Article ID: | iaor20073633 |
Country: | United States |
Volume: | 51 |
Issue: | 6 |
Start Page Number: | 1007 |
End Page Number: | 1012 |
Publication Date: | Jun 2005 |
Journal: | Management Science |
Authors: | Srinivasan Kannan, Akura M. Tolga |
Keywords: | information, game theory |
Better targeting opportunities and the increasing role of information-intensive environments have created new challenges for firms in obtaining customer information. Such information can help firms increase their profits through cross-selling opportunities. However, revealing personal preferences and contact information can raise the risks for customers when dealing with a firm. Consequently, some customers trade off the benefit and risks of revealing information. As the opportunity to obtain a higher level of information increases, customers incur a higher level of risk when dealing with a firm. This increases the firm's incentive to commit on a cross-selling level. By such a commitment, a firm can obtain customer intimacy and benefit from detailed customer information. As a result, profits increase while prices decrease. Thus, legal regulations that explicitly require firms to spell out the extent of cross-selling may actually improve the profits of the firm.