E-commerce firms are discovering
the value of online product
customization and the additional
revenue potential that can be
generated from it. Over the last few
years, product customization has
burgeoned in the online space, as
consumers look to buy a plethora of
differing mass customized goods
from suits to handbags and shoes,
from bicycles to personal computers.
A survey of more than 1,000 online
shoppers conducted by Bain & Co.
found that more than a quarter of
shoppers, 25-30 percent, are
interested in online customization
options, even if only 10 percent have
tried it until now.
Moody’s estimates U.S. online
clothing and shoe sales will top $45
billion by the end of 2014. If 25
percent of those online sales were
customized, that would mean over $
11 billion in sales per year from
online customization.
The decision to buy a
customized product is
mediated by a number of
unconscious factors that shape
the customers’ final decision.
So strong has it become that, today,
many popular brands rest their
entire business strategy on their
ability to customize. The NikeiD
website, 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 shoe lace
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, NikeiD has seen its online
business triple since 2004.
Why the Attraction of
Customization has become
increasingly significant to brand-
name companies because it’s now
part of a broader trend that shifts
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.
“I Built It, Therefore I Own It”
The ability to influence the shape of
an object automatically 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 been 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
Also, 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 Ann
Schlosser (2003, 2006) 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 to create far
higher customer engagement leading
to an eventual purchase of the
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 and colleagues tested this
assumption in an experiment
involving very simple origami and
found that 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” that are invested
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. It was
found that 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 percent of students
opting to trade, the endowment
effect seemed established (you
would expect 50 percent 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.
3 Implications for the Online World
1. Consumers are willing to pay
more for customized items
From the above examples, it is clear
that people are willing to pay higher
prices for self-designed products
relative to non-customized ones. And
in most instances, they would
consider the added premium a
reasonable cost to pay, as the
customized product is perceived
more valuable than the standard
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
appear 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
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 is 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.


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