Chocomize business case: mass customization vs. mass production

Inc Magazine recently published an article describing a strategic dilemma faced by custom chocolatier, Chocomize.     Chocomize launched a custom chocolate business after seeing the success of competitor Chocri in Europe.   When the Chocomize founders heard that Chocri already had plans to expand to the US, Chocomize set out to serve the large American market on their own, essentially mimicking Chocri in every way, from the core Belgian chocolate itself to toppings selections to packaging.  It seems that Chocomize intended to compete not on product quality or customization experience, but on regional marketing and PR reach.

 Volume vs. profit margin

Soon after launching, the founders of Chocomize were confronted with the classic business question of volume vs. profit margin.  Should they take a large corporate order at cost?   Or, should they strictly maintain their large profit margin and grow sales slowly but surely?  If they took the large order, they could get a lot of buzz in the market.

Every small customization company faces this dilemma.  Large corporate sales are attractive because of their volumes and their reach.  But ironically, they go against the very value proposition of a customization brand – to provide each individual with a self-designed product.

Marketing costs and brand building

Still, sampling is a very successful marketing technique, especially in the candy market.   Chocomize could eat the margin of the sale and hope that the flood of 10,000 chocolate bars out in the market would lead to future sales.  And more press coverage.

The question comes down to this; is Chocomize a custom chocolate company or is it a novelty gift company?   Custom products typically command a premium price because the customer is paying for both the product and the experience.  Personalized chocolate bars are unique, include only ingredients you specify, and are built-to-order.  Personalized packaging adds another layer of specialization compared to off-the-shelf bars.   And these custom orders require a long lead-time.

Marketing strategy and cost structure 

Although this identity crisis is difficult, small customization companies don’t have to choose one or the other.   If their supply chain can occasionally support large corporate orders (perhaps by sub-contracting out the work), they can extend their customization brand to a specialty chocolate bar brand.     Assuming, of course, that they can maintain quality and deliver on time, a risk that Chocomize admitted they could not overcome.

What would Willy Wonka do?

Can Chocomize differentiate by reaching larger corporate markets?   Even if they decided that a mass production batch of specialty bars were worth their weight in word-of-mouth marketing, their small operation was never set up for “mass” customization in the first place.  There is a fine line between mass customization and customization, but the main difference is efficiency and the ability to scale production with variable demand.

Taking the large order was never an option for Chocomize.  Ideally they could have taken the order and gained some exposure, but the reality is that their operation and their business model were never set up to support that level of production.   Luckily, they waited it out and found some seasonal growth during the holiday season, which is a much better fit for their primary brand message; “Chocolate exactly the way you want it.”

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: