Mass customization glossary

As the popularity of interactive, design-your-own shopping experiences increases, new terms are becoming more common among ecommerce professionals.   Here are a few key terms that anyone interested in creating online shopping experiences will need to know:

Configurable product

Configurable products

A configurable product is a made-to-order product that your customer assembles himself, usually online. It’s considered to be a “grouping” of many sub-products that ultimately builds one complete product.  From the buyers’ perspective, he or she is buying the configuration — not the individual products that make up the configuration.

Co-creation

Co-creation is when your customer is actually creating the product he or she wants using a visual product configurator.  Historically, a company will design and build many products and then publish them to their catalog in the hopes that someone will find one they like.  The process of co-creation avoids the browse and search model by empowering the shopper to create their own version of the product.

Customer co-creation (originally coined in our VentureBeat article on the mass customization trend) specifies that the customer is designing their product during the shopping process.

The term co-creation can also apply to the product development process.  An example is when a company hosts a focus group of customers to discuss a product concept for future development.

A related term is crowd-sourcing which implies that customers are creating user-generated content or products and selling it to other customers on the network.

Social co-creation

Social co-creation takes the concept of co-creation one step further.  Customers can “share” what they’ve built or co-created with your company with Facebook friends and Twitter followers.    Some may design products simply to express themselves and to inspire others.  Others may be inspired by designs.  Social creation is the process of community interaction in the creative process.  Shopping and designing become social and viral as users play with designs and show them off to the community.

Mass customization

As opposed to mass production, which is setting up your production facilities to generate massive amounts of standardized products, mass customization involves setting up production facilities to generate massive amounts of non-standardized products, i.e. configurable products.

Bespoke products

An early example of mass customization, “Bespoke products” is a British-English term that means an item — usually clothing – custom made to the purchaser’s specifications.  Unlike mass produced ready-to-wear clothes, which are made in a “one design fits all” pattern and a standardized size, and unlike made-to-measure clothes, which are custom cut to fit the customer, bespoke products are built from scratch, from the design and fabric to the final tailoring of the outfit.    This term could apply to any built-from-scratch product.

Product configurator

The product configurator is the front-end tool (usually online) that your customer will use to build their configurable product, showing price changes and visual updates as the user makes selections.  The configurator passes the complete order to the ecommerce shopping cart.

Personalized t-shirt

Personalization

In the context of ecommerce, personalization is the process of embellishing a product by uploading an image or overlaying text on a product.  Personalization often implies actually designing a printable product, like a t-shirt, mug, or poster.  Whereas a product configurator assembles components with a linkage system (like  building blocks), personalization is the process of taking a blank canvas and actually designing a custom layout with a design tool bar.

Video: the future of shopping

Check out this video on the future of ecommerce.  The theme is that shoppers are becoming more connected and that shopping is becoming more interactive.  Ecommerce is evolving into social commerce and expanding to mcommerce.  Shopping will be about location, mobile, interactivity, loyalty programs, rewards, and community interaction.  A few of these themes are directly related to the mass customization and co-creation.   Shoppers can interact with an online product configurator to design and create their own products via the Internet or their mobile devices, including digital shopping tools like “virtual fitting rooms right on your phone.”    The future of shopping is visual, fast, fun, personal and accessible.

Some favorite quotes from this video:

“Reinvent the retail experience.  Everything becomes interactive.”

“Are you on-demand, personal, engaging, interactive, and networked?”

Mass production vs. mass customization

For the past century, companies have been running on the Henry Ford marketing model of mass production: Focus on building the most popular models — in the most popular colors and styles — and assume that the market would adapt.  As Ford put it, when asked what choices were available for buyers of the Model T in 1908: “Any customer can have a car painted any color that he wants so long as it is black.”

A hundred years later, Ford’s model of “one car fits all” is as outdated as the Model-T itself.  Enter the era of mass customization.  Case in point: BMW.

As Nick Earle, SVP at Cisco noted in FastCompany last year,  BMW is finding that mass customization is a key to the growth of their business. “They allow everyone on the planet earth to configure their own Mini and there would never be two Minis that would be the same. … It’s any color you want.”

It’s part of the reason that BMW is seeing its sales skyrocket by 17 percent from a year ago last month. BMW is embracing the part of the market known as the “Long Tail.”

