This column is adapted from Enterprise One to One: Tools for Competing in the Interactive Age (Currency/Doubleday, 1997).
The 1to1 enterprise practices customer-driven competition rather than aggregate market competition. While traditional marketers focus on getting as many customers as possible, the 1to1 enterprise focuses not only on getting customers, but on keeping and growing the most valuable customers.
These two dimensions of competition do not necessarily conflict with each other. An enterprise can have both a product marketing department and a customer marketing department. However, to navigate into this new dimension of competition, customer differentiation is one of the 1to1 enterprise's most important disciplines. In order to succeed, the 1to1 enterprise must identify customers worth keeping, customers that can be profitably grown and customers not worth keeping. Once customers are identified, the 1to1 enterprise can tailor its marketing efforts to the customers worth keeping and the customers that can be profitably grown.
Since customers would rather be treated individually than equally, treating them individually will pay much higher dividends. Treating customers individually means paying attention to what they want. A successful 1to1 enterprise will never require a customer to tell them the same thing twice. And, because it is more convenient for the customer to do business with the "remembering" enterprise, the enterprise will be more successful in retaining and growing its customers.
Becoming a "remembering" enterprise also provides competitive advantage. It presents the opportunity to build powerful relationships through using the right design interface and remembering customers' individual specifications and interactions. The enterprise can take an integrative approach to competition, linking the individual customer's interactions with previous knowledge of that customer. This information is then used to drive the company's actual production process.
Fortunately, in addition to making routine interactivity possible and improving the cost-efficiency of computerized databases, computer technology is now frequently applied to logistical and assembly-line processes, enabling a firm to efficiently manufacture and deliver customized products.
Mass customization is an effective means to incorporate customer feedback into the production process. Mass customization differs from customization because the process of customizing products is engineered into a routine. Joe Pine, author of Mass Customization: The New Frontier in Business Competition, defines mass customization as the cost-efficient mass production of goods and services in lot sizes of one.
Mass customization involves producing elements of the product or service that can be assembled in different combinations using customer feedback to identify their individual needs. An enterprise adopting mass customization does not manufacture all of the potential combinations of a product and then wait for a customer to request that combination. Instead, the mass customizer waits for a request from a customer and then creates the product or delivers the service requested, assembling it by combining the individual components.
An enterprise willing to embrace mass customization must be willing to learn from each new customization initiative. According to Pine, the mass customizing organization is driven by observing and remembering individual customer requests and comparing those requests to the requests of other customers.
Consider a major hotel chain's customization effort. If a customer checked into one of the chain's hotels in California and asked the desk clerk for a firm pillow, the staff would make note of that request. When that customer's travels lead to Florida and another hotel in the chain, the customer would have a firm pillow on the bed even if he/she forgot to request it. In other words, this hotel chain tailors its service individually, based on the learning relationships developed with each customer.
While the quality of services provided through this customization effort is exceptional, the chain cannot be considered a mass customizer. To illustrate the difference, suppose a customer requests a unique service from the concierge at the hotel's Atlanta location. The concierge will search until that particular request can be fulfilled. However, if another customer in Denver requests the same unique service from that location's concierge, the entire search process will be repeated. In order to be a mass customizer, an organization must be able to learn and adapt to the individual needs of particular customers and also to the service delivery and production processes.
One of the secrets of success of mass customization is that it allows customers to actually participate in the design and development of the product or service desired. Consequently, the customer is more likely to be satisfied with the end result pleased that someone actually listened!
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