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We are so used to choice that we take it for granted. I believe the average supermarket has over 27,000 lines. Choice is also flourishing within Financial Services. Just take mortgages. From plain vanilla repayment mortgage we now have the flexible mortgage whereby customers can change their monthly payment amounts, take payment holidays and even withdraw money for holidays and other immediate requirements. With Legal and General, customers can make the changes via the internet.
These changes are a reflection of the more variable lifestyles and employment patterns, and according to Charles Handy, most of us are in for more dynamic, some say chaotic living patterns. This should be a great opportunity for companies but will they respond quickly enough?
Recently I investigated Permanent Health Insurance (PHI). A leading supplier provided increasing step benefits at the commencement of any claim but not at the end of the policy term when I would be eligible for a company pension. When I suggested to the broker that they should provide this, even better, that I should be able to design my own product over the internet, he laughed. Most providers it seems are content to follow their competitors rather than take the lead from their own more forward thinking and innovative customers.
Such customers will have knowledge, not just about how well or not so well the company's products and services meet their current needs, but also knowledge about how they personally are impacted by life style changes. To tap into this knowledge companies need to have processes in place to assist customers in particular circumstances, or indeed throughout their life. Processes for helping people to question, interpret, simulate, and adapt to all that life throws at them.
A topical financial services example is pensions. Every day consumers are reading how the government will not be able to meet people's pension expectations and the need for individuals to make their own provisions. Once consumers have come to terms with this situation many will begin to search and acquire further information to enhance their pensions knowledge. By integrating their customer's search and acquisition processes with their own new business, servicing and product development processes, companies will be able to sense and respond both to individual needs and to the wider market. Increasing these interactions, and those with suppliers and distributors, are being conducted electronically.
My research into insurance companies shows that they are far from ready with processes that integrate smoothly with their established non electronic processes, let alone with developing new processes such as capturing customer knowledge. They seem terrified at a possible explosion of electronic communications, being so ill equipped to handle it. Besides the Internet, there are other mediums that may well prove to be more of a mass market medium. Web TV and Interactive TV, public kiosk systems, mobile and fixed smart phones, with e-mail and fax facilities built-in, could well proliferate and flood companies with electronic communications.
All my interactions with my PHI broker were via electronic mail, though not with the insurer. Fortunately in this case it was a benefit. The broker said I should fill out two application forms for two different terms, but I simply drew a table on the form showing the two periods and their different sum insureds. With a standard web page this would have not been possible. More flexible products and services need underpinning by flexible technologies such as components and rule based system.
Some companies are using these advanced systems. BroadVision's One-to-One Customer Relationship Management (CRM) system can monitor and record each visit that a customer makes to a company's web site. So, for example, if a customer repeatedly looks at a particular product but makes no purchase, it can offer an instant discount. Similarly, to avoid customers being overwhelmed by 100s of products, the system can provide each customer with a personalised product list based on their individual profiles.
The BroadVision system determines an appropriate response through marketers, not technologists, defining rules. In the UK, Research Components is using BroadVision to customise its customer interactions. Each customer sees a unique home web page tailored with personalised offers created according to their industry sector and previous buying patterns.
With these type of systems, further integration is likely with links to the customer service systems in company call centres. It will be possible for customers to switch from one interactive medium to another, as well as to customer service clerks, without ever having to repeat any facts.
Many readers will recognise elements of Don Peppers' and Martha Rogers' 1 to 1 Marketing in the above. One of the inhibitors given for 1 to 1 Marketing is its cost. In part, this is a perception problem, particularly with marketers brought up in a mass market, short term culture.
One of the most exciting developments is that of Mass Customisation, a concept first created by Stan Davis in Future Perfect, and then in 1993 developed by B. Joseph Pine II in his book Mass Customisation.
With Mass Customisation, companies are building unique custom products and services for the same cost as their mass market competitors. For example, a credit card with a choice of interest rates, pay-back periods, minimum amounts, cash withdrawals, reward schemes, charitable donations, insurance protection, geographical use, fixed fee or no fee, and so on. The availability of these new interactive mediums now provides an opportunity to put Pine's ideas into practice.
But besides technology, it needs other organisational changes. A key process change for realising Mass Customisation is to consolidate research, design and sales into a step prior to production. Customers then interact with a company's design system to build their own unique product, and even perhaps subject them to simulation under varying circumstances. They may do this directly by selecting product components, or through question and answer dialogues. These interactions may be in one sitting or over an extended period of time.
Mass Customisation is a step beyond the frequent use of Mass Personalisation. With Mass Personalisation, customers simply select additional optional features to a core pre-manufactured product, for example, by embellishing a credit card with their favourite picture.
Driving Mass Customisation systems are business rules that ensure the assembly of only valid combinations of components. The assembly process will need supporting by the now established techniques like real-time credit approval, etc.. Short product development cycles are an instant by-product of Mass Customisation.
One needs to take care not to over exceed customer's expectations or capabilities. In Japan, National Bicycle mass customised and deliver their bicycles so quickly (2 days) that customers didn't believe they were actually customised. The answer was to deliver them more slowly!
Care also needs to be taken not to alienate a company's distribution chain. Levi had to discontinue it's direct selling of custom jeans after retailers complained. [TC]2's (US) approach is better. It provides retailers with a body scanning device that ascertains more than 300,000 points on the body using six cameras and light patterns that create 48 video snapshots.
Saab (US), on the other hand, allows customers to design their new car on-line but then sends the specification to the customer's chosen retailer where they can finalise the details, and no doubt haggle over the price. By this time of course, the customer has not only invested their time, but through customising the product to their unique needs, they have created a significant emotional commitment and buy-in.
Once the customer has purchased his or her product or service, then a company needs to keep an exact record of the unique product so as to support later servicing, either by the head office or by field staff.
To start with, only some customers may have the inclination to undertake the Mass Customisation process. Motorola used to manufacture custom pagers with numerous features in just 2 hours. But pagers were then so new, it is doubtful if customers had sufficient experience and knowledge to evaluate and choose all the features. In a new area it is therefore important to identify your most progressive customers.
This small group will form an important source of ideas that will be applicable to a wider group of customers and prospects who have the same or similar profile. Their needs can be met through more traditional channels such as a field sales force, direct mail, or the various media. By joining your company's electronic discussion groups these customers can learn from your more experienced customers. Then, as they become more familiar and confident about your products and services, they will migrate, first to Mass Personalisation and then to Mass Customisation.
Undoubtedly, in the coming year we shall read much about Knowledge Management. I look forward to learning about organisations who are taking a holistic approach. One that involves individual suppliers, distributors and customers all working together for their mutual benefit. I also expect to see more examples of mass customisation that are exploiting the flexibility, intimate dialogue and immediacy of the new interactive mediums.
The author Alan Cooper is a strategic business analyst at Managing Change, and a founder member of The Knowledge Partnership. He can be contacted via e-mail at alanc-at-managingchange.com
Internet Business is a recommended monthly UK publication edited by Tim Wilson. It is available from newsagents at £2.95 an issue or via postal subscription at a reduced rate.
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