The concept of the Long Tail, popularized by Chris Anderson in a 2004 Wired Magazine article and his book, “The Long Tail,” holds that most companies — such as Ford — have focused on mass producing popular, generic products and avoiding the costs of stocking inventory and distribution of less popular or “niche” products.  The body of the tail represents the largest portion of sales.  The tail end of the curve represents a high variety of products that are less popular.

Before the creation of online customization tools, ie visual product configurators, companies were forced to stock only the most popular items, favoring the upper 20 percent of the graph (or “hit” products) while the other 80 percent of products (“non-hits”) were virtually ignored.

The non-hit or “long tail” actually trails on infinitely as less popular products populate the farthest reaches of the tail.

Per a recent Forbes magazine article, “Today 15% of Americans custom-order their cars. BMW hopes to get 40% of its buyers to do it by 2015.”

The experiment is working. As Earle told Fast Company: “BMW makes about 35 percent more margin on mass personalization than the equivalent car from Audi or Saab or whatever that don’t offer it.”

Customization tools: Web app or desktop app?

When a company is planning an interactive customization experience, they need to consider if they want to develop a web application or a desktop application for download.

Of course a web app (an online product configurator) is the most convenient for Internet shoppers, but some companies may opt to invest in developing more powerful desktop tools that require a download to the user’s PC or Mac.

Picaboo is a great example of a desktop customization app.  Their photo album creation application is very similar to desktop photo management application like the Mac’s iPhoto app.

LEGO is another example of a desktop co-creation application.  LEGO developed the DesignedByMe application to offer an auto-CAD type desktop experience with their building blocks.   Performance is snappy, the navigation panel is rich with features, and visualization includes 360 degree spin.

Three reasons to consider desktop applications over a web app:

Performance

A desktop application can handle larger tasks via a local CPU without needing to depend on Internet connectivity.  For applications that involve large file upload or download, a desktop application can offer better performance.

Navigation

Historically, browser-based applications have had limited navigation options.   HTML has not supported full-menu based functionality.  For an example compare your favorite desktop application (like PowerPoint or Skype) to user interfaces you’d typically find on the web.  Another good comparison is Microsoft Office and Google Docs.

Visualization

Desktop apps are historically better at presenting large graphical files because they may cache them locally without needing to stream them over the web.  The result can be a much more visually rich desktop experience that doesn’t depend on Internet connectivity.

Of course desktop applications have their weaknesses:

• Require a download – this extra step can deter most shoppers
• Expensive to develop
• Slower to release updates, more difficult to get users to adopt updates
• Cross platform compatibility issues; Mac and PC

There are two reasons that we’ll see more web apps and fewer desktop apps in the ecommerce and customization markets:

1)   Shoppers prefer convenience

Shoppers have proven to be impatient and demanding.  Online shopping starts with search, then discovery of destination sites that offer browse, search, and customization.  Once shoppers find or build what they want they expect to able to quickly “add to cart” and check out.   Downloads don’t usually make sense in the context of shopping.

2)   Advancing web technology

If we look at the history of desktop applications and non-standard 3^rd party browser plug-ins like Flash, the purpose of these applications was to compensate for weaknesses of the browser, namely performance, limited connectivity, and limited support for advanced visualization.

Browser technology has come a long way in the past few years, as has Internet connectivity and performance.   Dozens of online customization sites offer full, desktop-like functionality within a standard browser.    Advanced Internet functionality, high performance, and cross-platform support are all supported by innovative ecommerce applications that use standard CSS and HTML protocols.

Whitepaper: What do consumers want from a product customizer?

A new generation of shopping tools are driving innovation on the web.  Shopping online is becoming increasingly more interactive, social, and fun.  Treehouse Logic launched a research study to learn more about consumers’ evolving tastes and preferences in the context of shopping for soft goods, specifically in the context of the design-your-own, customization experience.

Website speed directly impacts sales

KissMetrics recently wrote up a nice summary of a Colormatters.com report on “The effects of store environment on shopping behaviors.

One interesting finding is the importance of website performance:

“The element of time:   Speed, efficiency, and convenience are one of the many reasons why shoppers are turning to the Internet retailers.   Having a website that runs even five seconds slower than your competitor could mean a huge economic loss.

64% of shoppers did not purchase items because the website was too slow.

And, Amazon found that with every 100MS of load time there was a 1% decrease in sales.”

