Markets of One Customizing the Marketing Offer

Marketing Highligh 9.1

Several technologies have converged in recent years to allow companies in a wide range of industries to treat large numbers of customers as unique 'markets of one'. Advances in computerdesign, database, interactive-communication and manufacturing technologies have given birth to 'mass customization', the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to individual needs. Here are some examples:

Check into any Ritz-Carleton hotel around the world, and you'll be amazed at how well the hotel's employees manage to anticipate your slightest need. Without ever asking, they seem to know that you want a nonsmoking room with a king-size bed, a non-allergenic pillow, and breakfast with decaffeinated coffee in your room. How does the Ritz-Garleton work this magic? Starting with a fervent dedication to satisfying the unique needs of each of its thousands of guests, die hotel employs a system that combines information technology and flexible operations to customize the hotel experience. At the heart of the system is a huge customer database, which contains information about guests gathered through the observations of hotel employees. Each day, hotel staffers - from those at the front desk to those in maintenance and housekeeping - discretely record the unique habits, likes and dislikes of each guest on small 'guest preference pads'. These observations are then transferred to 3 corporate-wide 'guest history database'. Every morning, a 'guest historian' at each hotel reviews the files of all new arrivals who have previously stayed at ;i Ritz-Carleton and prepares a list of suggested extra touches that might delight each guest.

Guests have responded strongly to such markets-of-one service. Since inaugurating the guest-history system in 1992, the RitzCarleton has boosted guest retention by 23 per cent. An amazing 95 per cent of departing guests report that their stay has been a truly memorable experience.

At Andersen Windows, customers now help design their own windows, whether they're complex, lofty Gothic windows or centimetres-high miniatures. Previously, as the number of different products offered by grew from 28,000 in 1985 to 86,000 in 1991, the company's customers -mainly homeowners and building contractors - faced a mind-numbing array of standard window choices, displayed in rows of hefty catalogues. Designing a complicated custom treatment - such as an arched window - required advanced design skills and a working knowledge of trigonometry. Preparing a price quote for windows could take several hours, and the quote itself could run as long as 15 pages. One alarming result of this complexity was a rising error rate. By 1991, 20 per cent of deliveries of Andersen windows contained at least one discrepancy. Andersen responded by supplying its distributors and retailers with what is essentially an interactive, computerized catalogue system called Windows of Knowledge. An industry analyst describes the system: 'Using this tool, a salesperson can help customers [select from 50,000 possible window components] and add, change and strip away features until they've designed a window they're pleased with. It's akin to playing with building Modes. The computer automatically checks the window specs for structural soundness and then generates a price quote. ...The retailer's computer transmits each order to [the factory] where it's assigned a unique "licence plate number", which can be tracked ... using bar-code technology from the assembly line through to the warehouse.'

Such 'bateh-of-one' manufacturing lias greatly increased the customer's product selection while at the same time reducing errors. By 1996 Andersen offered 188,000 different products, yet fewer than one in 200 truckloads contained an order problem. Moreover, by making almost everything to order, Andersen has greatly reduced its inventory requirements. Distributors are delighted with the Windows of Knowledge system. Says one retailer, 'It's a terrific tool. It does things that would drive me crazy when I used to have to do them by hand.' But the real winners are Andersen's, the homeowners and contractors, who get just the windows they want with a minimum of hassle. All this has made Andersen a real markets-of-one advocate. Sums up one executive, 'We're on a journey toward purer and purer mass customization.'

SOURCES: B. Joseph Pine II, Don Peppers and Martha Rogers. 'Do you want to keep your customers forever?', Harvard Business Revieia (March-April 1995), pp. 103-14; Christopher W. Hart, 'Made to order,' Marketing Management (Summer 1996), pp 11-22; Justin Martin, 'Are you as good as you think you are?', Fortune (30 September 1996); James H. GilmoTe and B. Joseph Pine II, 'The four faces of mass customisation,' Harvard Business Review (January—February 1997), pp. 91-101; Kim CJeland, '1'eapod, Shoppers Express vie for online grocery business,' Advertising Age (9 June 1997). p. 40.

micromarketing. Micromarketing is the practice of tailoring products and marketing programmes to suit the tastes of specific individuals and locations. Micromarketing includes local marketing and individual marketing.

LOCAL MARKETING. Local marketing involves tailoring brands and promotions to the needs and wants of local customer groups - cities, neighbourhoods and even specific stores. Thus, retailers such as Akia and G & A customize eaeh store's merchandise and promotions to match its specific elientele. Kraft helps supermarket chains identify the specific cheese assortments and shelf positioning that will optimize cheese sales in low-income, middle-income and high-income stores, and in different ethnic communities.

