A new, more individualistic generation has arrived, and marketers as diverse as Roots, Rogers Wireless, MasterCard and Toyota are finding that customizable products are flying off the shelves. In fact, as new technologies make customization faster and more cost-effective, many are predicting the day when products are created for a market of one.
Sooner or later it happens to every shopper: you find a must-have item that suits your style, but it’s the wrong size. Or you head to a party and discover that you and three other people are decked out in the same Gap sweater. Not cool.
Retailers and manufacturers in categories as varied as automotive, telecom, fashion and financial feel your pain, and they’re beginning to address these concerns through a process called mass customization. It’s an important and growing trend, and it’s being propelled by a desire on the part of consumers to affirm their individualism – albeit without straying too far from the group. In other words, they no longer want to look exactly like their peers.
‘There are two forces at work here,’ explains Jeanette Hanna, SVP brand strategy at branding consultancy Spencer Francey Peters in Toronto. ‘People feel that everything has been homogenized, and they are looking for and willing to pay for something distinct. Also, it’s now more cost-effective to morph, customize and adapt, thanks to the digital technology revolution.’
John Torella, senior partner at Toronto-based retail consultancy J.C. Williams Group, agrees that customization is a significant competitive strategy and says it would be a mistake for retailers and manufacturers to ignore this reality. He also points out that selling personalized products can help avoid commoditization. ‘I don’t think any category is protected. So if you’re not doing it now, you should be thinking about it.’
However, Torella has a warning: While there is a definite movement towards expressing individuality, instant gratification also remains a major factor; in other words, if customization is an inconvenient process in the eyes of the consumer, it could negatively impact their experience.
‘Levi’s customized jeans are a good example of this – they offered it and promoted it [in the mid-’90s], but they weren’t able to execute it that well. Because of the time it took and inconvenience it caused, people didn’t really respond to it anywhere near where [Levi’s] thought they would.’
However, Roots is one fashion retailer that is reaping the benefits of customization. The Toronto-based company, which had estimated sales of $300 million in 2002, introduced its customizable handbags last year, available both at Roots stores in Canada, and online for U.S. and foreign shoppers.
Customers now have the ability to personally choose their favourite style and colour, and they can then have the bag embroidered with an initial.
Says co-founder Michael Budman: ‘We see this having a big future in our business…. [Customers] are taking part in the process of creating the product. They like it, because it’s more interactive.’
Due to the success of the handbags (Budman won’t give specific numbers), Roots has expanded its customizable offerings to include jackets, accessories and even sweatshirts.
While the company has advertised its customizable handbags in North American newspapers and magazines, such as the New York Times, Flare, the National Post, and the Globe and Mail, it didn’t engage in any research before launch. ‘I despise focus groups,’ says Budman, adding that the Roots team simply followed its gut.
But had the retailer conducted significant research, it would have discovered that a changing consumer mind-set is indeed behind the personalization trend. So says John Boynton, VP consumer marketing at Rogers Wireless, of Toronto, which has adapted a more personalized approach in recent years, from allowing customers to choose airtime packages to polyphonic ringtones, screen savers and Java games.
In fact, the ability to present so many choices has helped the cellphone industry claim the title of Canada’s ‘fastest growing consumer product in history,’ he says.
According to Boynton, there are strong macro trends evident, particularly noticeable in the target youth and young adult segments. Primarily, the new generation is far different from Generation X, in that it wants to make a difference, and it embraces both individuality and multiculturalism.
‘It looks a lot more like the postwar generation,’ says Boynton. ‘They are more socially conscious, more into friends and loyalty and far less into ‘what’s in it for me.’ It’s more about sharing and yet [still] presenting a reflection of themselves. If you think about personalization, it’s all about how I want others to look at me – and the idea is that everyone should feel comfortable with themselves.’
But aside from feeding these consumer desires, Boynton points out a second advantage to customization: the ability to increase customer loyalty and retention. This is achieved via the company’s ability to stay with consumers throughout major life changes.
For instance, if a 16-year-old buys a cellphone, he’s likely to want a different experience when he goes to college, and then again when he gets married. As a result, Rogers Wireless follows customer usage patterns, and accumulates date-of-birth information so it knows when to anticipate a major change in lifestyle.
The next frontier of data collection will likely look at attitudinal trends, adds Boynton, such as the importance of friends versus family (likely skewing to friends in the youth demo), and the importance of technology to a user. ‘For the next five years, part of our marketing dollars will be spent upfront to get you in the door, and the other part will be spent on, now that you’re in, here’s a world of possibilities you may not know about…. We need to have the opportunity to keep up with customers, and what matters to them now might be different next week.’
The customization strategy seems to be working: the Rogers Wireless division added 172,600 subscribers in the last three months of 2003 and now accounts for half of the parent company’s projected growth. Marketing-wise, that strategy means building a positioning platform that can encompass the many options. Thus, for the last two years, Rogers has used the tag ‘more than a phone.’ (In the near future, a campaign will launch with the same tag, but more of an ’emotive’ interpretation.) From that base, Rogers Wireless typically highlights a specific feature every quarter, whether ringtones or games.
Like Rogers, a key objective for the one-and-a-half-year-old MasterCard Mosaik card is to enhance customer loyalty and retention. Nancy Marescotti, senior manager, brand and enhancements for MasterCard’s issuing bank, BMO Financial Group, says consumers are encouraged to make changes to the customizable credit card, which allows them to choose their own reward programs, insurance plans and interest rates. They can alter the mix at any time either on- or offline.
‘We’re trying to get across the idea that this is the only card you need, it fits now and will fit going forward, when your lifestyle changes,’ says Marescotti. ‘We also make sure that, on an ongoing basis, we remind consumers about this.’
Mosaik has been promoted through direct mail (for acquisition), as well as print ads, the most recent of which debuted in the fall. The message of the advertising, created by BMO’s former AOR Arnold Worldwide (the bank switched to Cossette in November), focused on how simple it is to customize the Mosaik. According to Marescotti, acquisition volumes since the card’s debut have increased by as much as 75% for some campaigns.
The Web site, www.bmo.com/mosaik, is also an effective channel, with acquisition up 42% year over year. Additionally, BMO exceeded its annual target for cardholders registering for a password on the self-serve site – where they can make changes and access their statements – within the first four months of launch.
Perhaps the best indication that customization is for real is the fact that even the auto sector is paying attention. Chris Travell, VP for the automotive group at Maritz Research, Toronto, says there has been a ‘heavy renewed emphasis’ on personalization in the last 12 to 18 months.
He points out that Toyota has been active on this front, allowing consumers, for instance, to personally choose paint colours for its Scion division. He adds: ‘The whole area of personalization is being integrated into the sales operation. Before it was a sort of stand-alone merchandising case in the corner of the dealership, but now it seems there’s more of an emphasis on the ways you can accessorize your vehicle, to make it an extension of yourself.’
And by all indications, Canadians are interested in personalizing their cars, according to an online poll of 1,200 J.D. Power Web Perspectives Auto Panel members, conducted between Nov. 7 and Nov. 10. Forty-one per cent of participants stated that vehicle customization is important and furthermore, that they are willing to spend, on average, more than $2,000 to achieve a distinct look.
Furthermore, if you think customization is a passing fad, think again. It’s a movement that Spencer Francey Peters’ Hanna believes will only grow stronger. ‘Right now the component part isn’t customized. It’s the same car basically, but with [different] features. You could think about it [in the future] as a market for one – these are baby steps towards ‘we’ll build this just for you.”
