The context
When we talk about luxury goods, we are typically referring to products that bestow prestige and boost the self-esteem of the people who display them. By doing so, these items provide psychological benefits because they are perceived by consumers as being higher quality, more exclusive, and rarer than mainstream goods. But the scenario in the luxury market is shifting appreciably. In fact, companies are continually striving to strike the right balance: keeping enough distance from the market to animate the aura of exclusiveness that surrounds them on one hand, and on the other, connecting with segments of customers who are getting more and more used to engaging in various sorts of conversations with their favorite brands.
To enhance their uniqueness and offer one-of-a-kind experiences, many luxury companies are starting to turn to customization platforms. Here users can modify at least a few select product features by utilizing online toolkits that are increasingly intuitive and accessible. Louis Vuitton, for example, offers personalization for its bags, Dior for its sneakers, and with Gucci’s DIY project, some of its iconic pieces can be made to order. Products that are unique and adapted to suit customer preferences: these are some of the reasons for the willingness to pay a premium for a tailor-made item, created exclusively for and sold only to the person who designed it. Luxury brands can benefit from embracing this approach because the perceived exclusiveness of the product is magnified, and its uniqueness is objectively enhanced.
Yet this strategy also entails the risk that the resulting product will no longer be recognizable if too many features change, and this in turn could potentially diminish the value of the item in question. This makes it crucial to pinpoint the proper equilibrium between how much freedom to offer customers for customizing their products, and how to preserve the product configuration to avoid blurring the signals that help identify the brand.
The research
To test out the pros and cons of luxury product personalization, we recently conducted research based on four experiments.
The first study showed that for mainstream products, the relationship between design freedom and purchase intention is positive and linear, while for luxury goods we see an inverted U-shaped pattern. In fact, when luxury brands offer low or moderate levels of personalization, consumers perceive greater value in the personalized product as compared to the standard one, and they respond more or less the same way when traditional brands offer similar levels of personalization. But when luxury brands take this too far, they risk eroding their exclusivity, which means they have to carefully calibrate the level of personalization they offer.
In our second experiment, we hypothesize that consumers who are more fashion conscious have low purchase intentions if the customized products are luxury items, and high purchase intentions if they are mainstream brands. Our findings suggest that companies need to be very wary of offering too many personalization options for a luxury item. When the brand is anchored on the prestige, experience, and artistic ability of the designer, offering consumers too many choices for modifying the product to their taste may dampen their purchase intentions. This can be particularly damaging with customers who are experts in the identity and prestige of the brand, and more conscious of the image associated with the luxury item.
The basic hypothesis of the third study holds that when the logo is prominent on a customized product, it could enhance the desire of potential clients to have more design freedom, even for a luxury item. For mainstream products, instead, the prominence of the logo would have less impact because, by definition, in this case the brand is less relevant and consumers are less concerned that their personalization efforts will diminish its value. It follows that luxury brands can offer their consumers greater freedom of expression through a wide range of customization choices if they keep the logo plainly visible.
Our final experiment was based on the hypothesis that the position of a piece in a collection – in other words, whether or not it is a “signature product” - influences the tendency to customize that item. The more iconic the product, the less likely the customer will feel justified in modifying it; the more the product presents atypical features, the more confident the customer will be in personalizing it.
Conclusions and takeaways
Our study highlights the significant implications arising from the difference between commercial brands and luxury brands with regard to designing online personalization strategies. Specifically, for mainstream goods, we show that design freedom increases purchase intentions in a constant, linear way. In contrast, for luxury items, the relationship between personalization and purchase intention is more complex, making it particularly critical to strike the right balance between the contributions of consumers and professional designers in the design process. We must bear in mind that the value of the designer’s experience carries considerable weight in determining the premium price that the customer attributes to luxury goods, so too much personalization could be counterproductive. When products signal status, giving customers too much freedom in customization can backfire because it could taint the air of exclusivity and quality that these items emit.
The perfect point of equilibrium for every luxury brand depends on several factors, such as the product category, the characteristics of the target, and the market culture. Luxury companies should test their customization initiatives to find the sweet spot where both consumers and designers can add value to the design of exclusive products. To sum up, there is no doubt that luxury companies should consider the possibility of incorporating personalization into their business models, but they need to limit the type and number of design decisions to offer their customers.
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