Data Collection and Sample Description

This research is part of “The Customization 500,” an international benchmarking study on mass customization and personalization in consumer e-commerce initiated by the MIT Smart Customization Group, the Technology and Innovation Management Group of RWTH Aachen University, and the University of Applied Sciences in Salzburg.19

The unit of analysis in this study is the mass customization firm. To ensure comparability between respondents, we required companies in the sample to meet five criteria: First, they must sell their products directly to end consumers (B2C). Second, they must provide an online toolkit for customer co-design (web-based configuration). Third, they must market their products via the Internet (e-commerce). Fourth, the customization of the products must take place within the manufacturing processes (hard product customization). The opposite would be soft customization, where the product is personalized by the customers themselves (self- customization) or by retailers (point-of-sale customization). Soft customization can also result from secondary services provided with a standard product (service customization), which create the impression that the product itself is tailored to individual customers’ requirements (Piller 2006, p. 219). Fifth, customer co-design must be applied to change the physical characteristics of the products (tangible products). Especially in the entertainment industry, a growing number of companies offer customizable digital products (intangible products) such as movies, video clips, songs, or games (Anderson 2006). Due to the fact that the fulfillment process for digital products differs considerably from physical goods, these offerings were excluded from the analysis.

In total, we identified 620 mass customization firms that meet these criteria, using six Internet sources (milkorsugar.com, configurator-database.com, egoo-journal.com, egoo.de, mass- customization.blogs.com, and blogs.oneofakindpublishing.com). This can be regarded as a near exhaustive sample, as these firms represent virtually the entire mass customization universe in Western Europe and North America.

Our research applied a two-step data-gathering approach. First, a group of trained experts analyzed the website, the configurator, and the product offering of each of these 620 firms

from a customer perspective. For a comprehensive overview of the results of this research, see Walcher and Piller (2011). This expert evaluation was followed by an extensive company survey conducted to gain deeper insights into the structures and practices of the players in today’s mass customization market. The empirical results presented in this thesis are based exclusively on the data from this company survey.

For this survey, we developed a conceptual framework and formulated hypotheses based on the thorough literature analysis documented in Chapter 4. To ensure that our theoretical framework would be pertinent to our research context, we conducted a series of unstructured field interviews with managers of mass customization firms. We used these interviews to ensure that our theoretical understanding of the capabilities reflected managerial challenges in mass customization firms and that the experts could distinguish the three different capabilities. The interviews largely reiterated the insights from literature. We developed a draft of the survey on the basis of our interviews, academic literature, and discussions with academic experts in related disciplines and tested this instrument with managers from five mass customization firms and five domain experts in academia, who considered its wording, response formats, and clarity of instructions. We then made several changes to the survey instrument based on their feedback.

To ensure a satisfactory response rate, we administered the survey in four stages. First, we sent an e-mail with a personalized cover letter and a link to the online questionnaire to all 620 mass customization firms. The questionnaire was in English, primarily because the research on which the measurement scales were based was exclusively in English. Although not all respondents were native English speakers, many firms sold their products internationally and often had an English-language website. Extensive pretests also indicated that language issues did not compromise understanding of the questionnaire. As an incentive, we offered each respondent an individual capabilities profile, benchmarked against the mean value in their respective industry sector. Second, we sent reminder e-mails to the target respondents three weeks later. Third, to further boost the response rates, we made follow-up phone calls to the non-responding firms three weeks after the second mailing. Fourth, a final reminder went out to companies that had indicated their general interest in participating in the study during the phone calls. All in all, 118 mass customization firms responded, although we eliminated three responses due to excessive missing data, such that the overall response rate was 18.5%

(115/620). For web surveys, response rates in excess of 10% are generally considered acceptable (Klassen and Jacobs 2001, p. 724).

Non-response bias is always a concern in large-scale survey research. We tested for it by comparing early and late respondents, with the assumption that late respondents were more likely to resemble companies that decided not to participate (Armstrong and Overton 1977). Responses received in the first six weeks, before the follow-up calls, represented the early respondents; the remainder were the late respondents. A comparison across all 46 scale items using a t-test showed no significant difference between early and late respondents (p = 0.05), so non-response bias does not appear to be an issue.

