Ecommerce firms are discovering the value of online product customization and the additional revenue potential it can generate. Over the last few years, product customization has burgeoned in the online space, as consumers look to buy a plethora of mass-customized goods from suits to handbags and shoes, from bicycles to personal computers. Deloitte found one in five consumers who expressed an interest in personalized products are willing to pay a 20% premium.
Today, many popular brands rest their entire business strategy on their ability to customize. The Nike By You website (formerly known as NikeID), for example, offers customers the ability to customize their shoes. They can pick the color of the bottom and top of their new shoes, the pattern and shoelace color, and even have an inspirational message sewn into the tongue of the shoes and the option to share their designs online.
According to Brand Channel, Nike By You has seen its online business triple since 2004.
What's the Attraction of Customization?
Customization is part of a broader trend that shifts brands' perspectives from viewing customers as recipients of value to co-creators of value. Rather than being passive, the customer is now becoming a part of the “product development” process.
The decision to buy a customized product is mediated by a number of unconscious factors that shape the customers’ final decision. Moreover, the interaction in creating the product can lead the customer to buy it — even if they weren’t initially planning to.
Related Article: Why the Time Is Right for Personalization
'I Built It, Therefore I Own It'
The ability to influence the shape of an object generates emotional attachment. The final design of a product reflects the customer’s individual taste. The self-selection of features, color, shape, etc. all work to provide a glimpse of the customer’s inner world.
The opportunity to take part in a process and influence the end result promotes emotional attachment that leads to psychological ownership, the feeling that something is “mine,” even without legal ownership.
For example, kindergarten teachers feel proud as they see the children they have educated become successful adults. In the same way, online retail visitors may develop feelings of ownership toward the items in their cart just because the items stay in their cart whenever they re-enter the website.
In addition, the ability to customize a product and to be involved in the design process promotes feelings of control that have also been found to increase feelings of psychological ownership. For example, people, especially those on a diet, prefer to choose the ingredients of their salad as it endows them with a sense of calorie control.
The opportunity to touch an object creates sensual stimulation by activating the buyer’s touch receptors. As we are dealing with online purchasing, obviously the customer cannot feasibly touch the products; however the interaction with the product brings the imaginary path to life. The selection of the product’s features, colors and shape generates thoughts concerning “how it would feel” to own that object. According to Foster School of Business Professor Ann Schlosser, object interactivity in the context of virtual objects produces far more vivid mental images compared to text or static pictures of an object. Those mental images help create far higher customer engagement leading to an eventual purchase of the product.
When instant cake mixes were introduced in the 1950s as part of a broader trend to simplify the life of the American housewife, they encountered resistance as they were too easy. Housewives were concerned that their cake-making efforts would now be undervalued. However, once the cake mixes were modified to require the addition of an egg in baking, adoption rose dramatically.
When people imbue products with their own labor, their efforts increase the value of the product. Dan Ariely, James B. Duke Professor of psychology and behavioral economics at Duke University, tested this assumption with his colleagues in an experiment involving very simple origami. The found people tend to place higher value on the origami they created. Moreover, they thought everybody else would love it more. Ariely refers to this as the IKEA effect, named after Swedish furniture manufacturer IKEA whose furniture is sold in boxes — with sometimes a great deal of assembly required. The efforts and “labor” people invest in the customization process promote feelings of psychological ownership as well.
'I Own It, Therefore It Is Superb'
Not only do our possessions add value to our lives when we have a part in building them, but we also add value to our possessions. Consumers value an object more once they have taken ownership of it. This phenomenon is known as the Endowment Effect.
Over the past decade, researchers have found support for the endowment effect in many experiments. In one of the best-known, researchers at Cornell University began by giving university students either a coffee mug or a chocolate bar, each with identical market values. First the experimenters confirmed that roughly half the students preferred each good. After the goodies were handed out, they let the students trade: those who had wanted mugs but got chocolate (or vice versa) could swap.
With barely 10% of students opting to trade, the endowment effect seemed established (you would expect 50% to have swapped, given the random allocation of gifts). Even after a short time with items of little value, ownership had overwhelmed the students’ prior tastes.
Related Article: One Reason Personalization Fails? Customer Journey Mismanagement
3 Implications for the Ecommerce World
1. Consumers are willing to pay more for customized items
From the above examples, it is clear people are willing to pay higher prices for self-designed products relative to non-customized ones. And in some instances, they would consider the added premium a reasonable cost to pay, as the customized product is perceived as more valuable than the standard one.
In the same way, a car owner will automatically value his own car higher than the exact same model that he does not own. For this reason people almost always price their cars above the list price.
2. Customization is more appealing to women
The options to customize a product appears to be more appealing to women than men. A study produced by Wharton titled “Men Buy, Women Shop” revealed significant differences between the shopping behaviors of men and women. The study found that women are more focused on the experience, while men were focused more on the mission.
Women tend to be more invested in the shopping experience, while men just want to buy a specific item and get out. For this reason, in many instances, the customization process may be more effective when directed towards female audiences.
3. Maintain the fine line between effort and value
While it's true that the more effort a customer invests in the design of their product, the more they will be willing to pay for it, if the consumer is required to invest too much effort, the product will be viewed as inconvenient or annoying.
Greater customer engagement, satisfaction and online revenue can be achieved by allowing online visitors to take an active role in the product-development process. However, be mindful to create tasks that generate higher product value while remaining within the scope of most visitors’ attention spans and cognitive abilities.