Posted in Operations & IT Articles, Total Reads: 570
, Published on 22 February 2016
Customization refers to making tailor made products (and services), as per the requirements of individual customers, or customer groups. Letting a customer design his own greeting, and then delivering that to him is a customized business operation.
Customization is essentially useful when customer needs are varied; it is an essential tool for providing value to individual customers in a differentiated manner. Some services (products) rely a great extent on customization: a good example is the services of a psychiatrist.
The level of customization may vary from just changing the background-color of a visiting card, to letting the customer choose what goes in making her bridal set. In low volume markets (especially), customisation is the key to enhance value delivery and improve Csat, as needs vary over a great range.
Customization on ‘mass’ scale ?!
Customisation is looked upon as a low-volume game, with high costs, covered by high margins. This is the reason why a t-shirt printed with your personal message costs higher than a similar one up for sale, without customisation.
In manufacturing, customising each order would mean making a new set-up every time, and setup time and cost, both will be huge. Customisation becomes more of a low volume affair, where demands are not high and standardized, rather flexible and different.
Making tailor made goods (services) in an economically viable manner, thus seems a strange fir between two concepts of volume and customisation, and this is precisely what mass-customisation as an innovation is all about.
Emergence: Let customers have it their way
With the advent of industrial revolution, mass production was established as a norm to cater to the up-surging demand. Focus on individual customer needs was low due to various reasons: insufficient resources (technology), unaware customers not assertive enough, as Ford famously put it, ‘If I had asked my customers what they wanted they would have said a faster horse’, low affordability of market for high-end products, etc.
But as the customers began evolving, markets matured, commercial organisations started taking the preferences of individual customer more seriously. With evolving customers, their demands began varying, and value delivery to such customers required a fair-bit of adapting the product to their specific preferences.
A natural occurrence of high-end customisation can be seen in designer-boutiques.
What drives mass customization ?
Mass customization derives features of mass production, like presence of core product-features; platform, over which other features are customized. Take a watch for instance, the internal mechanism is the platform, and the watch can be customized for strap, or dial. The same holds true for other products as well, be it car or clothing, or accessories. Even a traditional mass production manufacturer like BMW now boasts that no two of its new cars are identical.
Information technology has largely been the driver behind the advent of mass customization. Levi Strauss measure customers in his stores, send their details electronically to the factory, and delivered them customized jeans. This all happened as early as 1994.
The internet has greatly increased the ease with which mass customization can be done. For instance, Dell allows you to virtually make your own PC online. Again, with a few basic platforms, the customers can customize their own PC, and Dell delivers it after putting together the requested components.
Companies usually fail to implement mass customization because they can’t clearly define on what dimensions they would allow their customers to customize their products, or their inertia in shifting from a rigid mass manufacturing structure to a more flexible one.
Need for mass customization
The European Commission report on Industrial Innovation defines mass production as ‘producing goods and services for individual needs with near mass production efficiency’. A Bain study found that people are indeed warming to the idea of customized products. They found 25-30% of total customers really interested in buying customised products. The market potential it projects is huge. To give an idea, 25% of sales of online footwear, if customized, would be equivalent to a market of $2bn an year. There are various specific reasons why marketers and manufactures (service providers) in general should turn their focus to mass customization, reasons pertaining to change in customer preferences, willingness to spend more on the products of their choices, and the potential market for this segment. The significant factors why mass customization is a need are explored below:
Customer elation is all about providing value to the customer. The consumers increasingly desire products which meet their ‘exact needs’. They are willing to pay for the higher costs involved. This is adequately reflected by the boom in customized t-shirts markets, and that of visiting cards, interior decors, car decors, and so forth. Some products (services) are inherently customizable in nature, while a few others are increasingly evolving. The ‘one size fits all’ approach is a thing of past now and customer-centred organisations, in their quest for delivering greater value to customer, has reached this stage as a natural consequence. Each customer is becoming his own market.
2. Profiting from exploiting heterogeneity
The heterogeneity of consumer needs has increased greatly, and this provides a great opportunity for brands to capture value from customers by providing them need-specific products. As Frank Piller puts it, mass customisation is essentially ‘profiting from heterogeneity from customer needs ’. Brands have reaped great revenues from the advent of mass customisation. Examples include Zazzle, Cafepress, Gemvara, and Coca-Cola.
3. Customers becoming more expressive
Certain product are personalise because they are an expression of the customer, typical examples like clothing, visiting cards, etc. The world is fast moving from a culture of self-effacement to a culture of self-expression. Self-expression is fastly moving from user generated content to user generated product. Innovations like 3-D printing might even fuel at-home customization, and the technology push is thus translating customer preferences to product specifications.
4. Customization is the new loyalty
Ever brand aims to command loyalty, that the only key to sustained profits in this highly competitive world. When customer itself takes part in creating a product, loyalty towards brand is bound to increase. This is an effective way to connect the customer with the brand, when you give him freedom to define your product as per his/her needs. Both gain in the process, you end up providing higher value to the customer, and thus capture higher value from the customer by commanding high brand loyalty.
CAD-CAM (Computer Aided Design- Computer Aided Manufacturing) is essential for mass customization, by combining the order-taking structures with an internet-based client interface. Internet made it possible for the companies to sustain a continuous real time interaction with their clients . This has enabled customer centric deliver systems, by keeping customer updated.
Can only giants offer?
Mass customization is not meant only for big brands or corporations. It is a tool of assistance to entrepreneurs as well. It enables small entrepreneurs to identify their customers and establish a connect with them, and provides lot of flexibility to their business. Big corporations usually find it very difficult to induct flexibility in already rigid product manufacturing. Adaptive customization may be especially suited to entrepreneurs, and this providing ‘extra-good’ value to customers will provide them with enhanced value-capturing opportunities from the customers.
We now have customers unwilling to be dictated by firms, and who wish to be at the centre of value-delivery process. They are willing to pay something extra for that, and this creates huge need for mass customization. Customers’ desire to obtain product tailored to their wishes, even at a higher price, is the justification for mass-customizers charging a premium price, a valid one.
The market is thus responsive today, and for a majority of business, mass-customization is likely to emerge as the best available option. There are many challenges related to higher costs, returns, supply chains, etc yet to be addressed properly, but mass customization as a concept is here to stay, simply because it is driven by the atomic concept to customer-focus: delivering a higher value."
The article has been authored by Anshul Jain, XLRI Jamshedpur.
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