Recipe
See also: Experience Selling, From Push to Pull, Long Tail, User Designed
| Key Partners | Key Activities | Value Propositions | Customer Relationships | Customer Segments | |||||
| Key Resources | Channels | ||||||||
| Cost Structures | Revenue Streams | ||||||||
How: Tailor you products to meet individual customer needs with the low unit costs associated with mass production, using standardized modular products and production systems.
Why: Generate customer loyalty and higher sales by personalizing and customizing products to fit specific customer needs while keeping efficiency as high as in traditional mass production.
This business model is part of the Business Model Patterns printed card deck.
A collection of business models that will help you understand the key drivers of business model success. The card deck will be ready for purchase in the end of 2023 and is now undergoing rigorous testing.
Reserve your deck!The term “Mass Customization” may seem like a contradiction in terms, as it combines the concepts of mass production and customization. However, it is a business model that allows for the customization of products according to customer needs, while maintaining the efficiency of traditional mass production methods.
This is achieved through the use of standardized, modular product architectures, which can be combined in a variety of ways to create a range of finished products that meet the specific preferences of individual customers.
By offering bespoke products at prices comparable to mass-produced options, businesses employing Mass Customization strategies can differentiate themselves from their competitors and foster closer relationships with their customers. These personalized products often carry an emotional significance for the customer, which can translate into positive associations with the company as a whole.
Where did the Mass Customization business model pattern originate from?
The advent of computer-aided manufacturing in the 1990s and the ongoing segmentation of markets have made Mass Customization a more viable option for businesses. Prior to that, making Mass Customization happen was hidden in the paradox of mass production (and standardization) meeting customization (tailoring). Until then, it seemed impossible to reconcile the efficiency of mass production with the personalization of individual products.
Companies like Dell, which allows customers to customize their PC specifications, and premium automakers, which offer a range of options for their vehicles, have successfully implemented Mass Customization strategies and seen increased margins as a result.
While Mass Customization has traditionally been more prevalent in the automotive and PC industries, it is now being adopted by a wider range of businesses as a means of differentiating themselves from mass-producing competitors and meeting the growing demand for personalized products.
Applying the Mass Customization business model
The ability to offer personalized products and services can lead to increased customer loyalty and higher sales for businesses. Mass Customization can be applied in all industries and to both products and services.
To successfully implement this strategy, it is necessary to have the appropriate backend systems in place to handle the added complexity. For companies that rely heavily on industrial automation, Mass Customization may be particularly appealing. By incorporating online orders, computer-aided manufacturing, and robotic assembly into the value creation process, businesses can effectively balance the demands of individualization with the efficiency of mass production.
Approaches to Mass Customization
According to HBR authors, James H. Gilmore and B. Joseph Pine II, there are four distinct approaches to customization that managers should consider when designing or redesigning a product, process, or business unit: collaborative, adaptive, cosmetic, and transparent. In some cases, a single approach will dominate the design, but more often a mix of some or all of the four approaches is necessary to serve a particular set of customers.
Collaborative Customizers
Collaborative customizers conduct a dialogue with individual customers to help them articulate their needs and create customized products to fulfill them. This approach is most appropriate for businesses whose customers cannot easily articulate what they want and become frustrated when faced with a plethora of options.
Paris Miki, a Japanese eyewear retailer, is an example of a collaborative customizer. The company developed the Mikissimes Design System, which allows customers to collaborate with opticians to design their own eyeglasses using a digital image of their face and a range of lens and frame options.
The customer’s inability to resolve trade-offs on their own has led Paris Miki and other companies to offer collaborative customization. In industries such as apparel, windows, news services, and industrial valves, customers have to make one-time decisions based on difficult and multi-dimensional trade-offs. This either/or sacrifice gap built into the one-time decision points towards the need to work directly with individual customers in order to determine the customized goods or services they require, together.
Customizing the representation allows customers to participate in the design stage and play with the possibilities available to them.
Adaptive Customizers
Adaptive customizers offer a single, customizable product that users can alter themselves. This approach is appropriate for businesses whose customers want a product that can perform in different ways on different occasions and have the available technology to customize it easily.
Lutron Electronics Company, which produces lighting systems, is an example of an adaptive customizer. The company’s Grafik Eye System allows customers to program different lighting effects for different occasions, such as lively parties or quiet evenings, rather than having to adjust multiple switches manually.
Adaptive customization is the creation of standard goods or services that can be easily modified or tailored to meet the needs of each customer without any direct interaction with the company. Customers are able to independently derive value from the product due to the multiple permutations designed into the standard, customizable offering. The product itself, rather than the provider, interacts with customers in this approach.
Technology may enable users to adapt the product themselves, such as with the control panels and microprocessors in Lutron’s lighting systems, or it may automatically adapt the product for individual customers through the use of fuzzy logic or other sensory agents in products like razors and washing machines. Adaptive customization is necessary when the intrinsic uniqueness of each customer’s demands spans a vast range of possibilities, or when users want to reduce the number of experiments required to get the product to perform as desired.
In most cases, adaptive customizers transfer the power of design, production, and delivery to the customer through electronic kiosks or subscriber tools like those provided by America Online.
Cosmetic Customizers
Cosmetic customizers present a standard product differently to different customers. This approach is appropriate when customers use a product the same way and differ only in how they want it presented. Rather than being customized to fit the needs of individual customers, the product is customized to fit their tastes. NikeID, which allows customers to customize their own sneakers, is an example of a cosmetic customizer.
Cosmetic customization is the approach a company should take when its standard product satisfies the needs of almost every customer, but the product’s form needs to be customized to suit individual preferences. This approach demonstrates that the company understands the unique ways in which each customer likes the standard product to be presented.
