Saturday March 01, 2014

Have It Your Way: How Mass Customization Is Changing Marketing.

Screen Shot 2014-02-25 at 3

After a 100 years of Mass Production - where one size fits all - 21st century marketing is moving to Mass Customization - letting you custom-design everything you buy. From cars, to clothes, to shoes - to your own breakfast cereal.

This week on Under The Influence, we explore how companies profit from personalized products, how they market those products, how consumers are drawn to companies that offer customization, and how brands use customization to fight competitors. Including how Burger King stole market share from McDonald's by letting customers personalize their burgers.

Their slogan said it all: "Have it your way!"

Back in the 13th century, the concept of war was evolving.

It was becoming a medieval arms race.

As weapons improved, the armour designed to protect knights was forced to improve as well. While there was armour long before the 13th century, the penetrating ability of the longbow had changed the rules.

Screen Shot 2014-02-27 at 10.21.28 PM.png
The longbow changed warfare - and armour - for all time.

Expert marksmen could shoot up to 18 arrows per minute, and thousands of archers in a line could dispose of an entire regiment efficiently and quickly. Especially when those arrows were shot within a short range - piercing plate armour - making men and horses extremely vulnerable.

While warriors needed to be protected, the armour was heavy and awkward. As the superb British TV series, Weapons That Made Britain notes, a knight couldn't even put his armour on alone. He needed a squire to assist.

Once inside the armour, knights experienced a form of sensory deprivation. Vision was impaired, breathing was constricted, hearing was muffled. Worst of all, movement was severely impeded.

In other words, a knight not only fought his enemy, he fought his own armour, as well.

So in the mid 1400s, England, while engaged in an historic war with France, hired 2,000 Italian craftsmen equipped in the latest armour technology. What those Italian craftsmen did was game-changing:

They created custom-made suits of armour.

Measuring each knight's body down to the last millimetre, the metal protection was designed to fit and move to each individual's body type.

It didn't come cheap.

Custom-made armour could cost up to one-quarter of a knight's annual income.

The ones who couldn't afford custom-made armour, only wore the few pieces they could afford, or found scattered on the battlefield. But custom-made armour gave armies an enormous advantage. The added range of sight and movement was incisive on the battlefield.

It was... bespoke tailoring.

The world of marketing is also a battlefield.

Territory, ground and market share are fought for everyday in every category imaginable.

And while the advancements in mass production accelerated the climb of most major brands, there is a new and almost inverse trend emerging:

Mass Customization.

We've entered the era of custom-design for the masses, from the music on our smart phones, to designing the cars we want via websites, to creating our own clothes and even our own breakfast cereals.

Screen Shot 2014-02-28 at 1.15.36 AM.png
Grab the steering wheel and design your own car.

And how we're doing that is fascinating. We've come a long way from Henry Ford's assembly line.

Because now... you can have it your way.

The term "Mass Customization" is an interesting dichotomy of sorts. "Mass" meaning majority, "Customization" meaning individual.

The seeds of mass customization were planted at the beginning of mass production.

As the ability to mass-produce a product started with companies like Oldsmobile and Ford in the early 1900s, it forever changed how big a company could grow and prosper.

Suddenly, thousands of identical products could be built at a low cost, and shipped to all corners of the country via railroads.

While Henry Ford didn't invent mass production, he certainly improved on it. For example, early assembly lines were static, with workers moving along it, performing a number of tasks.

Ford saw an efficiency opportunity, and decided to make the assembly line move, with workers remaining static. That way, an employee could perform just one function many times a day, resulting in more consistent workmanship.

Screen Shot 2014-02-27 at 10.29.50 PM.png
Assembly lines were the beginning of mass production.

It also meant the worker didn't need to be skilled, just trained at one specific task.

Keeping the design simple, the parts interchangeable, and by manufacturing a succession of identical products, auto manufacturers like Ford could sell cars for only hundreds of dollars and still make enormous profits.

It led to one of Henry Ford's most quoted lines, saying, "A customer can have a car painted any colour he wants, so long as it's black."

Screen Shot 2014-02-27 at 10.32.03 PM.png
Henry Ford brought great innovation to mass production.

There was method in his madness, as the colour black had the quickest drying time. But the undertow of that quote emanated from the very core idea of mass production, and that was one product for all.

As the 20th century unfolded, mass production was embraced by virtually every major manufacturer. Clothing, food, tools, toys, furniture, kitchen products - nearly every purchasable item distributed nationally came off an assembly line.

