How to scale up a mass customization business?

Most mass customization businesses are still rather small. Really small, if we compare their sales and volumes with the comparable category of standard products (I am just talking about consumer goods here, for industrial / BtoB-goods, this is a very different story!). This holds true for most start-ups and companies dedicated solely on mass customization, and the MC units of large established players.

While I do not believe that mass customization at any time will overtake mass produced (or better: high variety, build to stock) assortments, many MC businesses today face the demand to scale their business up. This also is a main topic we want to discuss during the MIT Smart Customization Seminar on May 20-21 at MIT.

While preparing for the seminar, and talking to some of our speakers, I drafted these four factors that influence the ability to scale customization up, i.e. increase the volumes:

  a) Short delivery times. This is what Zazzle and Spreadshirt learned: When you are able to deliver in 24h hours, you have an entirely new market segment, the gift and occasion market. Also take Chocri. With their custom chocolates they do not compete with Mars or Lindt, but with Hallmark and other greeting card companies, or also with book publishers that produce these typical gift books.

  b) Using affiliates and networks. Using your MC capabilities as a platform to enable advanced customers (retailers, country subsidiaries, and other distributors) to customize an assortment that then is produced in small batches (or on demand) to cover local market requirements.

This is what some sports companies do: Connecting mass customization and mass production into one model. In the end, a mass produced item is nothing else then a configuration in a solution space. The main driver for large scale customization in a consumer business will be not the average consumer, but some "customers" customizing for the mass. Like a local retailer that spots a market opportunity for her local market and wants customizes a special batch just for her school. The coach customizing for his team. Or even a country subsidiary of a firm that is creating a special assortment to meet the requirements of a local market.

While this has not been covered as "mass customization" in the past, I would argue, it is! One can apply exactly the same principles compared to customizing something "one to one" and on-demand for an individual consumer.

  c) Marketing communications for mass customization. This is a totally open point, see the previous posting!. There is no research at all (that I know) on how to "communicate" mass customization. What is the best communication policy for mass customization? (in the moment it seems to place "me", "my" or "individual" in front of the brand name).

Until today, researchers have focused on the interaction with customers once they have entered the system (there is plenty of research on how to design the interaction experience in a configurator etc.) But how to communicate customization? This is a major factor to reach new audiences. When I ask during a lecture or talk who in the audience has a custom product or knows about the ability to get one, the majority still has no idea!

  d) Internal change management. Often, the ability to scale mass customization up is constrained by the company itself (especially if you are a large firm like yours). In most companies, MC still is seen as a "pilot" or "something special", often just with a marketing / PR focus. As long as MC is seen internally as such an oddity, it will not scale up. I have seen this in many large corporations. In fact, I just do know very (!) few established large consumer good companies that really have a serious MC offering (serious being defined as "if I close it, I realize it on the balance sheet"). But as long as you don't have a business system that really can scale up (and also has the motivation to do so), it will be a difficult field to achieve.

Comments

[Treehouselogic]

How do you make a great product that successfully scales? How do you make your product easy to use? Ryan Spoon wrote a great piece on how a viral marketing strategy starts with a great user experience that customers will love, talk about, and recommend. http://bit.ly/z937D .

Certainly, network effects are important as indicated by Professor Piller. (Point B). In this case its not just the impact of each individual customizer but the influence of the power-customizer. A good customization site needs to have creative suggestions from both the company's product experts and from the community of designers.

In addition to creative suggestions, a good customization site should include a user flow that includes suggestions and guidance from the company's product expert. The website should reflect the dialog of a "personal shopper." Related to "the paradox of choice," users may not want millions of combinations. Trek.com, for example, boasts 56 million combinations for their custom bike. First, it takes several minutes to download all the images (causing abandons) and then the choices are overwhelming because they are technical and there are too many of them, causing frustration and more abandons.

Users do not know your product as well as you do and they appreciate your tips and suggestions, just like having a valuable dialog with a top sales person. When Rickshaw Bagworks www.rickshawbags.com customers select a specialty fabric, they are presented with matching binding options. In this case there is less clutter and choice so users build better products and are less likely to abandon or get frustrated (or return them).

When it comes to designing a great ecommerce experience, there is plenty of room for improvement. Users appreciate performance, simplicity, guidance, and great navigation, as well as the power to build their own creation.

Of course you need to offer fast delivery (Point A). Of course the price of a custom product should be competitive and on par with standard products. Of course your customizer should be strategically important to your company and easy to discover (point D). These factors are points of parity and should be already be non issues given the maturity of ecommerce.

Once your customization experience is fast, fun, and helpful, conversion rates will increase, word of mouth will spread, and your community will drive your marketing strategy for you (point C).

Related, your customizer should be social-integrated and mobile-ready. Again, obvious points given the state of the Internet's evolution.

-Dave Sloan
www.treehouselogic.com

[Carmen (chocri)]

Great article Prof. Piller, thanks.

Sivam Krish - you say you are not seeing growth of branded niche customization companies - chocri is seeing very high growth! But what I do agree is that a "social phenomena" is missing, and I say that because I've seen what is happening in Germany. In Germany, mass customization is a lot more common. (maybe Prof. Piller's influence?) There are a lot more startups in the space, and companies like mymuesli.de made the idea of design-your-own anything widespread. In the US - not so much. The average (young) German Joe knows to google for custom anything and expects a fair price, the average Joe in the US does not. It will take somewhat of a movement to do scaling up in the US, but I believe we're just on the brink to that. Hopefully the MIT Smart Customization Seminar will help us to rally together and drive that movement!

Thus I see Nr. 3 in Prof. Piller's list above as extremely important. We (in the US) need the Press to note what's happening, and then we need marketing communications that makes customers **aware**. Agree that marketing in the sense of "branding" is only for boring products, but marketing also has the task of letting people know that there's something new out there now.

[Sivam Krish]

I think we need to take complexity into account. Currently a lot of large scale mass customization like that of Zazzle and Cafepress are based on print technology - in effect they are online print shops with user and community engagement. So there is clarity in their model. The brand is defined by the customer and they are the efficient manufacturer. This efficiency will for some time guarantee an audience.

What we are not seeing, is the growth of branded niche customization companies - that are doing far more interesting stuff and dealing with much higher levels of complexity. Shapeways and Ponoko are of this category. While all companies tend to target "Joe" the customer, their clients are early adopters. Only social phenomena can take this to the next stage. If kids in California did not think that is cool to wear a reasonably priced hip t-shirts , zazzle and cafepress would not be there.

This seems not to be happening for the other rage of very exiting products now customizable online. So I would argue that this "the creation of value" to be the major barrier and I would not associate it with marketing. Marketing is for really boring products.