Digitalization is transforming the relationship between manufacturer and customer. For centuries, the roles were clearly divided between these institutions: one produced, while the other consumed. However, the Internet and new flexible production technologies are pushing the boundaries and creating the possibility for new business models in which the customer can become a product designer.
Is this a good idea? This was the question that launched a research project we carried out at the Vienna University of Economics and Business. Through extensive research, we identified the four most successful Swatch-type watch designs. We showed these watches to a group of study participants and asked them how much they were willing to pay for them. The average price was €24.25. At the same time, we gave a second group the opportunity of designing their own watch online using a digital configuration tool. After about 10 minutes they had finished. The functional, ‘objective’ quality of the watches was identical in both groups. The interview conditions were the same. And the composition of the two groups was also identical – there were a total of 413 randomly selected business studies students. The only difference was the design of the watches: in the case of the first group they were the most successful professional designs on the entire market; in the case of the second it was their own designs, that is, the hasty work of amateurs. We were curious: how much would the second group be willing to pay?
We might assume that the participants take into account their time and effort, i.e. they are willing to pay less simply because of the effort they had expended. Even if we focus on just the product itself, the case seems clear: in the first group the design is the work of professional designers who have training, qualifications and a lot of experience. When they design a watch, it should look a lot better than when non-professionals try designing for the first time. Not only are professionals more talented than the average student, they also put in more effort. They start with various different ideas, then discuss, improve and discard them; then they start again and ultimately through repetition work out the best idea in more detail. This can take weeks. The effort put in by the students, on the other hand, seems downright laughable. And finally, the four professional watches are not just random designs, but those that have won out as the best in competition against thousands of other designs. It would be a miracle if the watches designed by amateurs came even close to the €24.25 at which the professional watches were valued. Or would it?
In fact, however, the amount people were willing to pay for the watch designed themselves using a digital toolkit was not lower, but on the contrary, exactly twice as much, namely €48.50. How can this be? It looks at first glance like the claim that a junior player could crush the professional footballers of Real Madrid 10-0. So we repeated the experiment with two new groups. This time, however, we did not use an interview to assess how much the 304 participants were willing to pay, but rather an incentive-based auction process. We asked them to bid on each watch and told them in advance that we would then draw a random price. If this price was higher than their bid, they wouldn’t get the watch. If this price was higher, then they would be obliged to buy the watch for that exact price. If you think about it for a moment, you will see that the best strategy in this situation is to fix your bid so that it corresponds to the maximum price you are willing to pay. The participants completely understood this principle, which was reflected in the lower values compared to the first experiment. There is indeed a difference between answering a question without obligation and actually having to open your wallet and keep to your word! What remained, however, was the difference. An average of €7.82 was bid for the professional watches, and €15.50 for the self-designed watch – again a difference of around 100%. We also repeated the experiment with other products, from skis to muesli to fitted kitchens. Without exception, the value of their own design was significantly higher than that of the professional designs.
In a series of further experiments, we explored the reasons why one’s own design creates such a high level of added value. The first factor is the possibility of creating something that is precisely adapted to one’s own needs and taste. A standard product inevitably means a compromise. By contrast, if you design something yourself, you can make your own decisions. The second factor is the uniqueness of the product. Distinguishing oneself from others has become a basic need in an era of unlimited digital reproducibility. The third factor can also be explained by the way of life in a post-industrial society, which is no longer acquainted with manual labour and in which Marx’s ‘alienation’ has long since become a matter of course. It is the desire to create something yourself, to be an author, a creator. It is almost ironic that it is of all things digitalization that is helping us to satisfy this primal human need for self-actualization.
As far as the relationship between manufacturer and customer goes, this means that a tectonic shift has begun. Gone are the days when there was a clear separation between manufacturers and their customers. The development of the digital toolkit will continue. Design, creation and innovation will become easier and more intuitive; the designers of the future will be the customers. Compared to today, products will be much more individual, more diverse and tailored to the needs of the customer in a much more profound way. In just a few years we will be as astonished at our present situation and the relative uniformity of many products as we are today at the identical shoes worn by Napoleon’s army: for cost reasons, Napoleon equipped his armies with shoes that were all the same size. Regardless of the soldier’s shoe size, everyone got the same shoe, and even the left and right shoes were identical. Amazing? Yes, and our grandchildren will say the same about our era.
Nikolaus Franke, Vienna University of Economics and Business