But mass production eventually ignited the opposite desire - and consumers were soon willing to pay for special options that made their purchase unique or enhanced.

So, in 1919, Ford began offering electric starters as a $75 upgrade, which eliminated the need for hand-cranking. Removable rims and balloon tires were offered as options in 1925.

Going against Henry Ford's edict of every car being black, you could now buy Model Ts in several colours by 1926.

Screen Shot 2014-02-27 at 10.37.48 PM.png
In 1926, you could finally order a Model T in a variety of colours.

Automatic transmission became an option in 1938, eliminating the need for fancy footwork on a clutch. Air-conditioning was introduced by Packard in 1939, but it would be decades before the average car buyer could afford it.

Needless to say, while you could customize your car, the options were limited. Mass production still needed to stay "mass."

Then the world went on pause during the long Second World War...

Post-war, as the 20th century passed its halfway mark, mass production started to fall out of favour. The '60s was a decade of pushback of all things corporate.

Then came the 70s.

Burger King was a fast food company that opened its doors in 1954. By the '70s, it was feeling the continuous headwind from archenemy McDonald's.

Screen Shot 2014-02-27 at 10.39.18 PM.png
One of the very first Burger King locations.

Part of the reason for McDonald's vast success was its steadfast consistency. No matter which McD's restaurant you went into, you could be assured the menu never deviated. Every hamburger was massed-produced on the spot, sporting the same condiments, in the same amounts, in the same order.

That rigid consistency even led to one of McDonald's most memorable jingles:

The jingle that sang about McDonalds' famous consistency.
Source: YouTube

But that cornerstone of McDonald's success gave Burger King a strategic opportunity.

Beginning in 1974, Burger King offered the public customized hamburgers by saying, "Have it your way."

An early "Have It Your Way" Burger King commercial.
Source: YouTube

"Hold the pickles, hold the lettuce, special orders don't upset us" was the perfect strategy to pierce McDonald's armour.

McDonald's felt customization would increase labour costs, and take the "fast" out of fast food. But Burger King figured out a way to allow individualized burger toppings without sacrificing speed or price.

It was a powerful marketing strategy, because it positioned McDonald's as inflexible, and positioned Burger King as the company that listened.

It would be well into the '90s before the Golden Arches would embrace the concept of customization.

But "Have It Your Way" showed, not just the food industry, but other categories as well that mass customization could actually be good business.

Screen Shot 2014-02-25 at 3.29.45 PM.png
Burger King's strategy to battle the consistency of McDonald's was encapsulated in this slogan.

No story about mass customization would be complete without talking about Starbucks.

Howard Schultz joined Starbucks in 1982. It was a coffee shop named after the coffee-loving first mate of the whale ship Pequod in Herman Melville's famous novel, Moby Dick. At the time, Starbucks only sold whole beans and coffee in bags for home consumption.

Screen Shot 2014-02-27 at 10.47.10 PM.png
Starbuck's CEO Howard Schultz was inspired by cafes in Italy.

Schultz had experienced an epiphany while visiting Italy, where he saw small communities gathered around coffee shops, where baristas put on a show creating custom cappuccinos, lattes and espresso orders. As Schultz says, it was "coffee theatre."

So he returned in 1987, and bought Starbucks with the backing of some local investors.

Sensing a big opportunity, Schultz brought that 'coffee theatre' to Starbucks, and positioned it as the "third place" in someone's life, after home and work.

It's hard to remember that before Starbucks in the U.S., just about the only places to savor a cup of coffee were diners.

But Starbucks infused coffee with emotion and meaning, offered people a place to gather, and above all, gave customers a sense of ownership by customizing each and every cup served.

Schultz was only 34 at the time, and today, his customization strategy is poured in 18,000 locations in 62 countries around the world.

Starbucks has grown to include over 18,000 locations.
Source: mapsmania.gif

Before Apple launched its revolution in personal computing in 1984, someone else was busy taking the first steps to building what would also become an empire.

Michael Dell was 15 when he got his first computer - an Apple ll - and promptly took it apart to see how it worked.

Screen Shot 2014-02-28 at 12.03.21 AM.png
Dell founder, Michael Dell.

A few years later, working out of his dorm room at Texas University, 19 year-old Dell started an informal company called PCs Limited, selling and installing upgrade computer kits for university students.

In 1984, he sold almost $80,000 of merchandise. In May of that year, he incorporated as the Dell Computer Corporation and relocated to an office in Austin. One year later, his company built its first full computer, called the Turbo PC.

