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Giving the People What They Want: How Mass Customization Is Taking Advantage of the Customer Revolution

Digital Library > Defining and Serving a Market > Customization “Giving the People What They Want: How Mass Customization Is Taking Advantage of the Customer Revolution”

An increasing market for customized products, mass customization, is reported, with discussion of customer demographics and examples of new producers of mass-customized products.

"You can have any color you want, as long as it’s black."            — Henry Ford, Ford Motor Company, circa 1908

"If you’re interested in making money, the first thing you do is listen to your customer. If your customer says, ‘I want more than 10 colors,’ then you try to give it to her. If your customer says, ‘I want my pants longer or shorter,’ you try to give her that. If you’re not listening to her in the first place, then you never know any of those things."             — Brenda French, French Rags, 1998

The Industrial Revolution of the 19th century brought about mass production: a method of manufacturing standardized products that was faster and more efficient than building them by hand. The 20th century has seen a new revolution — the Customer Revolution — that businesses must acknowledge if they wish to be around for the next paradigm shift.

The Customer Revolution means that businesses in all sectors — manufacturing, technology, service, retail — must listen and respond to what customers want. Increasingly, the response that makes the most sense is customization: the production of a product or service around the specific needs of each individual buyer. This trend is being played out in exclusive boutiques for high-cost, hand-made products, but it’s also creating a whole new sector of business where technology assists manufacturers in the production of custom products at a price and scale comparative to mass production. It’s called mass customization, and most analysts agree that it’s here to stay.

When the customer is a private consumer, Faith Popcorn (author of Clicking) calls it "egonomics." When customized manufacturing involves business-to-business products, B. Joseph Pine II (author of Mass Customization) says it’s an extension of total quality management. Regardless of the industry, modern information technology enables manufacturers to track customer preferences, and flexible computerized manufacturing equipment allows finished products to meet those preferences.

Why Customization Is Popular

Ironically, despite Henry Ford’s defiance of customer choice, mass customization methods were actually pioneered by the automobile industry: Walk into any showroom, and if you can’t find exactly the options and colors you want on a model, you can order them. Some are added after-market, but most are created through flexible manufacturing methods on state-of-the-art automobile assembly lines.

Mass customization developed because of three simultaneous phenomena. First, consumers became aware of choice in reference to products like cars and demanded that this level of choice "trickle down" into other products. Second, competition among manufacturers and retailers led to the extension of "nichification": New companies created niche products to fill the gaps left by large, mass-produced products, but as each niche was filled it created a new one on either side. Third, advances in manufacturing technology and order-taking interfaces (including the Internet) made customization economically viable.

"Egonomics is niche marketing to the extreme," writes Popcorn in Clicking. "Think of each customer as occupying her own niche. The marketer who enables each customer to feel unique will succeed."

The processes behind mass customization are ongoing and, some say, irreversible.

"The real story underneath this is the disintermediation that’s occurring in all industries," says Jeff Hallett, author of Megatrends and co-founder of NMP Inc., a Falls Church, Va., Internet and media consulting company. "The power has shifted from the producer to the consumer."

"The reason it happened is that power resides in the hands of those individuals and organizations that have access to and control information," he continues. "Over the last 20 years, what’s been happening is that the consuming public has been getting smarter and smarter. It’s the cumulative effect of things like catalogs, the Internet, Consumer Reports, general awareness of markets and how businesses work. There’s over-capacity in the manufacturing of things, so people started to get options, like where to purchase Levis. You can go wherever you want. They’re in outlet stores, they’re in high-fashion stores, and people started to see and experience the fact that they had choices. They began to see and experience the fact that the same product could cost three times as much depending on where they bought it. As people get smarter, they get more demanding."

Popcorn believes that the "Me-ness" of the 1970s accelerated the onset of the trend: "Everybody just wants a little attention, a little recognition of the no-one’s-quite-like-me self. It’s about individuating, differentiating, customizing. And it’s a major force to reckon with in today’s marketplace. Egonomics means simply this: There is profit to be reaped in providing for the consumer’s need for personalization — whether it be in product concept, product design, ‘customability,’ or personal service."

Sheila Keegan, vice president of marketing for The Custom Foot, agrees. The 2-year-old Westport, Conn.-based retail outlet is banking that the demanding tastes that emerged from the 1970s and 1980s will grow the premium custom footwear line in the 1990s.

"Right now we’re looking at the growth of the 35-year-old to 50-year-old baby boomers," she says. "It’s this group of very savvy, confident consumers who desire the individual attention and personalization in the product choice. This is a consumer group that knows what they want."

