What I Learned: Customized Products aren't for Margin Lift

What I learned this
week is that companies aren’t primarily
pursuing configured products to drive higher margins. A
long held belief of mine was rocked the other day during an
internal research review. Michelle Boucher of Aberdeen
is running a study on customized and configured products. As
we started to review the pressures driving companies to tailorable
products, I naturally expected to hear that companies offer
customized products (engineer to order, assemble to order, etc.) to
drive higher levels of profit. “One-to-one marketing,” “batch size
of one,” and other concepts running through my head I sat back and
listened for the answer … that didn’t come. In fact, higher
profit margins was very low on the list of priorities.

So why Customize?
Admittedly,
some industries are compelled to offer custom products.
Architecture, building products like windows and doors, and
industrial equipment like valves are products I have learned
from in the past. These industries offer custom product because
they have to. And yes, they charge more for them. But other
industries offer configuration as well (although I haven’t heard
about Levi’s make to fit jeans in a long time, so I assume that
project went by the wayside). In the end, it appears that the
primary driver is to increase fit with customer needs and improve
customer satisfaction. It appears that the goal is not to get a
higher margin from the order, it’s to get the order in the
first place! There is a lot more to the report, but this
one finding was so different than my expectation that it had to
qualify for “what I learned” this week. As I told the team, “that’s
why we do the research!”

So customizing and configuring products is not
primarily intended at driving higher margins as I have believed for
some time. Who knew? I didn’t, if you did let us know about it. Or
was this an anomaly in our preliminary findings? Let me know what
it looks like from your vantage point.