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What is Product Customization anyway?

Some assumption in marketing is that a consumer realizes higher utility when the product better matches the consumer preferences. Therefore, when costs and efforts to achieve this match are sufficiently low, firms with some monopolistic power may reap higher profits by providing better-matching products. Product customization and product proliferation are two popular strategies for improving the preference-product match, with most Public Relations and Marketing firms actively pursing both. Firms pursing product customizations first invites each individual consumer to reveal her preference and then produces and delivers a product with the closest match possible. Firms that pursing product proliferation does not hold such one-to-one dialogs with consumers, it offers many variants and the costumers choose the most appealing product. Product proliferation is observed in many markets.

Customization, Competition, and Firm Profitability

Does marketing customization make profitability for firms?

     Even though customized products increase consumer utility, firms do not always gain from adopting mass customization, frequently because customization reduces product differentiation in a competitive context. If firms do not pursue customization but its competitors do, then the former would probably become worse off. In product categories today, the technological ingredients underlying product customization are relatively natural and readily accessible to all firms. This implies that adopting customization cant ensure competitive advantage and studies show that pursing customization may lead to a prisoner’s dilemma. Are customizing firms ever be able to escape the curse of the consumer’s dilemma? According to NYU Stern Business School researchers decide that the answer is yes. When firms differ in the timing of adopting customization, the early adopter may achieve an advantage. If the product being marketed, and has multiple attributes of keen interest to consumers, then firms may relax prices which attribute to customize.

What are the constraints and challenges in mass customization?

Even though it is economy viable for firms to tailor attributes valued by the consumers and not costly to customize, Firms in many industries customize only a fraction of the product attributes valued by the consumers and not costly to customize, firms in may industries customize only a fraction of the product attributes and allow limited options for each of these attributes. However, technological advances any lower these costs. Customization can even prove harmful for goods being marketed, which becomes an object of goods to project an image of exclusivity. In competing exclusivity with customized products, firms may lose all differentiation advantages, and they may therefore not want to eliminate their standard products.

The researcher’s findings question two important assumptions of product personalization and customization. The first assumption is that consumer preferences are stable or evolve in a predictable fashion. Reference stability is critical for personalization because previous choices are used to predict future choices. The second assumption is that preferences revealed by consumer choices truly maximize utility. A customer heavily weighs price in their product choices. A second possibility is that product information was presented in a way that made price comparisons easy and this accented the importance of price.

The danger of product customization is that customers may realize after designing their ideal product that their actual preferences correspond more closely to standardized products. Customer uncertainly about their preferences is less likely to be an issue in business-to-business settings, where buyers have greater experience and expertise.

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#1 POSTED BY Ryan Blaire Kahn, 04/22 3:58 PM

This is really well written and useful! Thanks, Dominique! I would be interested to hear what you have found about customization and social? How do firms use social media to improve the efficiency of their customization tactics? Is that something that regularly takes place? 

#2 POSTED BY Dominique Brielle Fluker, 04/22 6:12 PM

Thanks Ryan! That is what I am interested in exploring more for my presentation by using award-winning social media public relations campaigns from PR/Digital Marketing agencies and firms, like (Ogvily&Mathers) to see how efficient it is. In my opinion and from the statistics that I've seen, customization marketing is used quite frequently and it is a key component to understanding the customer's desire as far as their preference in product, which definitely influences the way product is being marketed to the public as a whole. *If interested, you should look up the difference between B2B marketing vs. B2C Marketing. I was very confused on B2B marketing until I realized the customization marketing tactic is mostly for the consumer and not privately/publicly owned businesses! 

#3 POSTED BY guest guest, 04/22 6:49 PM

Great! I will check that out over summer maybe!

#4 POSTED BY Wade Wallerstein, 04/24 3:33 PM

This totally reminds me of a TED talk by Greg Lynn about architecture and product design. Basically, he and his team designed a process for creating a titanium kettle and tea set that created a completely unique product each time. The cost of the teaset was astronomical—upwards of $2,000 if I remember correctly. Basically, the point of the talk was that the consumer of the product was not actually paying for the kettle, they were paying for the customization, the uniqueness. The process was the commodity, not the product. It brought up a really interesting discourse surrounding process vs. product and the usage of process as selling point in branding of goods. Really great post, Dominique!

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