Marketing mix customization and customizability

Business Horizons, Nov-Dec, 1997 by Marc Logman

Businesses looking for custom methods of designing, pricing, selling, and delivering their wares can do it themselves or leave it up to the customer.

We are sailing out of this century and into the next with our marketing methods in full-scale metamorphosis. Top-down marketing is becoming bottom-up. Transaction marketing is giving way to relationship marketing. One-way or broadcast marketing is moving to an interactive style to encourage a dialogue with the customer. And mass marketing is shifting to a customized, one-on-one method of reaching individual customers.

Because of fierce competition, long-term competitive advantages often are no longer sustainable. The policy to be followed, says d'Aveni (1994), is one of continuous market disturbance in order to create "temporary" competitive advantages. Hamel and Prahalad (1994) suggest that firms should look almost continuously for new opportunities. In the midst of such dizzying change, companies must be able to make "real-time" decisions, so their planning and tactics horizons often become shorter. To be flexible and highly responsive to market moves, a top-down approach in which business strategy decisions precede tactical and planning decisions often no longer works. Companies should be able to adapt their tactics immediately.

In the same context, a firm's communication approach becomes more and more bottom-up. Rather than determining target groups (who?) and communication aims (what?) before deciding on the instruments (how?), specific methods of communicating, such as via the Internet, are leading to the identification of who and what. Moreover, many writers claim that a paradigm shift is occurring from transaction marketing to relationship marketing. Firms are beginning to realize that keeping current customers may be more important than trying to attract new ones.(*)

Especially in business-to-business markets, many firms are starting to involve their customers in the product development process. Along with an increased concern about customers' real needs, wants, and demands, the information flow between customers and firms becomes more important. The Internet and other new communication media allow companies to interact with customers much more directly. Face-to-face or phone and fax contacts are no longer the only means of doing so.

Marketing strategies are also becoming more individually oriented. Businesses have begun to develop databases that allow them to approach customers on an individual basis. This in turn allows companies to customize their ways of introducing, providing, and delivering products and services to the customers.

A FRAMEWORK FOR MARKETING MIX CUSTOMIZATION

In light of all these transformations in the marketing field, particularly the trend toward "individualization" of the consumer, the focus here is on the impact of "customization" on the marketing mix. Five different instruments of the marketing mix--product, purchase price, communication, distribution and logistics, and after-sales support and costs--can be customized, either by the marketing firm or by consumers themselves. This is outlined in Figure 1.

Figure 1
Marketing Mix Customization and Customizability Options

Marketing                             Customization
Mix
Elements                By Company

Product               * Offering enhanced and/or bundled
                        products (to meet individual customer
                        needs)

Purchase Price        * Price discounting (dependent on sales
                        volume, sales history, time of purchase)
                      * As a result of product customization

Communication         * Using one-to-one communication tools
                        (direct mail, sales force)

Distribution and      * Offering multiple channel and logistics
Logistics               solutions (partly customizable)

After-Sales Support   * Offering augmented product solutions
and Costs               (with single or bundled services)
                      * Using remote control systems

                                      Customization

                        By Customer ("Customizability")

Product               * Offering final products with different
                        options
                      * Offering a menu of product components
                        (from which customers can select and
                        design their final product)

Purchase Price        * As a result of product customizability
                      * As a result of customers' bargaining
                        power
                      * As a result of customers' decision
                        timing

Communication         * Offering a customizable interactive
                        information network (such as the
                        Internet)

Distribution and      * Offering a customizable interactive
Logistics               logistics
                        and distribution network (such as EDI)

After-Sales Support   * Offering do-it-yourself solutions
and Costs             * As a result of product customizability
                        (such as the way the product is used)