Are You Ready for Mass Customization? Answer These Five Questions From a CEO Who Knows
by Carmen Magar, CEO of chocri
While the era of mass customization started ten years ago, momentum has reached a critical tipping point: many web-based customization start-ups have been founded in the past year that let you design your own products, ranging from jewelry to mattresses. There's still room for many more startups in the space - think customized backpacks, personalized paper calendars, or customized hot sauce - just three of thousands of products that would benefit from customization. Having started a mass customization business myself (chocri, which was founded in Germany and has just recently expanded to the U.S.), I wanted to share five things that you should consider prior to setting up shop:
Have you defined your solution space? "Design-your-own" websites allow consumers to create their own products by choosing from several options, but you should determine these options with care. At chocri, for example, you can choose from four base chocolates and over 100 toppings. You can also personalize your chocolate bar with a name that is printed on the packaging. These options allow for billions of combinations. When we invented the concept two years ago, we put lots of thought into how many "modules" we wanted to offer - one base chocolate and 300 toppings? Five base chocolates and 20 toppings? Think hard where you want to give your customers a choice - and where you don't. For example, we don't allow customers to determine how much of each topping we use per bar - the chocolate bars are more tasty this way.
Will you have your own production facility or outsource? Another important decision is whether you will produce the customized goods yourself, or with a partner with expertise. If you have to build new knowledge and production techniques, you might as well own them. At chocri we have found it important to run our own production, because producing 50,000 customized chocolate bars in a month is something no one else has ever done and has the skills for. Other advantages of having your own production include quality control and the ability to innovate - at chocri, we invented a way to combine white and milk chocolate to create a unique combo base chocolate. Beware however that disadvantages exist, including more operational and seasonality risks. Running our own production means more capital held in tempering machines and facilities - capital that has to be earned back before making a profit. Seasonality requires us to hire and train temporary workers during peak times. That allows us to identify high performers to retain, but is an investment we wouldn't have to make if we outsourced. We were lucky that our product was an instant hit (chocri has been profitable since month two), but that's not always the case.
Do you know the appropriate price levels for your product? Customized goods provide more value than off the shelf counterparts, which allows you to sell them at a premium. That is necessary, since production of, for example, customized backpacks will be much more costly than North Face's. Yet, you cannot charge too much either. Products sold online have the one big disadvantage that you can't experience them beforehand - customized products don't even exist beforehand! That makes consumers less likely to customize a high-ticket item online. Laudi Vidni, a sophisticated website that allows you to design your own handbags and purses, has found a clever way to deal with that: They exhibit samples at trade shows and parties, and provide their visitors with ways to customize the product from there.
Have you explored alternative ways to market your product? In Germany, customization is more common than in the US (there are twice as many design-your-own websites in a country half the size of Texas). As a result, consumers are well educated about customization, and plenty of people search for personalized products online every day. That's not so in the US. So traditional online advertising alone won't cut it. As a result, we've had to find alternative ways not only to market our customized chocolate bars, but also to educate consumers about mass customization itself. For example, we collaborated with 23 other mass customizers to advertise "Design Your Own" on one particular day on Facebook in August. Also, we have found social media to be highly effective in communicating with the type of consumer that likes to provide input in the product creation process.
Do you have a plan for scaling your business? Finally, if all goes well, your biggest problem will be to keeping up with demand. At chocri, we struggled with that. We tripled production in April, and we are expanding again so we don't have to shut down our website before Christmas like last year. Similarly, Blank Label, a custom dress shirt's company, suddenly received 50 orders per hour after a mention in The New York Times. Danny Wong, co-founder of Blank Label, advises other companies to invest more money in server space: "We could have made our investment five times back if the site had run smoothly," he says. As you move from "crafting" each order to "mass production", constantly reassess your processes and capacity. Keep your team on board throughout constant change, and use their input to make the production more efficient. For example, when chocri first started out we clumsily first produced all the white chocolate bars, then milk, then dark chocolate, then sorted orders back together. Today, our process is much more streamlined: We make one order at a time, cool and package in batches, and use technology (e.g. barcodes) to track progress of an order in our production. As we move along, many other steps can and will be automated.
Image courtesy of chocri
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