User-Generated Versus Designer-Generated Products: A Performance Assessment at Muji

Abstract

In recent years, more and more consumer goods firms have started to tap into the creative potential of their user communities in order to fuel their new product development pipelines. While many have hailed this paradigm shift as a highly promising development for firms, there is hardly any research available that systematically compares the actual market performance of user-generated versus designer-generated products. We fill this void by presenting a unique data set gathered from the Japanese consumer goods firm Muji, which has drawn on both sources of ideas in parallel in recent years. We find that the user-generated products, which were generally characterized by higher product newness, outperformed their designer-generated counterparts in key market performance metrics. Specifically, in the first year after introduction these products sold three times as much in terms of sales revenues, and they generated a gross margin that was four times higher. These effects even increased over time: On average, the aggregate sales revenues of user-generated products after three years were 1.25 billion yen (approximately USD 16 million) higher, or five times the sales of designer-generated products. The corresponding average margin was an impressive 619 million yen (approx. USD 8 million), or six times higher. Finally, we find that more user-generated products (and fewer designer-generated products) than expected survived the three-year observation period (i.e., were still on the market three years after introduction). While these findings clearly militate in favor of the paradigm shift recently identified in marketing and will certainly appeal to managers considering the idea of opening up to users, we discuss our study’s limitations cautiously and identify important avenues for future research.

Keywords: user design, user-generated products, user innovation, crowdsourcing, market performance, new product development, idea generation