Local marketing has some drawbacks. It can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistical problems as companies try to meet the varied requirements of different regional and local markets. And a brand's overall image may be diluted if the product and message vary in different localities. Still, as companies face increasingly fragmented markets, and as new supporting technologies develop, the advantages of local marketing often outweigh the drawbacks. Local marketing helps a company to market more effectively in the face of pronounced regional and local differences in community demographies and lifestyles. It also meets the needs of the company's 'first-line customers' - retailers — who prefer more fine-tuned product assortments for their neighbourhoods.

m i c r i mtarke ting

Aform of target marketing in which QfnnpimicK tailor their marketing programmes to the needs and wants of narrowly defined geographic, demographic, psychographio or behavioural segments.

INDIVIDUAL MARKETING. In the extreme, micromarketing becomes individual marketing tailoring products and marketing programmes to the needs and preferences of individual customers. Individual marketing has also been labelled 'markets-of-one marketing', 'customized marketing' and 'one-to-one marketing' (see Marketing Highlight 9.1).s The prevalence of mass marketing has obscured the fact that for centuries consumers were served as individuals: the tailor custom-made the suit, the cobbler designed shoes for the individual, the cabinet maker made furniture to order. Today, however, new technologies are permitting many companies to return to customized marketing. More powerful individual marketing Tailoring products and marketing programmes to the needs and, preferences of individual customers.

computers, detailed databases, robotic production, and immediate and interactive communication media such as e-mail, fax and the Internet — all have combined to foster 'mass customization'.''Mass customization is the ability to prepare on a mass basis individually designed products and communications to meet each customer's requirements.

Consumer marketers are now providing custom-made products in areas ranging from hotel stays and furniture to clothing and bicycles. For example, Suited for Sun, a swim wear manufacturer, uses a computer/camera system in retail stores to design custom-tailored swimsuits for women. The customer puts on an 'off the rack' garment, and the system's digital camera captures her image on the computer screen. The shop assistant applies a stylus to the screen to create a garment with perfect fit. The customer can select from more than 150 patterns and styles, which are re-imaged over her body on the computer screen until she finds the one that she likes best. The system then transmits the measurements to the factory, and the one-of-a-kind bathing suit is mailed to the delighted customer in a matter of days.

Another example is the National Industrial Bicycle Company in Japan, which uses flexible manufacturing to turn out large numbers of bikes specially fitted to the needs of individual buyers. Customers visit their local bike shop where the shopkeeper measures them on a special frame and faxes the specifications to the factory. At the factory, the measurements are punched into a computer, which creates blueprints in three minutes that would take a draftsman 60 times that long. The computer then guides robots and workers through the production process. The factory is ready to produce any of 18 million variations on ] 8 bicycle models in 199 colour patterns and about as many sizes as there are people. The price is steep - between Y65,000 and Y400,000 - but within two weeks the buyer is riding a custom-made, one-of-a-kind machine.

Business-to-business marketers are also finding new ways to customize their offerings. For example, Motorola salespeople now use a hand-held computer to custom-design pagers following a business customer's wishes. The design data are transmitted to the Motorola factory, and production starts within 17 minutes. The customized pagers are ready for shipment within two hours.

The move towards individual marketing mirrors the trend in consumer self-marketing. Increasingly, individual customers are taking more responsibility for determining which products and brands to buy. Consider two business buyers with two different purchasing styles. The first sees several salespeople, each trying to persuade him to buy their product. The second sees no salespeople but rather logs on to the Internet; searches for information on and evaluations of available products; interacts electronically with various suppliers, users and product analysts; and then makes up her own mind about the best offer. The second purchasing agent has taken more responsibility for the buying process, and the marketer has had less influence over her buying decision.

As the trend towards more interactive dialogue and less advertising monologue continues, self-marketing will grow in importance. As more buyers look up consumer reports, join Internet pro duct-discuss ion forums, and place orders via phone or online, marketers will have to influence the buying process in new ways. They will need to involve customers more in all phases of the product-development and buying process, increasing opportunities for buyers to practise self-marketing.

According to the chief designer for Mazda, 'Customers will want to express their individuality with the products they buy.' The opportunities offered by these technologies promise to turn marketing from 'a broadcast medium to a dialog medium', where the customer participates actively in the design of the product and offer.7

mass customization

Preparing individually designed products and communications on a large scale.

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