Mass Customization: Definition, Types, Benefits, Examples

Maya Dollarhide is a financial journalist with over 10 years of experience helping people understand challenging financial topics, such as student loan management, home buying, and retirement savings.

What Is Mass Customization?

Mass customization is the process of delivering market goods and services modified to satisfy specific customer needs. It combines the flexibility and personalization of custom-made products with the low unit costs associated with mass production. Other names for mass customization include made-to-order or built-to-order.

Key Takeaways

• Mass customization allows customers to personalize specific features of a product while still keeping costs at or near mass production prices.
• Innovative manufacturing techniques help companies produce interchangeable parts that can be combined in various ways to build a cost-effective product that satisfies specific customer needs.
• The four primary types of mass customization are collaborative customization, adaptive customization, transparent customization, and cosmetic customization.
• Various companies employ mass customization techniques, including retail companies, software creators, financial services companies, and modular home builders.
• Companies that offer mass customization can gain a competitive advantage over those that only offer generic products.

Understanding Mass Customization

Mass customization allows customers to design certain made-to-order features of a product while still keeping costs closer to mass-produced products. In some cases, the product components are modular, allowing clients to mix-and-match options to create a semi-custom final product.

Mass customization applies to various fields, but it is often associated with the retail industry. Software creators may use this method to include software-based product configurations that enable end-users to add or change specific functions of a core product. The financial services industry also embraces mass customization through the growth of independent, fee-only advisory firms.

The Growth of Mass Customization

B. Joseph Pine II explored the growth of the American economy through mass production. In his book, Mass Customization: The New Frontier in Business Competition (Harvard Business Review Press, 1992), he describes four primary types of mass customization that took the concept of mass production to a new level:

• Collaborative customization: companies work in partnership with clients to offer uniquely suited products or services
• Adaptive customization: companies produce standardized products that end-users may customize
• Transparent customization: companies provide unique products to individual clients without overtly stating they are customized
• Cosmetic customization: companies produce standardized products but market them differently to various customers

Pine focused on creating a small number of interchangeable pieces. These individual parts may be combined in various ways to produce a cost-efficient production model while allowing consumers to choose how the pieces go together.

Examples of Mass Customization

Fee-only, independent financial advisors allow clients to customize their portfolio holdings to match their unique situations. Clients can choose products that align with their investment risk tolerance, time horizon, investment style, and future goals.

Certain furniture companies offer mass customization by providing multiple options for components or features. This flexibility may include different fabrics, furniture legs, or pieces that combine in numerous configurations. Modular home builders also use mass-customization models by allowing customers to make changes to the base home package.

Benefits of Mass Customization

Mass customization enables manufacturers to delay product differentiation until the final phase of manufacturing. Instead of the manufacturer deciding on the unique features, mass customization allows consumers to make these decisions. For some consumers, the ability to customize a product is enough to influence their buying decision in favor of one company over another.

Mass customization can become part of a lucrative marketing strategy for a company. Companies that offer customization gain a competitive advantage over rivals. They can emphasize their ability to produce a semi-custom product at a reasonable price to consumers who want an upgrade from generic products. As long as the company delivers a product of high quality, they have an opportunity to increase sales, profits, and brand loyalty for their one-of-a-kind products.

Mass customization can also help companies reduce costs associated with excess inventory. Implementing a just-in-time (JIT) approach to manufacturing can minimize inventory and increase efficiency. JIT mass customization requires reliable suppliers and an inventory replenishment system that notifies the company when new materials need to be ordered.

Mass customization can also help companies reduce costs associated with excess inventory. Implementing a JIT approach to manufacturing can minimize inventory and increase efficiency. JIT mass customization requires reliable suppliers and an inventory replenishment system that notifies the company when new materials need to be ordered.