An example of cosmetic customization is Planters’ customized packaging capability, which allows each retailer to order the particular product it wants to stock. Planters identified the range of packaging requirements for different retail chains and installed new packaging lines that could tailor the package’s size, promotional information, and other nonproduct features such as the number of cans wrapped in cartons.
Hertz Corporation’s #1 Club Gold Program is another example of cosmetic customization. Gold Program customers still receive the same basic rental car, but they bypass the line at the counter and are taken by shuttle bus to a canopied area where they see their own name in lights on a large screen that directs them to the exact location of their car. When customers arrive at the stall, the car’s trunk is open for luggage, their name is displayed on the personal agreement hanging from the mirror, and, when the weather demands it, the car’s engine is running with the heater or air conditioner turned on. By offering each customer exactly what they require, Hertz discovered that its Gold service was actually less costly to provide than its standard service.
When performed well, cosmetic customization replaces piecemeal and inefficient responses
Transparent Customizers
Transparent customizers offer a range of options to customers and let them configure the product themselves. This approach is appropriate for businesses whose customers have a clear idea of what they want and are comfortable making their own selections from a list of options. Dell, which allows customers to customize their own PCs, is an example of a transparent customizer.
Transparent customizers tailor their offerings to the needs of individual customers in a subtle manner, altering the product to suit the customer’s preferences without the customer being aware of the customization. To achieve this, the business must have a deep understanding of its customers and be able to adapt its products over time. Transparent customization is the opposite of cosmetic customization, which focuses on customizing the packaging of the product rather than its content.
Businesses that are well-suited to transparent customization are those whose customers do not want to be involved in the customization process. For example, Ritz-Carlton observes the preferences of its guests during each stay and stores that information in a database, using it to tailor the service provided to each customer on their next visit. ChemStation also gathers information about its customers through analysis, rather than through collaboration, and adjusts its product to suit the needs of each customer. This allows ChemStation to keep its customers’ exact formulas and delivery schedules a secret, preventing competitors from gaining insight into the business.
Transparent customization can be a powerful tool for businesses that have the luxury of time to build a deep understanding of their customers. By constantly monitoring their customers’ needs and adapting their products to meet those needs, businesses can provide a highly personalized experience that adds value to their offerings.
Combining multiple approaches
Many companies combine two or more customization approaches to meet individual customers’ specific needs. For example, Datavision Technologies Corporation uses collaborative, cosmetic, and transparent customization to mass-customize marketing materials. The company gathers input from multiple sources and uses a computer-controlled process to produce customized videotapes based on a detailed profile of each customer’s interests and purchase history. The process can mass-customize individual tapes in small quantities as well as in batches of tens of thousands.
Customization Components
Customization can involve changing the representation of a product, such as its packaging or marketing materials, as well as the product itself. The placement of a product, the terms and conditions of its purchase, and the way it is marketed can all be customized to meet the needs and preferences of individual customers.
- Packaging. The packaging of a product can be customized to include containers for shipment, materials handling information, instructions, and storage and dispenser features.
- Marketing Materials. Customization can involve creating sales brochures, flyers, and other marketing materials that are tailored to the needs and preferences of individual customers.
- Placement. The placement of a product, including where, when, and how it is delivered, can be customized to meet the needs of individual customers.
- Terms and Conditions. The terms and conditions of a product’s purchase, including the purchase price, payment and discount terms, warranties, and after-sale service procedures, can be customized to meet the needs of individual customers.
- Product Names. Customization can involve branding a product with a unique name, cobranding it with another company’s name, or offering it as part of a club membership or frequent customer program.
- Stated Use. The advertised purpose and operability of a product, as well as its perceived advantages and conveniences, can be customized to meet the needs of individual customers.
Trigger Questions
- In what part of your customer relationship will customers value customization the most?
- How can you translate important differing customer needs into modular building blocks for your product?
- ow can we adapt our offerings to meet the varying preferences and expectations of our customers?
- Are our backend systems capable of efficiently supporting mass customization efforts?
- What parts of our value proposition could generate evn more value from being tailored to the individual?
Examples
IKEA
Kitchens and cupboards can be customized to individual needs with aid from “design assistants” through a modular design.
Nike By You
Nike offers customizable footwear and clothing with various colour and fabric variations in their online store.
Levi's
In the 1990s, Levi’s launched a mass customization initiative that allowed customers to customize their jeans according to individual body measurements and desired finishes and colors. A salesperson took the customer’s measurements, which were then entered into a computer and relayed to the Levi’s factory. The jeans were then individually manufactured on a production line and delivered to the store a few weeks later. This allowed Levi’s to differentiate itself from competitors and increase sales by up to 300%.
PersonalNOVEL
This company produces and distributes personalized books and novels via its website. Customers can choose a predefined novel or thriller and select names and other characteristics for the characters, as well as add dedications. The process allows for efficient on-demand publishing without the need for stock or traditional bookstores.
mymuesli
Customers can create their own customized breakfast cereals or mueslis by choosing from over 566 billion potential options. The mass customization business model has been a success for the company, which has been profitable since its founding in 2007.
Adidas
Miadidas allows customers to customize football shoes, shirts, and other accessories on the Miadidas website using an advanced graphical interface. Customers can choose colors and other design options, such as adding a personalized image, and once their configuration is complete, they can place an order for the product to be manufactured and delivered.
Related plays
- Business Model Navigator by Karolin Frankenberger and Oliver Gassmann
- Mass Customization: Definition, 4 Main Types, Benefits, Examples by Investopedia
- The Four Faces of Mass Customization by James H. Gilmore and B. Joseph Pine II