property between creation and

end of observed period for a card
3,500
3,000
2,500
2,000
1,500
1,000
500
Longitudinal analysis
We will now turn to the analysis of the events and usage of a
customized card after creation. The first aspect is the amount
of changes made to existing cards during the observed period.
Overall 4,675 cards of the 11,590 total showed a difference in
at least one major aspect between approval and the end of our
time window. Any in-between changes are not accounted for
in this analysis, e.g. if a card had reverted to the prior package,
no change would be recorded. Although not all cards have
been changed, we certainly find that customers do actually
engage in trial-and-error learning after initial configuration.
This confirms H1a.
We also analyze which attributes of a card have been more
prone to change (Figure 1), and the amount of changes
(Figure 2). When a comparison between the application data
and the present attributes of a card is made, it is found that
3,202 cards among 11,590 have a different plus reward/bonus
rate. This can also be interpreted as an aspect of H3a, as
changes in an attribute are much more common than in an
alternative, i.e. change in package. We can also analyze the
number of attributes changed for a card, and we find that most
cards have a change in one aspect only (Figure 2). This
provides first (partial) support for H3c, as complete changes of
0
1
a customization, i.e. changing several attributes, are

uncommon.
For more detailed analyses related to usage characteristics,
further sampling was necessary due to the amount of data, as
a cards life cycle for over a year may include many changes in
the properties and a number of statements. A sample of 500
cards has been chosen by simple random sampling method,
we ascertained that it has the same distribution with regard to
chosen packages as the full population.
First, the number of changes made is related to the total
amount spent during the time of observation as a measure of
base category consumption (according to H2c). The results
(Figure 3) show that most cards experience several changes,
with the majority between 4 and nearly 30. A change means a
new configuration of a card, and thus can include any number
of changes in properties on all levels. In this analysis, we also
account for all intermediate steps plus small adjustments, thus
the number of changes is much higher than in the previous
results on a global level (Figure 2). This clearly provides
239
Figure 3 Total amount spent by a card plotted against number of

changes to customization (N 500)
again relate to the number of changes. The correlation

coefficient becomes distinctly smaller but remains significant
at 0.16 (p 0.01), demonstrating a positive relationship
between number of changes and monthly spending, providing
additional support to H2c. The number of statements is also
positively correlated to the average spending at 0.26 (p
0.01), again confirming H2b.
We also analyze the card fee as a construct for available
resources of a customer. Card fees are determined by the
user through package properties, with more expensive
combinations more beneficial in some respect, mostly
usage-dependent. We therefore check for any relationship
between the total card fees paid and the total spending, as well
as between average values. For the summary values, a
correlation coefficient of 0.48 (p 0.01) can be found, for
average values the correlation is not significant. The number
of statements naturally is highly correlated to total card fee (at
0.77, p 0.01), but not significantly to the average card fee.
To aggregate these findings, we perform a multiple
regression analysis, first with the transaction amount as
dependent variable, as this is the aspect of highest interest for
marketing applications. We estimate both a model for the total
as well as average transaction amounts. As predictors, we are
limited to the variables retrieved, so demographic controls can
not be added. We therefore include the initial package
number, card fee (either total or average depending on
dependent variable) and the number of changes. We estimate
the full model and then also use stepwise multiple linear
regression analysis, using Akaike information criterion
(Table I). In both cases, but especially for the average amount
spent, the quality of the models is relatively weak. For the total
amount spent, the number of changes to the customization to
a card and the total card fee provide some explanatory power,
interestingly it is only the initial package selection for average
amount spent. As an underlying explanation, both number of
changes and total card fee are time-sensitive with regard to
usage. This seems to indicate that differences in total spending
are more related to continuous, but not necessarily high
spending per month. Customers who use their customized
card frequently over time accrue high total transaction
volume, and continuously adapt the card to their wishes.
Contrary to that, people with more infrequent but high usage,
resulting in high average amount per month, do not change
the customization often. An example could be a
card-optimized and used exclusively for a wedding, resulting
in high expenditure but no changes over a short period. If the
number of months active is added as an explanatory variable,
it is the only one that remains in stepwise regression.
3,00,000.00
Total Amount Spent
2,50,000.00
2,00,000.00
1,50,000.00
1,00,000.00
50,000.00
0.00
0
10 20 30 40 50 60 70 80 90 100
50,000.00
Total Number of Changes
support for H1a relating to the existence of continued

