Standardization Versus Customization In Product Delivery

Deciding the right approach to product delivery is a challenging task that most organizations face, and achieving the proper balance matters. Product delivery follows two broad approaches: customization and standardization.  Customization is the process of adapting products to unique consumer demands, whereas standardization involves creating uniform products to gain economies of scale and operational efficiency. The chosen approach will depend on several factors including the type of product and the target market. Let’s review the pros and cons of both approaches

Standardization

Standardization is the process of creating goods or services with little to no variation between individual units, following predetermined specifications or standards.

Pros of Standardization

Cost Efficiency

Standardization can lead to economies of scale and lower the cost of production and operations. You can repurpose one product for several clients without incurring significant production costs each time. Moreover, the time to delivery is shorter because of time saved in design and production.

Quality of Product Delivery

The ability to maintain product quality fosters a positive perception among customers. Where production has been standardized for consistency, products delivered follow a set standard with minimal post-production quality verification.

Predictable User Experience

When reusing an old product, you can more accurately predict user experience than with a fully customized product. This reduces uncertainties and improves the product’s capacity to satisfy consumer needs.

Ease of Recognition

The value of recognition is debatable, depending on the circumstances around the product or business model. However, broadly speaking, standardized products are easier to recognize in the marketplace. The consistency of brand elements like logos, colour schemes, and taglines, helps to create a distinct identity. This recognition is useful for increasing brand awareness and attracting and retaining customers.

Cons of Standardization

Lost Market Opportunities

Businesses with standardized products may find themselves at a competitive disadvantage if competitors provide more specialized solutions.
Competitors that adapt their products to meet the unique needs of different market segments may capture a larger share of those segments.

Unsatisfied Market Need

Consumer preferences vary greatly across different regions and cultures and standardized products may not accommodate these differences, which could lead to a potential mismatch between the product offering and customer needs.

An example of this needed adaptation is Netflix’s pricing strategies across different regions. For Instance, They have conducted several pricing experiments in the last few years across Africa. For Instance, In 2020, the company introduced a mobile-only plan for their African market that was less expensive compared to the rest of the world. They also had a free plan in Kenya, for some time.

Limited Opportunities for Differentiation

Standardized products tend to lack differentiation from competitors, making it difficult for businesses to stand out in the marketplace. Customers see minimal value distinction between goods, which might result in price rivalry and reduced profit margins.

Threat to Brand Value

Standardization can often result in items being seen as commodities, with customers prioritizing price over brand loyalty or other value-added attributes. This can reduce profit margins and make it harder for businesses to maintain a long-term competitive advantage.

Customization

Customization is the process of developing goods or services that are suited to the unique requirements, tastes, or needs of each client. It provides a great level of flexibility, letting users select different features, options, or settings based on their tastes

Pros of Customization

Greater Customer Satisfaction

Customization improves consumer satisfaction by adapting products or services to individual preferences.
This positive experience fosters customer loyalty, as individuals are more likely to remain with a brand that caters to their specific needs. Businesses that prioritize customization can foster stronger relationships with their customers, resulting in repeat business and referrals.

Customization Can Be A Competitive Edge

In a competitive market with multiple similar products, customization can be a unique selling point. This differentiation also allows companies to present themselves as being innovative and responsive to customer needs, boosting their brand identity.

Cons of Customization

Higher Production and Inventory Management Costs

Smaller batches might result in higher manufacturing costs per unit due to the loss of efficiency acquired by mass production. Moreover, dealing with a larger product portfolio requires a more robust and expensive inventory and supply chain management. For example, balancing stock levels for different components or raw materials becomes more difficult, increasing the likelihood of overstock or stockouts.

In software product development, without reusable software elements or templates, the cost of production increases due to more development time to match the needs of the customer.

Quality Assurance Problems

Maintaining quality standards across a wide range of customized products requires robust quality assurance. With more product variations, it can be more difficult to maintain consistency and match client expectations.

