Using Mass Customization to Build Learning

Relationships

Nilesh Joglekar
Setting the context
The truth is that choice is not the same as getting
things our way. Most of the time, in fact, especially
for routine purchases, people dont want more
choice.

They just want what they want. They want to satisfy

their need, and choosing from a large assortment of
alternatives is the only way they can accomplish this.
 Setting the context
Customization , however, involves producing
a single product, or delivering a single service,
to satisfy a single customers need without
requiring the customer to go through the
trouble of having to choose from a wide
variety of other products or services.
This is the payoff of the Learning Relationship - to the
customer and to the company.
Setting the Context
How the customer-based enterprise should use
what it learns about each customer to customize
and/or personalize some aspect of its offering for
that customer, in order to increase its share of that
customers business.

The whole point is to know more about a

customer than the competition does and then to
deliver something in a way the competition
cannot.
Cost Implications of Customer
Interactions
Treating different
customers differently
could be prohibitively
expensive, if every
interaction and
transaction had to be
individually crafted as
a tailored offering for a
single customer.
 Mass Customization
Information technology
can be used to improve
and streamline the
manufacturing and
service delivery
processes, so that an
enterprise can deliver
individually different
products or services to
different individual
Standardization
For the past 100 years, enterprises have standardized
their products and services to take advantage of
economies of scale.
They have standardized the product and their messages
about the product, and they have standardized its
distribution.
In the process, they also have standardized the
customer.
How Can Customization Be
Profitable?
A mass customizer does not really
customize anything at allat least not
from scratch. What a mass customizer
actually does is not customization but
configuration.
Variety through Configurations

The mass customizer pre-

produces dozens, or hundreds, of
modules for a product and/or its
related services, delivery options,
payment plans, and the like.
Variety through Configurations

Then, based on an individual

customers needs, the company
puts different modules together to
yield thousands, or even millions,
of possible product configurations.
Modularization

When an enterprise embraces mass

customization and determines how to
modularize its offerings, it must
thoroughly understand all of the
component elements its products or
services can be combined with,
connected to, reduced from, or built
onto.
Modularization

By determining the related products

or services it could offer to
customers, either by producing
them itself or by forming alliances
with other firms, the enterprise
takes a critical step in the mass
customization process
Example of Mass Customization
Efficiency through Modularization
Using modularization , building to order is
inherently more efficient than building to
forecast, because the enterprise need not
take ownership of the parts any earlier than it
needs them, and often the final product itself
isnt even builtor the parts even ordered
until the product has already been paid for by
a customer.
Cost Reduction due to
modularization
Mass customization of products reduces
speculative manufacturing thus reducing costs.

For instance, Dells well-known mass-

customization model, the first in the computer
industry, provided the company with tremendous
cost advantages when it came to managing its
production.
Not All Customization Is Equal
Pine and Gilmore have hypothesized four distinct approaches to mass
customization:

1. Adaptive
customization
2. Cosmetic
customization
Adaptive customization

Offers a standard, but

customizable, product that is
designed so that customers can
alter it themselves.
Cosmetic customization
Presents a standard product differently to different
customers.
Catalog company Lillian Vernon encourages buyers to
personalize backpacks and sleeping bags with a childs
name.
Collaborative customization

Conducts a dialogue with

individual customers to help them
articulate their needs, identify the
offering that fulfills those needs,
and then make customized
products for them.
Collaborative customization
Ross Controls, a Michigan-based
manufacturer of pneumatic valves and other
air control systems used in heavy industrial
processes in such industries as automobile,
aluminum, steel, and forestry, learns about its
customers business needs so it can
collaborate with them on precisely tailored
designs.
Transparent customization

Provides each customer with

a customized product or
service without necessarily
telling her about the
customization itself.
Transparent customization
This is what the Ritz-Carlton does, when it
configures a guests stay based on the
preferences the guest expressed during
previous visits to the hotel chain.
The guest who gets a hypoallergenic pillow
in her room may not even be aware that
this is customized service; she may think
this is how all guests are treated.
Note:
Notice that adaptive and cosmetic customizers
offer customers a better way to get what they
want, compared to a mere standardizer; but also
notice that these customizers have no
memory of the personalization they do
offer, thereby requiring customers to begin the
specification process again with the next order.
Note:

Adaptive and cosmetic customization

offer no real sustainable competitive
advantage against a competitor
offering the same thing.
Note:
In contrast, notice that collaborative and
transparent customizers maintain a
distinct competitive advantage because
they remember what a customer wants
and can therefore better predict what
she will want next timereducing her
need to make a choice.

In many instances, the company takes a

Examples of Mass Customization

Lenscrafters can mass-customize

eyeglass lenses in about an hour
while the customer waits.
(Customers dont just buy lenses
off the rack!)
Examples of Mass Customization
The Miki Corporation, a Japanese eyewear
firm, has taken eyeglasses a step further. With
its Mikissimes Design System, available at
several of its stores around the world, a
person not only specifies the lens prescription
but also can design the actual frame and
tailor its shape and lenses to any one of
thousands of configurations.
Examples of Mass Customization

Mattel Inc. has used the

Internet to allow children to
create the doll of their
dreams by selecting the hair,
skin color, and clothing of
their choice.
Examples of Mass Customization
The My Twinn doll company goes a step
further. Customers input the dolls desired
features, which are then assembled from a
fixed assortment of parts.
Once the customer receives her customized
doll, My Twinn continues to sell clothing and
accessories to fit the growing-girl customer
as the doll grows up with its human twin.
Technology Accelerates Mass
Customization
No matter how much value an enterprise adds, it is the value a customer
adds for herself that makes a product or service worth a higher price.