trial-and-error learning during use, as well as H3c related to
customers preferring a series of small scale changes.
Confirming H2c, there is a clear and significant positive
correlation between the number of changes and base category
consumption as expected, at 0.406 (p 0.01). For all
correlations, the non-parametric Spearman coefficient is used,
as variables are not normal distributed.
While the total amount spent by a card gives some
indication of behavior during the observed period, some
effects like different creation dates or non-homogeneous
distributions over time (e.g. including a wedding or vacations)
might introduce some bias. We therefore retrieved the number
of statements issued (which is the number of months the card
was actively used) for the evaluation of H1b. This shows a
clear relationship to the total number of changes according to
and confirming H1b, with a correlation coefficient of 0.76 (p
0.01), highlighting that customers who use the card actively
for a longer period change the customization more often. The
average number changes per active month is negatively
correlated with the number of statements though (correlation
coefficient of 0.7, p 0.01), which could hint at an optimal or
at least sufficient solution being reached after some time. With
regard to the impact of usage on base category consumption,
i.e. total amount spent, again a positive correlation of 0.57
(p 0.01) shows up for the activity time, confirming H2b. We
also compute the average spending per month for a card, and
Table I OLS regression results for transaction volumes
Variable
Number of changes to customization
Initial package selection
Total card fee
Average card fee
R2 (adjusted R2)
F-value (p-value)
Dependent variable: total amount spent coefficient (p-value)

Full model
Step 1
Step 2
165.854 (0.18)
270.803 (0.21)
15.821 (0.00)
0.08 (0.08)
9.92 (0.00)
240
19.007 (0.00)
0.07 (0.07)
25.63 (0.00)
189.708 (0.12)
16.196 (0.00)
0.08 (0.07)
14.08 (0.00)
A second regression analysis is performed to assess influences on

change behavior. This allows us to provide further evaluation of
H2b relating changes to base category consumption, and H1b
relating it to usage length. In that case, we add all available
variables, including the activity period (Table II). As can be seen,
only the number of statements as a proxy for length of usage, plus
the initial package selection significantly influence the amount of
changes made. The transaction volumes and card fees are not
significant as predictors. This analysis therefore confirms H1b,
but does not support H2b.
(Dellaert and Dabholkar, 2009) and considerable burden of

choice based on alternatives (Franke and Piller, 2004;
Huffman and Kahn, 1998). Also, pre-existing concepts are
most likely to be used, which therefore allow for easier need
matching (Huffman and Kahn, 1998). On the other hand,
the most often chosen package allowed for full
customization through attribute-based customization, while
pre-defined packages, especially limited ones, were less
successful. We can conceptualize the different packages as
different toolkits, with those that are already over-defined as
being too narrow in their solution space (von Hippel and
Katz, 2002). The fully customizable option also allows to
turn off unwanted features and come to the lowest possible
price, a feature found by Bardakci and Whitelock (2005) to
be especially important in the Turkish environment due to
budgetary constraints.
The longitudinal analysis of usage including change
behavior is a mostly under-researched topic in mass
customization literature. We found that most aspects of a card
are not changed, but that the number of changes in changed
aspects is relatively high, showing fine-tuning behavior,
respectively, learning by doing via trial-and-error (von Hippel
and Katz, 2002). Our related H1a was therefore confirmed.
The pattern of changes provided at least partial support to our
H3c that a series of smaller changes is used more often. We
find that cards with a higher number of changes are also those
which show a higher total turnover and, to a smaller extent,
average monthly turnover. Our H2c, extending current theory
on the positive effect of base category consumption to a higher
rate of changes, was only partially confirmed through
correlation analysis, but was not significant in the regression
analysis. The most important influence factor on the
number of changes was found to be the active usage
duration. Customers who use their customized card
frequently and consistently over time accrue high total
transaction volume, and they continuously and
meticulously adapt the card to their wishes. This second
aspect confirmed our H1b, that longer period of active use
will lead to a higher number of changes in configuration,
and also resonates the findings of Bardakci and Whitelock
(2005) for the Turkish car environment. Similarly, Prgl
and Schreier (2006) found that users of toolkits are not
one-time shoppers, but that their innovative engagement
is rather long-lasting, continuous, evolving and intense.
Discussion and conclusion

