11 Greater profitability.
12 Higher success potential of New Product Development projects.
How can luxury brands customize goods and services?
The luxury industry has several misconceptions regarding mass customiza-
tion of goods and services. The most prominent of these misleading ideas is
that mass customization increases operations costs. Another misapprehension
is that the ‘supposed’ high costs incurred through customization will auto-
matically be transferred to the price tags of the end products, making the
products more expensive for consumers. There is also the doubt that luxury
consumers will be willing to pay more for customized goods.
The first assumption, which is that customization equals higher operations
expenditure, is wrong. This is because advanced interactive technologies such
as the internet can be used to identify specific product requirements and to
manufacture them using automated systems. This system applies similar
economies of scale advantage of mass production. So instead of higher costs,
mass customization actually lowers production costs in the long run!
The second assumption, which is that the ‘supposed’ higher operations
expenditure incurred through customization will automatically mean an
increase in the price of the end products, is also wrong. This is because the
same systems that are used in mass production can be adjusted to produce the
standard or basic components that are required for mass customization. The
question of higher product prices does not arise.
The final assumption, which is that consumers might not be willing to pay
more for customized luxury goods, is wrong as well. This is because
customization is highly dependent on choice and selection and not an option
imposed on consumers like standardized goods. A consumer who opts for
customization knows exactly what appeals to them. This means that choice
would rank above cost for the consumer, making customization a strong sell-
ing factor. When consumers choose customized products, their level of
expectation is higher than that of the consumer that chooses mass-produced
goods. This higher expectation is also accompanied by an envisaged higher
price. The price difference between customized and standardized goods
should however be minimal.
The mass customization formula can be applied to luxury goods at little
cost difference from the current cost of mass production. This naturally
should not affect the prices that consumers would pay for the goods, although
luxury consumers are willing to pay more for mass customized goods, if
required. For example if a consumer can purchase a handbag for $2,000, they
will likely be willing to pay an additional $50 to have their component
choices or personalized message embossed on the bag!
As previously highlighted, advanced computer-aided technologies
chapter 8 253customize me!