Certainly users will have the same low tolerance when navigating a mass customization website where they can interact with a product configurator to co-create a made-to-order product.   Speed of the online customization tool greatly increases the chance that a shopper will play with various combinations and finalize the sale.

Customer co-creation includes community interaction

Co-creation has traditionally been understood as customers and vendors creating and or designing products together.    Usually co-creation implies that a customer can “build their own” product at a vendor’s website.  The customer samples available combinations based on their preferences.  The result is a highly personalized and unique version of the product.

Co-creation is the progression of online shopping behavior.  Basic ecommerce has been defined by allowing customers to search or browse an online catalog of products.  As user demand for better shopping experiences increases, the natural next step in ecommerce has been enabling customers to not only choose a version of your product, but to visually configure a version of your product.   We recently highlighted co-creation as a trend to watch in VentureBeat.

What is co-creation?

However, recent research by Treehouse Logic suggests that co-creation is not simply the union of customer creativity and a vendor’s mass customization tools.   We asked over 200 online shoppers “If you were to ‘build-your-own’ product online, what web features would help in your decision making process?”

The “a-ha moment” from our research is that customers now expect a third component in co-creation; community interaction.    Of course customer reviews and ratings have been status quo in standard online shopping for some time now.  But, in the context of “creative online shopping,” users want not only customer recommendations and ratings, but the ability to see creative product designs that have been built by other customers, as well as creative suggestions from the vendor.

In this context, “community” includes both other customers and the vendor themselves.  86% of respondents said that recommendations from the vendor or experts are important.   Clearly, if customers are shopping at a “create your own” website, they expect guidance from the shop owner themselves.   The shopper expects advice from the vendor, as if they were discussing a custom suit with a tailor.   The customer wants to design their own suit, but with the guidance and suggestions of the craftsman himself.

% of respondents who rank these features as important

Likewise, we want to share our own creations with our friends and family, which is why customization tools must support sharing each unique creation via email, Twitter or Facebook.    Sharing is a two way street.

It makes sense that shoppers would want to see social activity as they are customizing.   They will want to see what others are building; most recent products built, best sellers, crowd-sourced recommendations, Facebook “likes”, and “staff picks” from the vendor.  When we are in the midst of the creative process, we don’t want to lock ourselves in a room and dream up a product by ourselves, we want to get inspired by a community of people that may be more creative than ourselves, ie the vendor and other creative customers.

What I learned about mass customization this summer

Guest post: Arpana Prajapati is MBA student at Kelley School of Business, Indiana University. Her study areas are Product Marketing, Entrepreneurship and Corporate Innovation.

During my first year of business school, I had read an exciting case study about Timbuk2 and how they created a build-to-order business model.  The build-to-order model, ala Dell.com, has clear cost advantages.  Why produce massive quantities of inventory that may go unsold if you can wait to build product until you receive a customer order?

As luck would have it, I got connected with Dave Sloan, CEO of Treehouse Logic, and soon found myself hired as an MBA intern for the summer.  Treehouse Logic is a startup that provides a visual customization platform that enables mass customization.

My exposure to the exploding mass customization market has revealed a few key insights that I would like share with readers of our blog.

Myth: Mass Customization is a fad.

Truth: The US alone has some 220 online customizer firms. In the past decade shoppers could configure their own laptop at Dell.com or Apple.com but in 2010 you can create your own bags, t-shirts, jeans, shoes, shorts, bikes, lamps, cards, art books, jewelry, granola, chocolates and pet food as well.

The New York Times reported on growth in sales of customized products in US for 2009. In 2009, orders at Spreadshirt had doubled. Blurp (customize your art book or photos) sales were up 43%. Zazzle, Cafepress and Scrapblog each reported 80% increases in sales in the holiday season compared with previous year’s sales. At Blue Nile, orders were up 20%. This was despite the fact that ecommerce sales had only grown by 4% in the season. In March 2010, readwriteweb.com suggested that the U.S. may be on the verge of a co-creation invasion from Europe, where these kinds of startups are more prominent. Looks like co-creation is here to stay.

The reasons that this trend is no fad are highlighted in our VentureBeat article, but in a nutshell it is the alignment of growing customer demand, maturing technologies, and Internet penetration.

Myth: An online customizer is just a visual product picker.

