Value creation by toolkits for user innovation and design: The case of the watch market

This study analyzes the value created by so-called "toolkits for user innovation and design", a new method of integrating customers into new product development and design. Toolkits allow customers to create their own product, which in turn is produced by the manufacturer. In our study, we asked (1) if customers actually make use of the solution space offered by toolkits, and if so, (2) how much value the self-design actually creates. In our study, we used a relatively simple, design-focused toolkit for a set of four experiments with a total of 717 participants, 267 of whom actually created their own watches. The heterogeneity of the resulting design solutions was calculated using the entropy concept, and willingness to pay was measured by the contingent valuation method and Vickrey auctions. Entropy coefficients showed that self-designed watches vary quite widely. On the other hand, significant patterns are still visible despite this high level of entropy, meaning that customer preferences are highly heterogeneous and diverse in style but not completely random. We also found that consumers are willing to pay a considerable price premium. Their willingness to pay (WTP) for a self-designed watch exceeds the WTP for standard watches by far, even for the best-selling standard watches of the same technical quality. On average, we found a 100% value increment for watches designed by users with the help of the toolkit. Taken together, these findings suggest that the toolkit's ability to allow customers to customize products to suit their individual preferences creates value for them in a B2C setting even when only a simple toolkit is employed. Alternative explanations, implications and necessary future research are discussed.