Longer Production time

Customization usually involves several change approvals (for example, approval of design changes or manufacturing process changes). This extended timeline can increase lead times, affecting the overall time-to-market for products.

Difficulty Matching Customer Expectations

Customization requires that we spend a lot of time meeting with customers to understand their requirements and translate those into features. We then have to work iteratively with them to ensure that what we build aligns with their intent or business case.

Most clients expect to be able to design a product exactly how they want, even if their ideas are not always practical. As a result, this pushback may lead to dissatisfaction with the experience; especially in cases where the final product doesn’t precisely match their vision. Moreover, there might be some challenges in communication between the customer and the production team which ultimately leads to more errors with the product.

Scalability Issues

Highly customized items may not be easily scaled. As demand grows, maintaining the same level of personalization may become impossible owing to production capacity and resource constraints.

Training Requirements

Where templates or references are not available, you’d need a greater level of expertise for production. Otherwise, you’d have a lot of errors and rework.

Cost of Product Exchange

Customized items make it more difficult to handle returns and exchanges. Companies may encounter problems remarketing returned products, resulting in possible financial losses.

Key Differences Between Standardization and Customization

Focus:

Whereas standardization aims to satisfy the needs of a wider market group, customization concentrates on satisfying the needs of each person.

Flexibility

Standardization strives for uniformity and consistency, whereas customization offers a significant degree of flexibility and variability.

Cost

Because customized production procedures are more expensive than standard ones, standardization is frequently more economical because of economies of scale.

Customer Satisfaction

Standardization provides stability and dependability but may not fully satisfy individual preferences. Customization, on the other hand, usually results in higher customer satisfaction because it fulfils personal desires.

Tips for Balancing Customization and Standardization

  1. Tailor your customization efforts to market needs and the client’s willingness to pay for customized features.
  2. Use consumer data and market analytics to find patterns and trends that will guide both customisation and standardization efforts.
  3. Pay attention to changing customer needs to refine your standard product over time.
  4. Pay attention to accessibility needs. When you design with accessibility in mind,  you create products that can be adapted for use in new ways.
  5. Invest in adaptable manufacturing methods that can accommodate both customized and regular production runs.
  6. Implement a modular design strategy, in which certain components or functionalities may be readily altered while keeping a standardized core.
  7. Create a strategy document that outlines the conditions for standardization or customization depending on market conditions, consumer preferences, and the competitive environment.

Some businesses may take a hybrid approach, providing a core set of standardized items while also allowing customization choices to fulfil a wide range of consumer demands. The key is to match the selected approach to the company’s overall goals and the needs of the target market.

Examples of Standardization and Customization

Examples of Standardization

Pharmaceutical Products

In the pharmaceutical sector, standardization is critical to maintaining medication consistency, quality, and safety. Standardized formulations are created to assure consistent drug composition, stability, and bioavailability. This includes selecting the right excipients, additives, and manufacturing procedures to ensure consistent product quality and performance. Manufacturers are required by regulatory authorities to demonstrate batch-to-batch consistency to ensure that each pharmaceutical product produced satisfies the same quality standards and requirements.

Airlines

Airlines provide standardized seating options and services across their aeroplanes. Passengers can select economy, business, or first-class seats, but the basic layout and amenities for each class are standardised operational efficiency.

Consumer Electronics

Companies like Apple and Samsung manufacture standardized smartphones with predetermined designs, functionality, and operating systems. Customers may have various options for storage space or colour, but the basic functionality and user experience remain constant across all units.

Examples of Customization

Customized Home Construction

Homebuilders provide customisation options for new house constructions, letting purchasers choose floor plans, architectural styles, finishes, and fixtures that suit their needs and budget. This flexibility allows homeowners to design a living area that reflects their lifestyle and aesthetic preferences.

Financial Advisory Services

Wealth management organizations and financial advisors create personalized investment portfolios, retirement plans, and financial strategies based on their client’s financial objectives, risk tolerance, and time horizons. Personalized financial guidance assists individuals in optimizing their asset management and achieving long-term financial success.

 

Product Management