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Why Brands Like Chaco Turn to Customization/Personalization Strategies – Sourcing Journal

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Leading companies are constantly looking for ways to drive growth, improve their bottom line and create a loyal customer base. In addition, the pandemic has caused a major surge in online consumer purchasing, providing tantalizing opportunities for new and old brands to reach their customers directly.
But how can these companies stand out from their competitors? How can they differentiate while staying on brand? Is there a way to maintain margins and reduce discounting in the face of major supply chain disruptions?
“To many brands, these problems may seem intractable or, at best, extremely difficult to overcome,” said Jud Barr, CEO of JTB Custom, whose end-to-end solution includes a software platform, business analysis and strategy, customization R&D, plus turn-key custom manufacturing capabilities for brands who don’t want to impact their existing manufacturing and supply chain. “But what some are starting to realize is that a well-planned customization/personalization strategy offers a powerfully effective way to boost growth and profitability, for nearly any brand.”

Here, Barr outlines the benefits of a such a strategy.
Capitalize on the price premium: Simply put, consumers are willing to pay a higher price for a customized product. There’s real value to having your initials embroidered on a bag, adding a personalized decoration to your backpack, or changing the colors on different parts of a sandal to express your unique style.
A recent Deloitte study found that consumers will pay an average of 15 to 40 percent more for products that they’ve personalized, even when the actual cost of the personalization is negligible (for example, embroidering their initials on the product) or non-existent (exchanging one color for another). Over the past year, a major accessories brand increased their average order value by 21 percent simply by allowing customers to personalize products.
Avoid double marginalization: Depending on the industry, selling direct to consumer is usually twice as profitable as selling through retailers, either brick and mortar or online. Customized products are sold at full retail price plus a customization charge, allowing the brand to capture more margin. The same accessories brand’s direct-to-consumer business increased by 300 percent year-over-year, representing a huge increase in gross margin dollars.
Reduce your discounting: It’s nearly impossible to maintain starting gross margins throughout a season. Gross margins typically fall by about 20 percent when closeouts are factored in. Fortunately, it’s been shown that engaging a customer in customizing their product can prevent the need for discounting.
Product personalization translates to fewer closeouts by making it unnecessary to stock so many SKUs. Higher prices and fewer markdowns? That translates to a fatter bottom line, and avoids cheapening your brand with an oversaturation of SKUs and off-price products in the market.
Improve your average order value: A differentiated custom offering gives brands the opportunity to increase sales of popular products, sometimes dramatically. We’ve seen clients increase their sales as much as 10X, from $300 per day to $3,000 per day, during holiday and then settle in at a much higher average order volume of $1,000 per day.
In addition to increasing sales of popular products, brands deploying a lean manufacturing “build to order” customization process are able to avoid out-of-stocks and continue selling hot items they would have been unable to fulfill following the traditional “build to forecast” process.
Volcom takes advantage of JTB’s customization technology.
Increase customer loyalty: Human psychology is simple—we have greater commitment to things that we make than to things we simply purchase. Indeed, research by the Gartner Group indicates that giving customers a personalized shopping experience—allowing them to express themselves—resulted in a 49 percent increase in the lifetime value of the customer.
By giving your customers an opportunity to participate in the creation of their product (by as much or as little as the brand desires), you increase the emotional connection to the product itself and to the brand behind it. And that translates to greater satisfaction and a higher lifetime value of the customer.
Leverage free marketing (and market research): Instagram influencers are paid to hawk off-the-shelf products. Now, imagine tapping into the intrinsic pride people feel for their own creations and having them organically share their work within their networks—for free. Your product may not go viral, but you’ll gain exposure within peer groups, and you’ll learn what items and features appeal to different demographics. Consumer word of mouth is one of the most powerful marketing currencies out there. Product customization is the perfect way to leverage it.
The Covid pandemic accelerated the shift to online shopping, which has opened the doors for greater use of personalization as part of your product mix. It’s a highly effective way to increase profits, strengthen customer loyalty, and broaden your grass roots marketing. Now is a great time to provide your customers with the personalized products that make them one in a million, not one of a million.
For more information on developing a profitable customization/personalization strategy with JTB Custom, click here. 
Sourcing Journal is a part of Penske Media Corporation. © 2022 Sourcing Journal Media, LLC. All Rights Reserved.
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Sourcing Journal is a part of Penske Media Corporation. © 2022 Sourcing Journal Media, LLC. All Rights Reserved.

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