Descriptive statistics for the responding firms are provided in Table 4. As can be seen from the table, 82.6% of the firms were founded exclusively with the purpose of mass customization, while 17.4% run their mass customization business in a separate unit, in addition to their standard business. 27.8% of the responding firms launched their online mass customization offerings less than one year ago and can thus be considered typical start-ups. The majority of firms (56.5%) have operated their mass customization business between one and five years, while only 15.7% have been in the market for more than five years. This indicates the long time lag between the first description of the mass customization concept in the 1990s and its broader application. It is important to note, however, that the launch date of the online mass customization offerings and the founding date of the firm are not necessarily identical. Many of the established firms had been active in their respective industry sector for years before deciding to add customized products to their portfolio. Annual sales of the responding firms ranged from less than $100,000 to over $5 million in the fiscal year 2010, with the majority having sales of less than $1 million (83.5%). 53.9% of the firms have less than five employees; in many cases, these are also the founders. 20.9% of the firms are even operated as a one-person business. However, as customized products are often subject to strong seasonal effects (e.g., Christmas gifts), many firms reported that they employ additional temporary workers during peak times. The range of annual sales and number of employees indicates that the sample consists mainly of small and medium-sized enterprises (SMEs). This is consistent with our earlier observation that the current dynamism in mass customization is driven primarily by innovative SMEs that have built their business models from the ground up and focus entirely on the promises of mass customization.

Food customizers (23.5%) account for the largest product category in the sample, clearly reflecting the continuous trend toward mass customization of food products and beverages, which is enthusiastically covered by the press (Martell 2010). Companies offering custom shoes and accessories like bags and belts come second (18.3%). Customized apparel offerings, ranging from t-shirts to dress shirts, jeans and bridesmaids’ dresses, amount to 14.8%. The large category “Other” (17.4%) comprises a diverse range of custom offerings such as books, scooters, perfume, license plates, or tissues. According to a recent Forrester Research report, Germany is a clear intellectual and practical leader in mass customization due to its long tradition in innovative manufacturing (Gownder et al. 2011). This fact is well represented in our sample, with 59.1% of the respondents coming from Germany. As Table 4 shows, the majority of respondents in the surveyed firms were from the top management (87.0%). We are therefore confident that the respondents possess accurate knowledge with regard to the mass customization capabilities of their firm and the resulting performance effects.

Metric Frequency Percentage Cumulative percentage Company type

Company founded with the purpose of MC 95 82.6% 82.6% MC business unit of an established company

with standard product range 20 17.4% 100.0%

MC offering online

< 1 year 32 27.8% 27.8%

1 to 5 years 65 56.5% 84.3%

> 5 years 18 15.7% 100.0%

Sales in fiscal year 2010 (in USD)

< 100.000 57 49.6% 49.6%

< 500.000 23 20.0% 69.6%

< 1 million 16 13.9% 83.5%

< 5 million 10 8.7% 92.2%

> 5 million 9 7.8% 100.0%

Number of employees (FTEs)

< 5 62 53.9% 53.9%

5 to 24 38 33.1% 87.0%

25 to 100 10 8.7% 95.1%

> 100 5 4.3% 100.0%

Product categories

Food and beverage 27 23.5% 23.5%

Accessories and shoes 21 18.3% 41.8%

Apparel 17 14.8% 56.6%

Home decor and furniture 13 11.3% 67.9% Sportswear and equipment 7 6.1% 74.0%

Toys 5 4.3% 78.3% Photo printing 5 4.3% 82.6% Other 20 17.4% 100% Location Germany 68 59.1% 59.1% USA 31 27.0% 86.1%

Western Europe (excl. Germany) 13 11.3% 97.4%

Rest of world 3 2.6% 100.0%

Position of informant

Top management (e.g., Founder/CEO) 100 87.0% 87.0% Middle Management 15 13.0% 100.0%