Summary and analysis
In this paper we have analyzed an example of mass
customization in the financial services sector. Our exploratory
case study has focused on adoption and usage of a
customizable credit card offered by a Turkish bank, as well as
for the first time, a longitudinal analysis of usage and changes.
Overall, the attractiveness of the customizable offering seems
to be small in number of customers as well as in total volumes
compared to traditional credit card services offered by the
same bank. The customizable credit card accounts for about
10 per cent of the volume of the most successful product from
the same bank, although average transaction volumes are
larger. Our H2a, that customers with a higher base category
consumption have a higher likelihood to adopt the mass
customization option, was confirmed. This confirms and
extends the findings of Kaplan et al. (2007) for intention to
actual adoption and usage. Also, lead user theory (von Hippel,
1986) can offer an explanation, as lead users generally, among
other factors, show a higher use (Schreier and Prgl, 2008) or
product experience (Dellaert and Stremersch, 2005). Some
reasons for this low adoption rate could also be the marketing
policy of the bank or the understanding of customers about
the product, basically relating back to a possible mass
confusion problem (Huffman and Kahn, 1998; Franke and
Piller, 2004; Piller et al., 2005). When analyzing customer
choices, we found at least partial support for H3a, that mass
customization options based on attributes will be more likely
to be adopted than those on alternatives, and H3b, relating to
the negative effect of a larger number of options on the
attractiveness. We found that one of the least preferred
package is selecting firms which have the most complex
interface, resulting in several levels of process complexity
Table II OLS regression results for change behavior
Variable
Dependent variable: number of changes to customization coefficient

