Corporate gimmicks: Profiting from product personalisation

How free-of-charge services go beyond altruism.

Apple Inc offers customers the choice of personalising their iPod and iPad purchases by adding an engraved message at the back of the device – at no additional cost. This facility from Apple is not as altruistic as it appears and actually helps boost the company’s revenues in various ways.

Personalisation attaches a sentimental value to products. An iPod from a loved one might be worth more than all other similar devices because of the special message permanently engraved on the back. Unlike the special edition red iPods endorsed by pop band U2, these customised devices are only valuable to the original recipient.

For this reason, it’s rare to find a personalised iPod for sale on eBay or elsewhere. In fact, the personalised devices may sell for an even lower price than their ‘over-the-counter’ siblings because of the inconvenience caused to the new buyer of permanently overlooking the customisation.

Not to mention that re-selling the iPod will be far more difficult.

All this points to one thing: personalisations are non-transferable. Even if the message is something as generic as “To my best friend”, it still won’t be transferable since it was not intended for all best friends.

In contrast, a “Best dad!” coffee mug might have far better resale since it’s intended for all fathers and was personalised by the manufacturer rather than an individual. Of course, personalisations and sentimental value are not entirely black and white.

But then how does a company like Apple really benefit from all this? It should be obvious by now that the lack of resale value for a personalised iPod creates room for selling a brand new model of the same product. The biggest competitor to the iPod, not surprisingly enough, is an older model of that iPod.

Typically, customers will trade in their old gadgets for newer ones. However, with personalised devices it is no longer possible or even desirable to sell them. So much so, depending on the personalisation, the iPod may not be transferrable even to a family member – sometimes not even for free!

For Apple this is the most graceful way to retire an iPod: have the customer purchase a new one and put the old one away in a box, as it gradually depreciates in value. The fact that the older iPod has sentimental value helps overcome the customer’s guilt of depreciating a functional iPod in exchange for a newer one.

But there is yet another interesting characteristic of personalised products: they cannot be returned (for obvious reasons). By agreeing to personalise their products, customers willingly enter into an agreement to never return the product. Apple usually refurbishes returned items at its own expense and sells them only to minimise loss.

However, every refurbished iPod sold results in one less brand-new iPod sold which is, obviously, undesirable. For personalised products, Apple is also well within its rights to repair and return faulty products rather than to replace them outright.

Moreover, personal engravings are only available for purchases made directly through the online store. This helps boost online sales, which are more cost-effective for a company than in-store sales due to cheaper warehousing costs and centralised back office.

Apple, for example, will also tack on optional $5 gift wraps on items which have engravings or shipping as gifts. In doing all this, it is also able to control the entire user experience. Receiving an iPod in the mail with a personalised message and specially crafted gift wrap helps the iPod become a popular choice for gift ideas.

Personalised engravings will continue to remain a popular feature with customers because they do add sentimental value, and that’s a good thing. For Apple and its customers this is a win-win business strategy.

The writer is heading Online Strategy and Development at Express Media and can be contacted at [e-mail]

Published in The Express Tribune, December 20^th, 2010.