Will customers be satisfied by one-to-one marketing methods?
Recent developments in computer hardware and software allow marketers to direct individual messages to individual consumers. Could this mean the end of mass marketing? Yes, according to some prophets. In future, they argue, a company will aim to create a long-term 'learning' relationship with each of its consumers, which will lock in his or her custom and increase its value year-by-year. 'The more the customer teaches the company, the more difficult it becomes for the customer to go elsewhere,' US marketing guru Don Peppers told a conference of Britain's Institute of Direct Marketing this summer. The reason being that before any new company can be as useful to him as the existing company, the customer will have to invest time in teaching the new company. This is the essence of 'one-to-one marketing'.
But there is a corollary to one-to-one marketing and that is mass customisation. Once the customer has taught the company what he or she wants, then the company must mass customise the product or service to meet the individually expressed need, explains Peppers. So instead of producing things and then selling them, companies will have to recreate the age of the Victorian tailor who made each item to measure and delivered it to order. This time round, however, they will have to mass produce the product in order to be cost-effective.
Companies which combine one-to-one marketing with mass customisation will achieve new levels of customer satisfaction, loyalty and profitability, argue the enthusiasts. Moreover, the cost of holding components and finished stock can be slashed. Just as improved quality can actually reduce costs, so 'building variety and customisation into processes can lower costs,' insists consultant Joseph Pine in his book Mass Customisation: the New Frontier of Business.
Numbers of companies are currently testing the thesis. Ford UK has a £9 million computer system linking dealers with factories and enabling customers to specify their car's colour, trim, etc. It hopes to cut its running stock of 24,000 Fiestas (showroom value £175 million) by 75% while keeping production levels much closer to fluctuations in demand. Rover has a similar programme. PC makers such as Dell invite customers to choose from a range of different modules such as screen size and keyboard. Few configurations end up exactly the same. Clothing retailer Next is doing made-to-measure clothing, including suits, to order.
However sceptics argue that both one-to-one marketing and mass customisation are examples of techno-hype speeding ahead of commercial reality. Individualised database marketing is fine in theory, concedes Barbara Stanley, head of business development at the software firm, Oracle. But many of the companies currently 'spending an arm and a leg' on vast data warehouses will not only derive little benefit, they will drown in their data. Old-fashioned marketing techniques like market segmentation give far better returns, she maintains. As for mass customisation, customers either don't want or are not prepared to pay for the choices on offer - or are simply confused by them.
Businesses have been hypnotised by the need to respond to every fleeting whim of the customer, argues Harvard Business School marketing guru Ted Levitt. 'Mass production operations have been converted to approximations of job shops, with cost and price consequences far exceeding the willingness of the customer to buy the product.' Mark Schennum, a vice president of Gemini Consulting believes that although 'mass customisation is working in a few areas, it isn't in most'. Thus motor companies are finding it cheaper to put all their extras into every car rather than take them off for people who don't want them - or don't want to pay for them.
Pine admits he has learned two things since writing his book. First, 'adding variety on top of existing production methods does add a lot of cost'. Second, variety is not necessarily the same as customisation: additional variety of finished goods merely adds to inventory. Some manufacturers - of soft drinks, say - are natural mass producers. Computer chips also have to be standardised because they link other companies' modules. But in sectors like clothing and electrical goods, and services such as telecoms and insurance, mass customisation coupled with one-to-one marketing point the way of the future, Pine insists. Probably, but it won't happen overnight.