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For more information,ebusiness@mit.edu or 617-253-7054

please visit our website at

http://ebusiness.mit.edu

or contact the Center directly atA research and education initiative at the MITSloan School of Manaement

The Virtual Customer:Communication, Conceptualization, andComputation

Paper 104

Ely DahanJohn R. Hauser

September 2001

The Virtual Customer

Ely Dahan and John R. Hauser September 2001Ely Dahan is an Assistant Professor of Marketing and Management Science, E56-323, SloanSchool of Management, Massachusetts Institute of Technology, 38 Memorial Drive, Cambridge,MA 02142-1307, (617) 253-0492, edahan@mit.edu.John Hauser is the Kirin Professor of Marketing and Management Science, E56-314, SloanSchool of Management, Massachusetts Institute of Technology, 38 Memorial Drive, Cambridge,MA 02142-1307, (617) 253-2929, jhauser@mit.edu.The authors thank the MIT Center for Innovation in Product Development and the MIT Center for eBusiness for financial support. The authors also wish to thank Nicholas Chan, Wendell Gil-land, Rob Hardy, Adlar Kim, Leonard Lee, Bryant Lin, Meghan McArdle, Olivier Toubia andLimor Weisberg for their contributions and for communicating concepts using computers. Profs.Andrew Lo, Tomaso Poggio, Dražen Prelec, Duncan Simester, and V. Seenu Srinivasan werekey contributors to some of the methods described herein. This article has benefited from semi-nars at Columbia University, Georgetown University, Harvard University, M.I.T., University of Texas at Austin, and the Wharton School as well as presentations at the CIPD Spring ResearchReview, the Epoch Foundation Workshop, the Center for e-Business at MIT, the MIT ILP Sym- posium on “Managing Corporate Innovation,” the AMA Advanced Research Techniques A/R/TForum in Amelia Island, Florida, and the Marketing Science Conference in Wiesbaden, Ger-many. Demonstrations of the methods discussed in this article, open-source software to imple-ment the methods, and many of the working papers referenced in this article are available atmitsloan.mit.edu/vc.

The Virtual Customer

Author Biographies

Ely Dahan is Assistant Professor of Management Science in the Marketing group of MIT's Sloan School of Management where he teaches New Product Development and MarketingHigh Technology Products. His article with V. Seenu Srinivasan on Internet Concept Testingwon the Thomas P. Hustad Best Paper award in the

Journal for Product Innovation Manage-ment

. Dr. Dahan completed his PhD in the Operations, Information and Technology program atStanford Business School, where he held an Integrated Manufacturing fellowship from the De- partment of Energy, a National Doctoral Fellowship from the American Association of Colle-giate Schools of Business (AACSB), and a Jaedicke Fellowship for scholarly achievement fromStanford. He researches internet-based market research methods, mathematical models of paral-lel and sequential prototyping, the economics of cost reduction, and models of mass customiza-tion. Dahan received a Bachelor's degree in Civil Engineering from MIT and an MBA from theHarvard Business School. He worked as national product manager for W.R. Grace & Companyand NEC Information Systems in Massachusetts until 1984 when he founded a computer net-working company in Maryland, serving as CEO until the firm was acquired in 1993.John R. Hauser is the Kirin Professor of Marketing and Head of the Marketing Group atM.I.T.'s Sloan School of Management where he teaches new product development, marketingmanagement, competitive marketing strategy, and research methodology. He is the co-author of two textbooks,

Design and Marketing of New Products

and

Essentials of New Product Manage-ment

. He has published over sixty scientific papers. Among his awards include the ConverseAward for contributions to the science of marketing, the Parlin Award for contributions to mar-keting research, the MSI award for the most significant contribution to practice, three awards for the best paper of the year in the marketing sciences, and four additional awards as finalist. Hehas won an award from the Sloan School for outstanding teaching in the Master's program. Hisstudents have won major thesis awards including the Brooke's Prize, the Zannetos' Prize, theAmerican Marketing Association dissertation award, and the INFORMS Bass Award. He hasconsulted for a variety of corporations on product development, sales forecasting, marketing re-search, voice of the customer, defensive strategy, and R&D management. He is one of the foun-ders of Applied Marketing Sciences, Inc and has provided expert testimony regarding marketingresearch and sales forecasting. His current interests include metrics for product development,customer satisfaction incentives, new methods for targeting customer needs, the development of virtual-customer methods to provide rapid, usable information to product development teams,and new applications of reinforcement learning to automate marketing tactics and product de-sign.