Screen Shot 2014-02-28 at 12.05.43 AM.png
The original Dell Turbo PC.

At that stage, the mighty Dell Computer Corporation consisted of a few order takers, and three guys with screwdrivers sitting at a table.

But Dell's idea was novel: Sell direct to customers, and design the computers to customer specifications as they were ordered.

It was a first - mass customization in the PC world.

Dell also employed just-in-time manufacturing - which allowed him to keep his inventory low. He wouldn't build a computer until he got an order - unlike all other computer manufacturers who would build thousands of computers and hope for customers.

The genesis of Dell's master plan was simple:

He didn't have any capital.

And there you have it: The game-changing customization strategy of the Dell Computer Corporation was born not of envisioning a new paradigm in computers, but rather of having no money in the bank to buy materials with.

In its first year in business, that forced-customization plan generated over $73 million in revenue.

By 1992, Dell Computers was on the Forbes list, making Michael Dell the youngest CEO of a Fortune 500 company.

Screen Shot 2014-02-28 at 12.08.00 AM.png
Michael Dell was the youngest CEO on the Forbes 500 list at 27 years of age.

It was a model based on mass customization in a category crowded with mass production. And it was an idea that made the whole world sit up and take notice.

Soon, the idea of customization began to pollinate other industries.

For more than 100 years, Levis Strauss & Co. had been the leading brand of blue jeans in the world.

Then, in the 1990s, its business went sideways.

While baby boomers were a loyal audience, their children weren't, as Levis had lost touch with changing tastes. And with overseas factories, competitors were capable of manufacturing low-cost jeans, turning them into a commodity. Levis' 50% market share had fallen to 27% by 1997. Then 18% by 1998.

It desperately needed to innovate.

So Levis decided to do something no other major clothes manufacturer had ever attempted.

They decided to offer customized jeans.

Design your own jeans on the Levis website.

It was a radical strategy - considering the fashion industry is shackled to mass production by squeezing out margins through factory efficiencies and low overhead.

But Levis knew that women, in particular, were frustrated with jeans shopping.

54% of them try on 10 pairs or more to find one pair they would buy.
87% wish they could find jeans that fit better.
67% felt that jeans were designed for women with "ideal" figures.

There was a clearly a gap in the market. But was there a market in the gap?

So Levis launched "Personal Pair" - and invited women to pick the style of jean they wanted, the colour, the type of leg opening (tapered, boot cut, etc.) and the type of fly. Then three body measurements were taken. Customers could even name the jeans.

Screen Shot 2014-02-28 at 1.09.56 AM.png
Slip into a "Personal Pair" of custom-designed Levis jeans.

The custom order was sent via the internet to the factory. Computers cut the pattern pieces, and the jeans were sewn manually. Total time from store to customer - two to three weeks.

At that time, custom jeans cost 35% more than regular Levis. But women saw the value. And they felt the satisfaction of feeling good in jeans that were made specifically for them.

As a result, over 25% of all Levis jeans sold to women became custom orders.

It helped turn the business around. In the process, Levis learned that in the jean category, price wars aren't the only option. They learned that mass customization allowed them to charge more for their jeans, while at the same time building customer loyalty among service-hungry customers. It also allowed Levis to create a valuable database of customers when databases were rare.

And best of all - the custom jeans orders instantly provided trend data about customer preferences and in-demand styles, which gave Levis a competitive edge.

It became a strategy Levis has stuck with.

In 2010, Levis introduced Curve ID - a revolutionary line of customized jeans based on the shape of a woman, not her waist size. And in 2012, Levis launched the "Made To Order Project," where jeans are created from scratch, by hand, for individual customers.

Custom-designed, hand-crafted jeans is a growing segment at Levis.

Levis had found a way to innovate, generate revenue and revitalize its brand at the same time.

And who ever thought Levis would do it with bespoke jeans.

One criticism of bespoke manufacturing is that it can't be scaled up to become a major revenue generator. Well, tell that to Nike U.S.

Its Nike ID website lets customers custom-design their own shoes, with dozens of colour combinations and styles.

Screen Shot 2014-02-28 at 12.16.21 AM.png
You can even add up to eight characters of personalized text to your custom-designed Nike's.

According to reports, Nike iD now accounts for 20% of store revenue.

In a category that runs on mass production, Nike found a way to make hundreds of millions of dollars with mass customization.

Some auto companies are now offering to let you custom design your own car online.

