Customisation is one of those marketing ideas that look great in theory but don’t always work in practice.
The benefits of customisation include:
|For the firm:||For the customer:|
But there are downsides, too. For instance, the firm misses out on economies of scale.
And while customers like the idea of having lots of options and being able to customise the product to their exact specifications, choice can actually decrease customer satisfaction. In fact, the higher the effort in customising a product, the more likely that the customer will be dissatisfied in the event of service failure.
Hence, it is really important for marketers to understand when to offer customers the ability to tailor the product or service that they get. Nikolaus Franke, Peter Keinz and Christoph J. Steger investigated this issue, and published the result in the Journal of Marketing, in a paper entitled “Testing the value of customization: When do customers really prefer products tailored to their preferences?” (open access version, here).
The researchers investigated whether customers had a higher willingness to pay for a product that they could customise vs the mass-market option. They found that, indeed, customers were willing to pay between 34% and 50% more for a product that matched their preferences:
That is, there is a significant gain to be made by firms that allow customers to get tailored solutions to their needs.
More importantly, though, the team found that the increase in the willingness to pay for tailored products depended on three factors:
- The customers’ level of insight about their preferences – i.e., the customers know exactly what they want
- The customers’ ability to express their preferences – i.e., how easy it is for the customers to describe exactly what they want
- The level of product involvement – i.e., how important the product is for the customers
I was just thinking about this study, earlier this week, while out shopping for bedroom curtains. It is for an odd-shaped window, so I need to get these curtains tailor-made. And it is a really important purchase, for me, because it is expensive, it won’t be easy to replace, and it is something that I will be looking at every day.
But, gosh, I am really struggling to express – or even know – what I want! The generic description ‘Scandinavian’ isn’t doing much for me. As the shop assistant said: “What is Scandinavian for me, may not be Scandinavian for you”. The ‘no flowers’ criteria helped to narrow down the pool of options to choose from, but there is still an overwhelming range of options. And what to say of my desire to have something that is ‘not boring’ but also ‘not in your face’?