Technology is enabling enterprises to meet their customers demands

through mass production, but in ways that offer people their own choice of
products that are personalized and made to measure.

The Web, for instance, has become an ideal tool for mass customization,

anything that can be digitized

precisely because

can be customized.
Competitive Advantage
Customizing products and services can yield a competitive
advantage if the enterprise deploys the correct design
interface and remembers its customers unique
specifications and interactions.

By linking an individual customers interactions with previous

knowledge of that customer, and then using that learning to
drive the production process, the enterprise takes an
integrative approach to competitionone customer at a
time.
Customization of Standardized
Products and Services
Its important to realize that even
companies that cannot customize a
product per se still can customize
what they offer to individual
customers and thus build Learning
Relationships.
Customization of Standardized
Products and Services
It may be able to sell standardized
product, but provide various services
that enable a customer to receive
personalized attention before and after
she buys the product, and make it
possible for her collaboration with the
firm to benefit her.
 Customization Options
There are many customization options beyond the
physical product itself, and many ways an enterprise can
modify how it behaves toward an individual customer,
other than customizing a physical product.
1.Configuration of the product or 6. Training
services surrounding it 7. Service enhancements
2.Bundling of multiple products 8. Invoicing
or services 9. Payment terms
3.Packaging 10. Preauthorization
4.Delivery and logistics
5. Ancillary services (repair,
calibration, finance, etc.)
Visualizing the Product in Broadest
Sense
The key, for any enterprise trying to plan
ways to tailor its products and services for
individual customers, is to visualize the
Product in its broadest possible
sensenot simply as a product but as an
object that provides a service, solves a
problem, or meets a need.
Enhanced Need Set

This product-as-service idea can be thought of in terms of

three successively complex levels in the set of needs a
customer is trying to meet
Core Product
The core product itself includes its physical nature, if it is
an actual product, or its component services and
executional elements, if the core product is actually a
service. Customizing the core product could include:
1. Product configuration
2. Features or capabilities
3. Fit and size
4. Color, design, style
5. Timing or frequency
Product-service
The product-service bundle includes the services and
features that surround the core product. Customization of
the product-service bundle could include:
1. Invoicing, billing, and cost control (i.e., helping the customer
manage or control costs)
2. Additional services
3. Packaging and palletization of the products
4. Promotion and marketing communication
5. Help lines and product support
Enhanced need
The enhanced need set includes product or service features
that could meet related customer needs, enhancing or
expanding the customers original set of needs. Activities
undertaken to customize an enhanced need set could include:
1. Offering related products or services
2. Forming strategic alliances with other firms serving the interests
of the same customers
3. Providing the customer with opportunities to collaborate in
product or service design
4. Offering value streams of services or benefits following the
actual sale of a product or service
Value Streams
Find another customer for the product you
sell, and then another and another, to
generate more and more transactions.
Or find a related stream of products and
services you could offer in order to get a
greater share of customer from each of
the customers youve already acquired.
Value Streams

Usually a value stream relies on

some type of follow-on service, after
the product sale, but it could also be
an interaction designed to generate
income later from customer
referrals.
Culture Rules

Nowhere does an enterprises

corporate culture play a more
important role than in dealing with
customers, because doing this often
requires conceptual-age, non
routine skills such as empathy,
creativity, and sensitivity.
Culture Rules
We need to remember that mass
customization is simply a process for
customizing more cost efficiently. However,
it is in the exceptions to the rules, the
unusual and problematic situations, that a
company has to rely on individual people to
make wise decisions.
Culture Rules

If an enterprise has the

wrong employee culture, for
whatever reason, good
systems and processes
actually might magnify this
problem.
Culture Rules

Instead, particularly in the service

sector, the enterprise wants front-line
employees who are not only
empowered to make decisions and take
action but also motivated to make those
decisions in a way that is in the long-
term interest of the firm (i.e., in a way
that customers feel they have been
Summary

1.Instead of expecting a customer to

use what she knows about a company
to figure out what she should buy, the
customer-focused enterprise uses
what it knows about the customer
to figure out what she needs.
Summary

2. Our story of managing

customer relationships in
the interactive era now
takes a turning point.
Summary

3. We have laid the foundation of

relationship theory and provided a
comprehensive examination of each of
the four tasks of the IDIC methodology:
Identify-Differentiate-Interact-
Customize.
Summary

4. We have shown the importance of

Learning Relationships and the sensitive
issues related to privacy protection.
Summary

5. We have peeked at the technical

tools that help to accelerate the
relationship management process and
reinforced how technology does not,
and should not, manage customer
relationships alone.
Q&A