ORIGINAL ARTICLE A multiobjective differentiated service model for pricing and due date setting in the handmade wood product industry Shu-Chu Liu & Chih-Hung Chung & Yi-Chen Lai Received: 7 February 2014 /Accepted: 25 September 2014 /Published online: 10 October 2014 # Springer-Verlag London 2014 Abstract Since various service needs for pricing and setting due dates in the handmade wood product industry are increas- ing dramatically, a differentiated service based on the maximal profit criterion becomes an important marketing strategy for customer relationship management (CRM). However, other important objectives of customer satisfaction maximization are often ignored. In this paper, a multiobjective differentiated service model based on customer preference information on pricing and due date setting into consideration in the hand- made wood product industry is proposed. Since resolving the differentiated service model is an NP problem, a multiobjective hybrid heuristic method is proposed. The hy- brid heuristic method integrates large neighborhood search (LNS) into particle swarm optimization (PSO). The results revealed that the proposed method is better than existing methods and other heuristic methods for the single or differ- entiated service model in terms of both profit and customer satisfaction criterion. Some sensitivity analysis for different customer segments and different arrival rates is also considered. Keywords Handmade wood product industry . Differentiated service model . Multiobjective . Particle swarm optimization (PSO) . Large neighborhood search (LNS) . Customer preference information . Hybrid heuristic method 1 Introduction Many industries are aware that more and more homo- geneous products have entered the marketplace. Consequently, these industries have transferred their marketing approach to differentiated services so that they are better able to promote the additional value of their products [37]. Not only does this marketing ap- proach satisfy customer ’ s demand and gain their trust, but also it helps the company obtain a higher rate of the market share [13]. Different service needs for pricing and due date setting are increasing dramatically in the handmade wood product industry today. However, the single service (fixed price and due date) based on the maximal profit criterion is still provided by the hand- made wood product industry [8, 19, 21, 28]. As a result of the shortcomings in the current situation, a differen- tiated service model is needed to enhance competitive advantage [12]. The differentiated service model has been adopted in var- ious industries, including Internet services, delivery services, manufacturing, etc. [11, 13, 34]. Maximizing profit is always the most important objective for the differentiated service model [5, 11]. However, the objective of customer satisfaction is ignored in the differentiated service model. Customer satis- faction should be another important objective in the differen- tiated service model [20]. It is difficult to consider only one objective without influencing or compromising other objec- tives. For example, due to the dynamic change of demand, manufacturers should plan an appropriate order schedule and set a price to achieve the objective of profit maximization [7]. However, the production capacity is limited. Some orders might be rejected, and customer demands are not satisfied. Consequently, manufacturers need to balance profits and cus- tomer satisfaction to improve their advantage over the com- petition [24]. Accordingly, a multiobjective differentiated S.<C. Liu : C.<H. Chung : Y.<C. Lai National Pingtung University of Science and Technology, Neipu, Pingtung County, Taiwan C.<H. Chung (*) University of North Texas, Denton, TX, USA e-mail: chih-hungchung@my.unt.edu Int J Adv Manuf Technol (2015) 77:131–144 DOI 10.1007/s00170-014-6440-0