What’s it: Mass customization is a technique for modifying something according to our needs and on a large scale. For example, in a production company, a company modifies and adjusts its output to demand using flexible manufacturing technology. Apart from manufacturing, this technique is also relevant in marketing, call centers, and management.
Manufacturers usually design specific products and promotions, including advertisements. Also, they adapt products to demand and achieve economies of scale through mass marketing or production.
To do this, the company uses flexible manufacturing technology. The technology makes it possible to reconcile two objectives: low cost and differentiation (product customization).
In the old technology, the two goals were considered impossible to achieve simultaneously. The low cost requires companies to manufacture standardized products, enabling them to achieve savings from economies of scale and mass production. Furthermore, differentiation emphasizes uniqueness so that it is challenging to produce output at a low cost.
In building mass customization, a company may rely on mass production techniques to produce parts. For the final product, they then customize it according to the demands of each customer group.
Difference between mass production and mass customization
Mass customization is different from mass production. Under mass production, the primary consideration is quantity. Companies produce a homogeneous and standardized output. Thus, there is no product customization to suit variations in market demand. Mass production allows firms to lower production costs through higher economies of scale.
On the other hand, under mass customization, the company compromises between differentiation and quantity. Not only adopting mass production, but the company also differentiates its output according to consumer preferences. Thus, they can offer their products at a premium price and, at the same time, save costs, give them higher margins.
Types of mass customization
Advances in technology allow companies to gather critical information faster, more deeply, and efficiently than ever before. Also, technology facilitates more design variety and flexibility in production.
And in general, the mass customization types fall into the following four categories:
- Collaborative customization
- Adaptive customization
- Transparent customization
- Cosmetic customization
Under collaborative customization, companies talk to customers to determine the right product and best fit their needs. The company then makes use of this information to produce output according to each individual. For example, some clothing companies produce pants or jackets to suit each of their customers.
This kind of customization is common for online businesses. Customers can define their own criteria and specifications for the product.
In adaptive customization, companies produce standardized products but with some flexibility. So, when the product is in customers’ hands, they can customize it to their wants and needs without direct interaction with the company.
Take the Lutron lamp, for example. Customers can program them to provide different aesthetic effects, according to their tastes.
Companies produce a unique product for each customer. Products are continually evolved to suit the unique needs of individual customers without going through direct interaction.
For example, Ritz-Carlton hotels developed databases to capture information about customer preferences without talking to them directly. Ritz-Carlton uses this information to tailor service to each customer for their next visit.
Companies produce standard products. However, to market it to customers, they use a unique approach for each customer segment. For example, the company offers drinks in various packages: cans, 1.5-liter bottles, 750-milliliter bottles.
Examples of mass customization
Mass customization has developed in several industries. Here are some examples of companies adopting mass customization:
- Dell in the computer industry
- The Brooks brothers in clothing
- Nike in the shoe industry
- Longchamp for handbag production
- Toyota in the auto industry
- Paris Miki, a Japanese eyewear retailer
- ChemStation for industrial soap products
- The Ritz-Carlton in the hotel industry
Benefits of mass customization
Mass customization is an attractive business model for maintaining customer satisfaction and building a competitive advantage. It offers several advantages for the company.
First, mass customization is a means of creating a competitive advantage and increasing profitability. Companies take advantage of advances in technology to compromise between quantity and differentiation. That way, the company can set a premium price. And, at the same time, they produce more efficiently, taking advantage of higher economies of scale.
Second, the company can offer products more satisfyingly. They obtain information about variations in customer preferences and capture each other’s tastes to customize offers. By doing so, they can offer a highly personal experience. So, in the end, it increases customer loyalty.
Third, companies can minimize excess inventory. They can adopt just-in-time to match demand, production, and supply. It tells them exactly when and how many new inputs they should order. Also, they have less unfinished goods to store, reducing overhead costs.
Fourth, customers can find what they need at a reasonable price. They are more involved in product making decisions.
Fifth, companies can build long-term relationships and retain consumers. Together with consumers, they jointly create new products. Consumers get the opportunity to buy the products they prefer—also, their willingness to pay additional fees increases.
Mass customization challenges
Implementing mass customization doesn’t always lead to success. And here are some of the challenges for adopting this technique.
First, companies need more complex and better coordination. They must have reliable suppliers and distributors to support their synergy with flexible production. For example, they must ensure that suppliers can meet their raw material needs when demand suddenly spikes.
Of course, such coordination is difficult, mainly when companies rely on external suppliers and distributors. One solution is through vertical integration, where suppliers and distributors operate under the control of the company.
Apart from that, companies also need fundamental and coordinated changes in their business functions to be successful. Mass customization is not only about marketing and production but also product research and development, supply chains, and technology infrastructure.
Second, technology continues to evolve. Companies cannot rely on old technology to support this technique. New competitors can emerge with new technology, making the company less competitive. Likewise, investing in new technology also carries risks and does not necessarily lead to the expected success.
Third, the costs increase. The complexity increases with the increase in the number of customers. Companies must address the various needs and wants of different customers.
Fourth, customers are no longer willing to pay premiums is another reason mass customization fails. The more companies adopt mass customization, the more alternatives for customers. They will rationally choose a company that offers a lower price. They can immediately switch to another company when they are dissatisfied with one.