Customer preference based optimization in selecting product/service variety

Abstract The breadth of customer choice of products and services has increased dramatically. Consequently, both manufacturing and services have adopted elaborate variety management to satisfy various customer needs while maintaining business profitability. Our study presents a formulation of variety selection problems considering customer preferences by the introduction of preference order from economic theory. Using Frequent Shopper Program data of a large shopping mall in Japan, our proposed framework is applied to the optimization of tenant-mix problems as a case study of service variety selection. Results demonstrate how an optimized variety of shops can satisfy various customer preferences at a reasonable profit level.