Mass customization is a business model which allows the customer to purchase a product which has been customized to meet his/her exact needs, for example the color of his/her car, his own drawing on a T-shirt or creating a pair of customized sneakers. From a company perspective, mass customization has been defined as the ability to provide customers with whatever they want, whenever they want it, wherever they want it and however they want it. It has been heralded as a change of paradigms from the mass production paradigm to the mass customization paradigm and named a significant competitive advantage in the future. However so far no large cap companies have been able to make substantial profits employing mass customization – NIKE iD is changing that.
Industry leaders, including Toyota, Dow Jones, and Motorola, have tried to employ mass customization but many have failed. Toyota, for example, understated the increase in complexity related to its intention of timely delivering a custom made car. Lately several large companies such as Levis and Apple, have implemented mass customization successfully. However the innovation space has remained small and the share of total revenue likewise.
Mass customization have some limitations compared to mass market products.
- More expensive than mass produced products
- Mass customized product cannot be delivered to the customer at time of purchase
- The customer must spend time designing the desired product
- Customers of lifestyle products often have problems articulating what they want
- Customers want to feel unique but are also comfortable in standing too much out
A couple of years ago I discussed this issue with Frank Piller, a leading researcher in Mass Customization who has worked with several big companies and their mass customization initiatives including Adidas. He claimed that about 80 percent of mass customization is about brand building and for consumer goods mass customization is utilized primarily to increase existing sales of mass produced products. During the last couple of years I have been stating that mass customization is a great for brand building, but it does not substantially drive revenue because it by nature is difficult to reach a high consumption volume through a 1:1 offering due to the impediments described above. In November 2009 I spoke with Eric Liedtke, Head of Global Brand Marketing at Adidas, about their Mass Customization offering MyAdidas and the US sales numbers they provided were still a small fraction of total sales.
NIKE ID
NIKEiD is a service provided by the sportswear company NIKE allowing customers to customize clothing purchased from Nike. The customer becomes the designer as they change and add a personal look and feel to a selected item. The service can be accessed both online from their homepage and in select physical branches. The service was launched initially in 1999 and could only be accessed through their website. It provided customers the ability to choose from a limited range of different material and colors to develop their own style of tennis shoe.
NIKE iD is a fantastic customer experience (try it at nikeid.nike.com) and their online community has recently reached 15 million people. In the same period Nike’s market share has grown from 48-61%. The most interesting fact is that I learned recently is that NIKE iD now is 20% of store revenue. If these numbers are real Nike is the first company to show how Mass Customization can become a real driver of revenue, which makes me happy even though it is proving me wrong 
- David
Tags: mass customization
Nice post! I spoke to someone at NikeiD, and basically, after 5 years of “trying” mass customization (they started 10 years ago) they said “let’s either make it profitable or let’s shut it down”. And they made it profitable! Compared to stand alone customization websites, the idea is that you can go from a standard product to a customized product if you don’t find exactly what you’re looking for.
Carmen
http://www.mass-customization.info
[...] couple of weeks ago I wrote about how Nike now is making 20% of store revenue from its Nike ID mass customized shoes engaging users in the value creating process. So while it is interesting that [...]
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Very interesting article! I was wondering where you found those figures.
online community has recently reached 15 million people. In the same period Nike’s market share has grown from 48-61%. The most interesting fact is that I learned recently is that NIKE iD now is 20% of store revenue.
Thanks in advance
I recently commented on JP Gownder’s, Forrester Research, blog related to his recently published paper on mass customization – “Mass Customization Is (Finally) The Future of Products”.
http://blogs.forrester.com/jp_gownder/11-04-15-mass_customization_is_finally_the_future_of_products
My comment was titled “Historical Issues With the Adoption of Mass Customization” and is listed below in full. My comments directly relate to points #2 & #3 of your article that discusses limitations when compared to mass market products.
I believe one of the historical issues with the adoption of mass customization is the need to change an individuals buying habits, patterns and behaviors. This is sometimes difficult since humans have an inherent reluctance to change. However, much of this reluctance is fading, in my opinion, as consumers are becoming acclimated to an environment where they can get “whatever I want whenever I want it”. Companies like Amazon, Netflix, Pandora, Rhapsody, and iTunes offer consumers virtually unlimited choices in real time. What I think mass customization allows is a company that operates in a physical goods environment (i.e. http://www.bluewardrobe.com) the ability to offer the customer anything.
Mass customization allows the deployment of a “long tail” strategy without the burden of physical inventory. Companies that can match their product offerings to the true shape of the demand curve (a curve that incorporates both “hits” as well as “niches”) will be able to offset any initial inconvenience that mass customization inherently possesses.
How did we provide mass customization while overcoming reluctance to change? We employed both an online and offline strategy to help customers “bridge the gap”. Customers can order a shirt online or have the unique experience of meeting one of our professional tailors in person. We ensure that an individual’s buying habits, patterns and behaviors are taken seriously. It has been said that an individual will only change their behavior if they are forced to (e.g. lose weight/stop smoking or face a premature death).
If you don