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Mass customisation seems as a contradiction - and consultants risk being labelled alchemists by mixing a brew of technology and business techniques to create volume custom products and services, yet at low cost. It seems a contradiction because in the post war era we have become used to automated production techniques and sleek supply chains producing quantity, quality and low prices. At the same time, increasing labour costs have loaded a premium price onto personal services and custom products.
But there is a downside to this manufacturing and service revolution: products and services are increasingly seen as being 'same-y'. From houses and cars through to burger outlets, consumers are having to hunt for the logo to see who makes the product. Faced with this sameness, consumers will often end up selecting either by the lowest price or by brand. In a global information based society, competitors find it easy replicating ideas, and the resulting glut of goods means price wars are common and often deadly.
Mass customisation provides an escape from this impasse. But realising the dream needs a number of components to come together:
The challenge for marketers is to understand these needs and preferences for each of their customers; then capture those needs, analyse them and meet those needs profitably. But introducing mass customisation is not a trivial "overnight" project. Before undertaking these activities, companies will need to identify product and market segments that are more amenable to the concept. They then must communicate to their customers the possibilities, thus giving customers an incentive to respond with their needs. For in many markets, customers may be resigned to accepting a mass produced product or service.
Product design and build needs to be based on configuring and assembling components according to rules. The component specifications and the rules need to be accessible at the point of sale so that customers can experiment with different configurations.
A component based approach is equally applicable to services. For example, advanced internet bank accounts allow customers to define the rules themselves. They can automatically sweep excess money from current into savings accounts and then back again for paying bills. Other rules send alerts by email or SMS text messages when particular events occur.
Mass customisation makes a fundamental impact on the supply chain process. In a traditional mass production environment, market research leads to design then to manufacturing, distribution, sales, delivery, installation and use. This is an unresponsive business model where changing customer requirements are slow to surface and excess inventory is common.
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In mass customisation, market research creates a product architecture where at most sub-components are designed and manufactured. The production process starts with the customer specification and the sale of their particular requirement. After communicating the requirements to the manufacturing plant, the process continues with assembly, delivery, installation and use. Alternatively, assembly of the components could be by the distributor, at the point of sale, or at the customer's site. Maximum leverage is obtained when customer's use and ongoing adaptation is directly fed back to market research, identified by the unique product / customer identifier built-in at assembly time.
With pure service offering, where there is little or no tangible product, the design and the production become one of the same. For example, with a credit card there may be the physical production of a custom card, say with a personal photo, but the major customisation is in defining the terms and conditions and the benefit features.
One of the not so apparent challenge is: Who in the supply chain owns the valuable personalised customer data? Is it the retailer, the distributor, the manufacture, the designer or the brand owner? Levi jeans found this to its cost. Customers are measured by retailers for custom jeans, so when Levi tried to make additional sales to the customers direct, the retailers naturally felt aggrieved.
Mass customisation needs a combination of integrated technology systems: front end systems for customers and clerks: CRM, CAD, supply chain, CAM, and logistics. With many companies turning to package solutions and out-sourced operations, astute suppliers have created flexible component based packages and flexible supply lines.
The new technologies like the internet, interactive TV, kiosks, PDAs and mobile phones are allowing customers to communicate direct with companies. Unfortunately, companies are typically using these mediums in a push mode, just like newspaper and TV advertising. For mass customisation, companies need to use these technologies to interact with their customers, often in real time.
Where companies are revolutionising their industry, they may need to take on the risk of technological development. In the clothing industry Digitoe has taken many years to develop foot scanners for taking 3D measurements for custom footware. Companies like Dell show significant changes to the business model are possible and the risk worthwhile.
Whilst automated systems will be used in undertaking much mass customisation, it is important that staff are able to support the process. Customers need to be able to breakout of design and servicing systems to speak to a customer service representative. They in turn will need access to customer profiles and designs as well as all the computer systems mentioned earlier. Critically, staff quickly need to be able to tune into the customer's psyche and standing. What personally motivates these customers? What are they trying to achieve? What do they value? What is their life time value? What is their skill level? How can I close the sale?
Thus staff need to be accessible (in the broadest sense), knowledgeable, analytical, creative, a good mentor, motivating, and technology competent.
Mass customisation with its millions of combinations of finished product or service does require a flexible pricing scheme. One factor, for example, may be the current price of a sub-component purchased from suppliers via a trading exchange on a pull basis.
But pricing needs to be more than simply adding up the cost of the components. Some costs - such as delivery charges - are less a reflection of the components chosen. Different customers will have differing valuation of the benefits and the supply and demand can dynamically change pricing over time, even by the second. In the US, Green Mountain Energy Resources allows its consumers to specify the source of their energy (e.g. oil, hydro or wind) and decide when to use energy based on time/price basis.
Mass customisation has been proven in manufacturing and is now revolutionising services. But a successful implementation requires appropriate technology - which is now available in package form - plus a complete rethinking of the business model. This includes the business processes (including the supply chain) and the whole way a company interacts with its customers. The result is more loyal and valuable customers and a bottom line that some shareholders may see as quite magical!
Alan Cooper is a strategic business analyst at Managing Change. Tel: 01225 719153. More information on mass customisation, one to one marketing and interactive mediums is available at www.managingchange.com.
Consultant's Advisory is produced by Prime Marketing Publications for Consultants and Systems Integrators and is free to qualifying readers. Each monthly edition covers a particular theme and contains a mix of product profiles and articles usually from consultants.
The idea of mass customisation is not new. The concept was first conceived in 1986 by Stan Davis in Future Perfect. It was then further developed by Joseph Pine in his seminal book Mass Customization - The New Frontier in Business Competition (HBP, 1993) and used by Peppers and Rogers in their 1994 book The One to One Future.
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