The Continuum Of Customization

The trend toward customization is far-reaching. At the simplest level, it involves customized products that are produced by hand. Aveda Cosmetics, for example, produces custom fragrances called Personal Blends that combine floral and herbal notes to match the customer’s personality — "you, bottled." Prescriptives Cosmetics custom-blends "color-printed" foundations at its department store counters. While these products take advantage of the egonomics trend by providing individualized attention and one-of-a-kind products, they are not mass-customized products; the end result is blended one at a time by a sales representative.

Mass customization is less about the "mass" at which a commodity is produced than it is about the method. Ascot Chang, the legendary Hong Kong shirtmaker, reported that its New York store experienced growth in sales of hand-tailored shirts from just over $3 million in sales in 1996 to more than $4 million in 1997. While the target market — extremely fastidious men willing to pay $92.50 to $189.50 per shirt — is the same, that small target of demanding customers is getting larger. Thomas Yu, the New York general manager, gives a figure of close to 100,000 customers for his shop alone. But despite the big numbers, Ascot Chang’s custom product is not entirely mass customized. Explains Yu: "Our body reading is all manual — no high-tech involved."

"The typical view of manufacturing is that there is a continuum from custom products to mass-produced products," explains Charles Mosier, professor of business at Clarkson University, "essentially characterized by a parallel continuum of productive technologies ranging from low-volume, high-cost, artisan-like production to high-volume, low-cost, ‘hard’ automation." All customized products fall somewhere along this scale, combining varying degrees of human labor with technologically advanced manufacturing techniques.

Bill Goodhew, chairman of Navision U.S., the American arm of a Danish customized-software company, explains the difference: "A man can buy a custom-made suit, where he is measured by a tailor who starts with a bolt of cloth and makes a suit specifically for him, he can buy an off-the-rack suit, or he can buy something in between, which is called a made-to-measure suit. The tailor cuts a standard size 42 suit, but he makes some adjustments before the machine sews it all together, but it’s kind of halfway in between. You get the advantages of mass production, but you get a suit that looks like it was made for you."

While clothing manufacturing is frequently cited to illustrate mass customization, other industries pioneered the processes for bigger-ticket purchases. Following the lead of the automobile sector, furniture companies introduced customized upholstery in the 1970s with Krause’s in the West and Choice Seating in the East. In 1984 Dell Computers transformed the way computers are sold by assembling specified components to order. Then in 1990 Los Angeles-based French Rags pioneered mass customization for clothing with $500 custom-knit sweaters, jackets and coats, and by 1994 Levi Strauss democratized the process with its popular Personal Pair jeans program, available to the masses exclusively in Levi’s stores.

Distribution Channels

For customization to be possible, an effective sales and distribution system is necessary to channel the individualized product to the end user. For some companies, the distribution method leads to the customization, and other times the drive to customize requires the company to adapt their delivery systems. Some companies, including Ascot Chang, The Custom Foot and Levi Strauss, use retail-based models, employing specially trained sales representatives to take the measurements for production at an off-site factory. The final product is then shipped directly to the customer.

"What mass customization really is, is the ultimate in customer service," says Keegan. "There’s a lot of training on the front end of store employees so they understand the process and can best communicate that to the consumer."

But while the shop-based model has been effective for some, other mass customizers have developed alternative sales and distribution channels. Brenda French transformed French Rags, her clothing business, into a custom manufacturer only after she began employing a unique sales method: After selling her knit scarves and sweaters in Neiman Marcus, Bloomingdale’s and Lord & Taylor for more than 10 years, she cut out the middlemen (along with returns, stock shrinkage and damaged goods) by selling her garments through in-home trunk shows among her affluent target market. Once French gained direct customer contact, she realized that each woman who bought her clothes wanted something different. She decided that she’d deliver it, becoming the first mass-customized clothing manufacturer in the United States.

"In order to mass customize there are several key things that are important," she explains in her clipped British accent, a remnant of her Manchester childhood. "Number one, you have to be a real manufacturer. Most people in America who say they’re manufacturers are not manufacturers; they are sales organizations. They go to another factory to have them make the clothes or products. I own my own factory. I have a 60,000-square-foot factory with tons of people, so if I decide to make ‘one-ofs,’ I can make ‘one-ofs.’ I don’t have to please someone else. Unless you own your own factory, you can’t do things like mass customization because a mass-producer won’t do it.

"Then you have to be able to offer all these combinations, and be able to do it and deliver it. You have to be able to convince your client that she has to wait six weeks for her clothes. When you go to a department store or a boutique, you get instant gratification. That’s hard to achieve, so there are inherent problems you have to overcome." French overcomes these problems by listening to her customers with an attentiveness no department store can match, then using her $80,000 computerized knitting machines to make the exact garment each customer wants, with the choice of 58 colors, many patterns and any size and length to produce more than 36,000 unique pieces per year.

