Published on July 15th, 2018 | by Todd Smekens0
How Mass Customization Boosts Local Businesses
Blog– Customers want mass-customized, made-to-order parts, and they’re willing to pay more for them. Over half of consumers are interested in purchasing personalized products and services, a Deloitte study reports. A majority say they are willing to pay a higher price for customized options, and one in five are willing to pay 20 percent higher. Most consumers are also willing to wait longer for customized products and services, and 22 percent are willing to share personal data in exchange for personalized products.
These figures help explain why industry watchers such as the National Retail Federation are calling mass customization the future of retail. Mass customization is boosting both big manufacturers and local businesses by enabling even small companies to cost-efficiently offer customized products without outsourcing. Here’s a closer look at what mass customization is, the technology that makes it possible and how it benefits local businesses.
The Concept of Mass Customization
The concept of mass customization, also sometimes referred to as made-to-order parts, was first introduced in 1992 in “Mass Customization: The New Frontier in Business Competition.” It refers to manufacturing and marketing methods that combine the cost-efficiency advantages of mass production with the personal quality of customized products.
Pine identified four major strategies companies use to deliver made-to-order parts. Two of these strategies focus on the manufacturing end of mass customization, while the other two focus on the marketing end.
On the manufacturing end, in fully collaborative customization, customers actively work with manufacturers to develop designs tailored to their specifications. In adaptive customization, manufacturers produce standardized products that customers can modify.
On the marketing end, in transparent customization, companies offer products that are customized for the individual without necessarily drawing explicit attention to their personalized angle. In cosmetic customization, companies make standardized products but market them in unique ways to different market segments.
Mass Customization Production Technology
Mass customization’s manufacturing and marketing strategies are made possible by a number of key innovations in digital technology. McKinsey identifies seven key innovations that support mass customization. One of the most crucial manufacturing technologies that enable mass customization is 3-D printing. Because 3-D printing works from a digital blueprint and uses an additive process instead of cutting away excess material from a mold, it is relatively easy and inexpensive to alter a digital design to suit customer specifications.
For instance, in the o-ring industry, manufacturers who use 3-D printing for prototyping can offer as many as 8,000 different o-ring sizes made out of specialized materials adapted for a wide range of customized applications from aerospace to medical uses. Three-dimensional printing is supported by 3-D scanning software, which allows manufacturers to scan the shapes of physical objects for purposes such as producing customized prosthetic devices.
Mass customization also depends on enterprise resource planning software and supply chain management software. These technologies help companies maintain sufficient inventory for personalized offerings and keep customization cost-efficient. Together technologies such as 3-D printing and ERP software make mass-customized production affordable for small local businesses.
Mass Production Marketing and Sales Technology
Mass customization further depends on marketing and sales technology to communicate personalized options to customers. Social media helps companies gather information about what types of personalized offerings customers want. Recommendation engines use consumers’ personal information to suggest products that might meet their preferences. Online interactive product configurators allow customers to see online previews of product options and let companies know what specifications they want. Together these technologies make marketing more personalized, effective and cost-efficient for local companies.
To keep mass customization profitable, companies also rely on smart algorithms that dynamically price products based on fluctuating real-time factors. For instance, the availability of component parts may alter production costs. Delivery costs are another variable that must be factored into pricing to maintain profitability. Dynamic pricing helps local companies keep operating expenses affordable.
Mass customization is a game changer that makes it possible for local companies to offer personalized products at scale while staying profitable. Three-dimensional printing and scanning and ERP software keep mass-customized production cost-efficient. Social media, recommendation engines, and online configurators allow local businesses to effectively market personalized products to customers, while dynamic pricing algorithms ensure that price levels for customized products remain profitable. Together these technologies are giving local businesses a boost by delivering them the benefits of mass customization.