BMW, for instance, was one of the first luxury brands to offer mass customization.

Even the BMW Mini lets you totally custom design your new car online. From exterior colour, to a roof with a different colour than the body, to racing stripes, interior stylings and wheels all the way to premium performance and trim packages.

The website lets you see the car from different angles as you design it, and does a running tally of the cost.

Analysts say that a big part of BMWs success in the last decade was due to customization.

We've clearly come a long way from the "You can have it in any colour you want, as long as it's black" days of Mr. Ford.

Coke is brilliant at finding new ways to connect with their customers.
Source: YouTube

Coca Cola has a sizable vending machine operation around the world.

Recently, the soda company introduced the "Coke Freestyle" machine. It lets customers pick their favourite base drink, then use a touch-screen to create a custom beverage from over 100 variations of flavours.

Screen Shot 2014-02-28 at 12.48.17 AM.png
Create your own drink with Coke Freestyle vending machines.

The Freestyle machine has an interesting strategy: It was designed not only to attract new drinkers, but to bring back old ones who haven't had a Coke in years.

Plus, the Freestyle tracks what flavour combinations are the most popular, and reports back to Coke headquarters in Atlanta every single day - giving Coke valuable insights into what might be the next big flavour launch.

The ability to create custom beverages has resulted in double-digit increases in fountain sales, and has given Coke a new and surprising way to connect with their customers.

Did you know you can even custom-design your cereal? lets people create their own organic muesli mix, choosing from 80 distinct ingredients. Which, according to their website, allows for 556 quadrillion possible combinations.

Screen Shot 2014-02-28 at 12.51.13 AM.png
Wake up, design your own cereal.

Many of those ingredients are exotic options from 20 different countries, including flavours such as Tibetan Goji berries and even jelly babies.

Customers can go online and create a personal muesli mix. Then that new muesli is put into a can with an individual label, displaying the name the customer has given to the mix - and shipped.

Screen Shot 2014-02-28 at 12.53.50 AM.png
Honey, did my cereal come in the mail this morning?

While a few food companies have succeeded with mass customization, like Subway and Harvey's, most haven't., on the other hand, has already had to expand to a new plant because of the overwhelming demand for their product.

And the crazier your custom muesli mix is, the more the company likes it.

Which is not a universal sentiment shared by all companies offering customization. Take upscale fashion retailer, Burberry.

Established in 1856, the British luxury fashion house outfits an affluent customer base that includes the Royal Family. And recently, it started to invite customers to design their own trench coats online.

Called Burberry Bespoke, clients can select the cut of their trench coat, the fabric, the colour, and then navigate through options like sleeve studs, leather cuff straps, mink lining and shearling collars.

Screen Shot 2014-02-28 at 1.00.52 AM.png
Design your own trench coat on the Burberry site. Go easy on the fuchsia.

At each step, the screen assembles the virtual coat, and the real-life version arrives at your door in four to six weeks.

The cost for a custom Burberry trench coat: Anywhere from $1,800 to $6,000.

The high price point is a strategy, by the way, as Burberry believes luxury isn't a luxury if everyone has it.

So they let their highly visible, wealthy customers enhance their brand by wearing ultra stylish, custom-designed trench coats.

But there is a caveat.

A Burberry trench coat designed by you still reflects on Burberry. So even though they offer customization, they still want to prevent unsightly creations. Like, say, a pink collar and a fuchsia lining inside an olive green trench coat. So they don't allow all combinations.

It seems while offering mass customization, some brands have their limits.

It's been an interesting journey.

We've lived through one century of Mass Production that has given way to a new century of Mass Customization.

From the music on our smartphones, to the TV shows we choose to record on our PVRs, to the filters and alerts we set up on Google, to how we curate our news on apps like Flipboard, to actually being able to custom-design a car on a website, we are truly personalizing every corner of our lives.

It could be argued that none of this mass customization would be possible without computers and the Internet.

The digital world has opened up an immediate and direct line of communication between companies and individuals that has never existed before.

And any company that doesn't embrace that connection will have a hard time surviving into the next decade.

Then there's the Burberry conundrum - how much control do you give customers when the resulting design will reflect on your brand?

Good or bad.

In the end, the real win is customer engagement. If companies can entice you to spend more time with a brand, roll up your sleeves, dig into the design elements, and then make you fall in love with a product because it's tailor-made just for you, well, that's every marketer's dream.

The trick is to have it your way...

...when you're under the influence.