(p-value)
Full model
Step 1
Step 2
Initial package selection

Total number of months active (Number of statements)
Total amount spent
Average amount spent
Total card fee
Average card fee
R2 (adjusted R2)
F-value (p-value)
0.223 (0.01)
1.115 (0.00)
0.000 (0.98)
0.003 (0.73)
0.006 (0.27)
0.032 (0.48)
0.33 (0.32)
26.01 (0.00)
241
1.442 (0.00)
0.31 (0.31)
145.4 (0.00)
0.223 (0.01)
1.394 (0.00)
0.32 (0.32)
77.16 (0.00)
Implications
Financial products are not the outcomes of a manufacturing
process as in traditional mass customization, but constitute, in
many cases, long-term services. Differentiation through
creating alternatives can constitute a competitive advantage to
banks. There were many credit cards with different targeting
offered to the customer, but a mass-customized credit card
constituted a new complementary offering. Kotha (1995) has
described a company active both in mass production and mass
customization. This is similar to the case here, and can provide
a competitive advantage. Kotha (1995) described that
competitors have been forced to offer mass customization as
well, probably leading to a change in industry conditions,
which is not yet visible for our case. The author also noted that
competing in two segments might lead to problems stemming
from different priorities, mostly relating this to production
aspects (Kotha, 1995). This is not a factor in our case, but
marketing aspects are, as both initiatives basically compete for
the same budgets.
A second aspect of offering a toolkit to customize a financial
service beyond as a marketing strategy can be to learn about
customer preferences. Our analysis has shown very different
adoption rates for different packages, as well as the ability to
gather data about changing behavior and relationships to card
usage. This can provide important feedback to product
development. Prgl and Schreier (2006) also found that
sometimes leading-edge users do not merely content
themselves with the official toolkits, and either develop their
own or provide ideas. In addition, individual user designs are
not only attractive to the creators themselves but can also be in
high demand among other users. This means that providing a
toolkit for customization can be a way of getting ideas for new
product development, or even to identify lead users (von
Hippel and Katz, 2002; Prgl and Schreier, 2006). Also Alam
(2002) discusses user involvement in new service
development, using cases from the financial services
business-to-business sector. He reports that user involvement
can help companies to achieve more superior and
differentiated services. Oliveira and von Hippel (2011) have
also focused on banking services, and found that in the
majority of cases, users self-provided a novel service before
any bank offered it.
The results of this study also confirm the difficulties of
designing an appropriate toolkit and solution space, as
packages that specify a card too narrowly already are not
highly adopted. On the other hand, also a too wide solution
space, e.g. encompassing every single possible shop for
selecting benefits, proves problematic. We also found evidence
for extremely targeted customization, cards created for
providing maximum benefits for limited applications like a
wedding. Those incur high transaction volumes in a short
time, and are seldomly changed. It should be noted that the
pricing for customized cards is problematic for the bank in our
case study. As a solution to clearly existing mass confusion
problems, an online community to allow customers to discuss
the customization process, share creations and support each
other (Franke et al., 2008; Piller et al., 2005) would be an
interesting solution and increase the popularity of the card.
The bank in our study is reluctant to do so, as the pricing and
their experience shows that there are some sweet spots in
the configuration, and therefore it is not in their best interest

to enable this kind of sharing and communication.
Limitations and future research
This research has several limitations which also provide areas
for future work, and should be seen as a starting point for
further research on this topic. The first area of possible
concern is external validity. The study is based on a single case
of mass customization in the sector of financial services. The
generalizability of the results regarding longitudinal aspects to
other industries is unclear. Similarly, the Turkish environment
has found to be more ready to adopt mass customization than
the UK market (Bardakci and Whitelock, 2005), and the
results might be influenced by this as well as other cultural
factors. Naturally, in further research, different industries as
well as different cultural settings would be interesting to
explore and compare, in addition to gathering data from
several institutions. The bank used is a leader in the field in the
country, as well as one of the largest banks with over 10
million customers, which could hint at a relatively
representative customer structure.
A second concern is construct validity. The study presented
here has relied on observed data gathered from the databases
of the participating bank. Any kind of error in that data would
also transfer to our study. The data were checked by the bank
and the researchers for duplicates as well as any extreme or
impossible values. Although any other error can nearly be
eliminated as a concern for some aspects like credit card
statements, the number of changes to a customization is less
clearly defined in literature. Further work should consider
using measures of distance or similarity to configurations. In
addition, no personal data were available, so two cards in our
sample could belong to persons in the same family (but not to
the same individuals, as bank guidelines do not allow for that),
or a person could own both a customized and a traditional
card. This could have an effect on the results, although the
relatively high mean transaction volumes might be an
indication that this is a smaller problem. Although privacy
naturally has to be a major consideration, the use of
anonymized identifications would be a remedy for this in
future studies. In such a case, the data could probably also be
augmented with demographic aspects for research on
adoption and usage.
Finally, customer-customer environments as a complement
to mass customization (Piller et al., 2005; Franke et al., 2008)
are an interesting area. Unfortunately, the participating bank
has not agreed to implement such an environment, but
research to study the effects of such an environment on
configuration change frequency or even configuration
convergence would be highly relevant.
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Corresponding author
Stefan Koch can be contacted at: stefan.koch@boun.edu.tr
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