Dynamic pricing and service customization strategy for IoT-based smart products

Digital technology has changed consumer behavior and expectations motivating firms to innovate customization strategies to meet the increasingly personalized needs of consumers. To explain this change, we first constructed a two-period game between a smart product manufacturer and a service customization platform. Second, we obtained optimal service customization strategies based on the impact of Internet of Things (IoT) technology. Finally, we implemented a case study of the smart product manufacturer ORVIBO and the Oppein MALL platform for whole-house customization to verify these optimal strategies. The results indicate that (i) firms should view the IoT's value in the long term, as their profits do not always increase as the IoT functionality level improves; (ii) the manufacturer's optimal strategy is to adopt service customization in both periods; (iii) service customization strategies can achieve Pareto optimality for the manufacturer and platform, resulting in a win-win state for consumers.