Truth:   Guidance matters.  A customizer must be more than just a stand-alone build-it-yourself tool.  Treehouse Logic recently conducted a survey that asked users the importance of (subject matter expert’s) recommendations.  85% of respondents deemed it as an extremely/very/somewhat important feature.  77% of responders wanted to see creations of other shoppers to drive their design process. Customization is seeing the rise of community interaction and crowd sourcing.  Shopping is an inherently social activity; shoppers like to get creative tips from vendors as well as see what other customers are creating and buying.

Myth: Mobile-based customizers have yet to arrive.

Truth: Interestingly, downloadable iPhone/iPad apps for customizers have arrived. Shirtee allows users to design t-shirts with outstanding ease of use and place the order in a click, simultaneously providing a gaming-like experience. Mobile creates an even richer Internet customization experience because of interaction elements like drag-and drop, multi-touch, app performance, and easy user interaction via finger touches.  Apps expose a whole new potential target segment for customizers – the mobile gamers.

WSJ: Provide choice through mass customization

Dr. Barry Berman recently wrote an article in the Wall Street Journal called “Products, products, everywhere” about how consumer-goods companies tend to proliferate selection in order to target a wider variety of customers.  In fact, increasing the breadth of a product line can reduce profitability and confuse customers.

Here is an excerpt that speaks to the value of co-creation (ie a build-to-order business model that presents the consumer with a product configurator.)

“Manufacturers and retailers have expanded their product offerings at unprecedented rates over the past decade, often by taking a popular product and selling it in various sizes, brands, colors, fabrics and flavors.

Some of these companies think that by being all things to all people—say, by offering 17 varieties of toothpaste—they will increase sales and deter competitors from entering the market. Others are afraid to remove products that have been around for a while—or are declining—for fear of turning off important customers. And sometimes, big retailers ask manufacturers to produce a unique version of a product just for them, so they can prevent customers from comparison shopping.

But instead of improving profitability, these tactics often lead to bloated product portfolios that raise a company’s costs, reduce supply-chain efficiency, confuse consumers and lead to shortages of popular products.

Image from WSJ

A slimmer product lineup, on the other hand, offers numerous benefits. Marketing executives can better monitor sales, competitive developments and crises such as product recalls. Manufacturers can cut back on costly assembly-line changeovers, as well as the payments they offer retailers to guarantee shelf space for products. Retailers selling a smaller selection of similar goods have fewer suppliers to manage, more shelf space for their best-selling merchandise, and fewer customers leaving stores overwhelmed and unable to make purchase decisions.

It can be challenging to prune a product portfolio without turning off key clients and customers.

One way to provide choice without adding to product proliferation is through “mass customization”—an approach in which products are built only after customers order them.

The manufacturers that have the most success with this are those whose products are made from components that can be assembled in numerous combinations. It requires a system that allows consumers to understand and communicate their unique needs, and it relies on flexible manufacturing to keep costs low and build-times short.

Dell Inc. is commonly cited as an example of a company that has used mass customization effectively. It builds each personal computer’s memory configuration, hard drive and graphics board after the customer places an order. In this manner, Dell can produce hundreds of different combinations of computer configurations with relatively few different components.”

Research: Which customization features are most important?

Treehouse Logic recently surveyed over 200 people about their online shopping tastes and preferences.  Specifically, we asked respondents about their opinions on the product customization process.    Co-creation has become more mainstream in the past year, so it will be enlightening to show new research on consumers’ demand for the customization process.

We asked respondents a variety of questions about customization features and how they would prefer to build their own products.  We also had them test-drive a product customizer and then give feedback on their experience.  The results were very insightful, and we’ll be sharing them soon in a whitepaper.

Here’s a preview of one key finding:

We asked “If you were to ‘build-your-own’ product online, what web features would help in your decision making process? Please rate the importance of the following features.”

The top three features, per top-2 box of “extremely important” and “very important” were

• 94% – Visualization of designed product
• 86% – Pictures – several product images
• 86% – Intuitive – Ease of use

It’s no surprise that shoppers want to see a high quality image of their customized product as they build it.  The Internet is extremely visual and shoppers expect to see what they are about to order.

After rating features for the product configurator, users were asked to test drive a sample customizer with a ‘what-you-see-is-what-you-get’ visualization of the final product.  Here are a few verbatim comments that support these findings:

“Intuitive, good use of images to show what the product will look like.”

“A lot of options to choose from, and easy to see the changes to the product with the selection of different options.”

“It had a preview of the final product. Very important.”