Business-to-business mass customizers require other solutions. ChemStation, a $25 million Dayton, Ohio, industrial detergent manufacturer, overcomes the delivery problem with an innovative distribution system that uses 41 digitally linked manufacturing centers dispersed throughout the country to blend its custom cleaning products. George Homan, ChemStation’s CEO, instituted this process during the recession of the late 1980s. In order to gain a competitive edge, his company offered individually formulated detergents to dissolve the exact type of grime his clients were battling. From this gimmick grew the Tank Management System, a proprietary database that controls the formulation of the customized cleaning products at each site.

"In order to keep it under control, you have no choice but to computerize," explains Homan. "Once you’ve done that, it makes it easier to grow."

Technology

Computerized flexible manufacturing equipment integrated with an order-taking system is necessary for mass-customized manufacturing. For many mass-customizers, that order-taking system is combined with a customer interface on the World Wide Web, one more reason why mass customization is both possible and necessary (for more information, read "Value-Added E-Commerce").

Says Hallett: "The Web creates an obligation and a responsibility for companies to interact with consumers (and investors) on a daily basis, one-on-one. It’s turning distribution systems on their ears — out with the old Ford model! Now technology allows us to respond to individuals’ needs, so companies will need to create multiple distribution systems from the same content to meet consumer needs."

Many companies, such as Yahoo!, Newspage and Individual.com, are using the Web to create customized news sources for their visitors, and many more are using the ease of the interface to allow customers to design their own customized products. One arena where this has been succeeding is music, with companies including Musicmaker and Volatile Media providing customized CD compilations.

Jeremy Kagan, the founder of New York City-based Volatile, explains how the Web enables the creation of a product that couldn’t otherwise be effectively mass-customized: ""In the late ’80s there was a company called Personix, and they used to let you create your own tapes," he explains. "They had these big machines in record stores, but they went bankrupt. The reason wasn’t that they weren’t selling tapes and they weren’t popular, but the problem was only one person at a time could use the machine. With the Web, they can do it anytime, whenever they want to."

"Volatile is capable of an unlimited scale," he continues. "In terms of how we developed the system, it depends a lot less on people. It’s a lot more automated. At the level where we’re selling a few CDs a day, it’s not as urgent or as practical to build a huge multimillion-dollar system. In fact, it doesn’t make much sense, but down the road we expect we’ll have a lot more music and a lot more CDs moving out the door. We’ve already designed the system and have automatic machines that will do a lot of this for us. It’s mostly, believe it or not, a database-driven thing where we’ve prepared templates of artwork and liner notes, and we just have human supervisors."

While software is driving the development of mass-customized products, the creation of software itself is falling into the mass-customization trend. The key is object-oriented programming, which is an essentially modular system using program components that can be customized without complete reprogramming. For example, think of Netscape Navigator. When you download "plug-ins" to enhance your browser you are putting object-oriented customization in practice. Navision Financials, a mass-customizable accounting package, is another program that uses object-oriented language.

"Several years ago, Navision began developing an accounting system that would give a great deal of flexibility in how the system worked," says Goodhew. "So if you had a special way of calculating commissions for salesmen, then we could insert that calculation method into payroll so you don’t have to use the standard commission-calculation routine. If you had a special way of invoicing people or there was something peculiar about your business that allowed you to do things differently, then we could relatively easily and inexpensively customize it. You have a software product in a box, so you have the advantages of buying something that’s produced in high volume, and yet it is customized for you."

Future Of Mass Customization

Some theorists, such as Stan Davis, author of Future Perfect, believe that modern information technology and automated manufacturing equipment will allow the production of mass-customized goods to occur at the cost of mass-produced goods, and for some companies this may be close to true as mass customization decreases wasteful expenditures and manufacture overruns. But for most, mass customization will have more potential in markets where mass production is not a viable option or where cost is less of a factor. Most companies currently mass-customizing charge a premium for the customization (e.g., Levi’s Personal Pair jeans cost $65 each, as compared to $45 off the rack), or have absorbed the additional costs within the price range of a high-end product (e.g., French Rags and Custom Foot prices fall within the range of the high-quality goods with which they compete).

The market seems to be willing to pay the price for the attention. For example, Danny Kraus of Levi Strauss reports that 80 percent of the jeans ordered through the Personal Pair sizes actually fall into the ranges for existing sizes — the customers choose the Personal Pair for the extra attention and feeling of control. Keegan confirms that this same motivation propels customers to The Custom Foot.

Now that the Customer Revolution is in full force, the only direction the trend can move is forward, according to French. "I am not a visionary," she says. "My clients demanded this."

Explains Hallet: "The ‘Dumb Public’ is dead — the power has shifted from the producer to the user, altering the power structure forever."

Writer: Kelly J. Andrews

All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. This article originally appeared in Entrepreneurial Edge Magazine — Volume 3 – 1998.

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