Increasing Retention and AOV with Customization

Every day we meet with prospective customers who are eager to learn how they can add a co-creation, customization, or personalization feature (collectively Customization with a capital C) to their existing product offering. Conversations, guided by our prospective clients, often start off with an overview of their current product offerings and quickly move to a discussion about which products cater to the customization demographic and then finally how and where they want to add this new feature to the limited set of SKUs where it makes sense. Customers know exactly what they want or so they think. One of my favorite parts of this job is what comes next. Armed to the teeth with data, we demonstrate that while content is demographic specific, Customization adds value to all consumers; and far from being a feature, Customization is a product strategy. It impacts how customers perceive their relationship with both a brand and its products. For those that get it, its revelatory. Customization is not a feature; like product quality or ease of use, Customization is a fundamental dimension of the customer experience. In 2011 prominent behavioral economist Dan Ariely along with colleagues Norton and Mochon published groundbreaking research demonstrating just how much impact Customization can have on the perceived value of a product1. In what they call the IKEA effect, participants were asked to engage in a variety of construction tasks including building IKEA products, folding origami, and building Legos. The research concludes that in at least one experiment participants valued their creation twice as much as the same product created by another participant. How is it that additional labor on the part of the consumer creates value? Done right, it is not labor at all. Instead it is engagement; and this is the key to success. Customization fulfills our innate desire to be creative and productive and those positive emotional qualities are attached to the product in the Customization process. Personalization - true one-to-one product delivery - extends the value even further by imbuing the product with personally relevant content in addition to the value attached from the creation process. The prospect of implementing Customization can be daunting. There are numerous technical, legal, supply chain, and other various implementation considerations; and thats after youve convinced the business to head down this path. However, for those organizations progressive enough to take

the first mover advantage, it can translate into game changing growth. The good news is that

(Norton, Mochon, & Ariely, 2011)

ORIGINALLY PUBLISHED IN CRMBUYER.COM APRIL 2012 DARRYL KUHN, CTO - SKINIT

there are several methods to engage the customer in Customization and some can be quite a light touch. These methods include: Crowdsourcing: A distributed problem-solving and production process that involves outsourcing tasks to a network of people, also known as the crowd. Co-creation: Enlisting individual consumers to become content creators, crowd sourcing without the crowd. Mass Customization: The repurposing or decoration of standardized product with one or several features selected by the end-consumer. Personalization: Producing products, which are one of a kind and made by specific request of the consumer. Highly personalized products are characterized as being relevant to only the end consumer.

Each of these Customization methods represents a progressively more complex and higher value added engagement. You can use this progressive scale to ease into Customization. In fact you can gain tremendous value without ever disrupting your existing supply chain. Ghirardellis 2010 New Intense Dark campaign 2 serves as a good example of this. Ghirardelli collected 14,000 flavor entries but rather than build a personalized chocolate supply chain capable of producing all these distinct combinations they simply introduced the most popular combination. After more than 232,000 votes, the winner, Hazelnut Heaven, was produced in 2011. This didnt require a new supply chain or automated manufacturing. They just added a new SKU to their standard line up; its a simple way to get started. At Skinit were able to charge a 30% premium for personalized product s and thats on top of the premium were able to command for our traditional customized product (e.g. items in our design library and branded product). Not only that but we end up with a more satisfied customer who is more engaged with their product as well as the Skinit brand. Imagine what a 30% revenue bump from a more engaged customer can mean to your business. In the words of Forrester analyst JP Gownder mass customization is (finally) the future of products.3

Works Cited
Norton , M. I., Mochon, D., & Ariely, D. (2011). Retrieved April 3, 2012, from Harvard Business Review: http://www.hbs.edu/research/pdf/11-091.pdf

2 3

http://www.newintensedark.com/default.aspx http://blogs.forrester.com/jp_gownder/11-04-15-mass_customization_is_finally_the_future_of_products
ORIGINALLY PUBLISHED IN CRMBUYER.COM APRIL 2012 DARRYL KUHN, CTO - SKINIT