Swap Meet - customization of products and services - Polling Data - Statistical Data Included

American Demographics, July 1, 2001

AMERICA'S YOUTH AND VETERAN ONLINE USERS ARE THE MOST LIKELY TO DRIVE THE CUSTOMIZED MARKETPLACE.

AS COSTS CONTINUE TO DROP, AND CUSTOMER DEMAND CONTINUES TO RISE, MORE COMPANIES WILL BE FORCED TO ADOPT CUSTOMIZATION JUST TO COMPETE.

BEYOND TANGIBLE GOODS, THE NEXT BIG WAVE OF CUSTOMIZATION WILL BE IN THE OFFLINE SERVICE SECTOR.

In 1913, Henry Ford transformed consumer expectations by bringing mass production to the marketplace. "The consumer can have any Model T he wants, just as long as it's black," Ford was known to say. Since then, shoppers have learned to sacrifice what they really want for what is available and affordable, and only the extremely affluent have dared to desire customized products and services. But today, advanced technology and the Internet's ability to seamlessly collect consumer preferences are making tailor-made items and attention more cost efficient for manufacturers and service providers, and more affordable for consumers. Now, anyone who covets customization must pay for it with a currency even more valuable than money: personal information.

Seventy-eight percent of adults say they'd be willing to trade some personal info for products and services tailored just for them, according to an exclusive survey conducted for American Demographics by market research firm Market Facts. The challenge facing marketers today is not in convincing people to give up the 411, but in proving that they can provide something of personal value in exchange, and that they can be trusted not to "sell out" their customers. Consumers and business execs now have unlimited access to data about each other, and as a result, consumers have reached a new level of power. With the competition quite literally a quick click away, cost is ceasing to be the primary point of differentiation for many services and products. The degree to which a company can meet the specific needs of each customer, while protecting his personal privacy, is fast becoming the new benchmark.

Consumers crave customization. In an exclusive, nationally representative survey conducted for American Demographics by Internet research firm Harris Interactive, 75 percent of adults in the United States say they wish there were more products and services customized to their personal needs and tastes. Moreover, 70 percent say they are more loyal to companies that make an effort to get to know what those needs and tastes are, and 70 percent are willing to pay a premium for the attention. The question then becomes one of pure demographics. Which consumers are most willing to trade personal information for personal service? With which kinds of information are they most willing to part, and for what kinds of products and services is it worth the swap?

America's youth are the most likely to drive the customized marketplace. "Younger consumers will come to expect customization more as they grow into adulthood," predicts Joe Pine, co-author of Markets of One: Creating Customer-Unique Value Through Mass Customization (Harvard Business School Press, March 2000). "Older consumers were used to having to sacrifice what they wanted in order to get a low cost, but today's young consumers won't have that ingrained in them."

In fact, 85 percent of 18- to 24-year-olds say they wish more products and services were customized, compared with 62 percent of those 65 and older, according to our Harris study, which weighted its sample of 900 to reflect the U.S. population. And 77 percent of the youth group say they are more loyal to companies that make an effort to get to know their tastes and needs, compared with just 54 percent of the senior set. This demand runs across all industries. Eighty-six percent of the youth group is interested in buying customized clothing or shoes (compared with 67 percent of the general population), 80 percent are interested in personalized computer or electronic equipment (compared with 57 percent), and 82 percent are interested in tailored travel services (compared with 65 percent).

Online users, regardless of age, appear to be similarly conditioned to expect just-for-me experiences. Among "tenured Web purchasers" - those who have been online for two or more years and bought at least one item over the Internet in the past year - 56 percent say they are more likely to purchase from a site that allows them to personalize it, according to a report by the Personalization Consortium Inc. (PCI), an advocacy group formed by marketers and researchers that promotes the use of responsible one-to-one marketing technology on the Web. In fact, 85 percent of heavy Internet users in our Harris study (defined as those browsing the Web for at least eight hours per week) say they wish there were more customized products and services available, compared with 72 percent of non-Internet users.

This demand for customization online has led to the launch of numerous personal-focused e-shops and e-services, across a variety of industries. News and information are customizable on sites like myCNN.com and Individual.com. Entertainment sites like SonicNet.com allow music buffs to customize their own radio stations. As for products, major players like Nike have created an online space where customers can design and personalize their own "Nike iD" sneakers. And at Reflect.com, women can design made-to-order cosmetics, based on their skin type, style, and personality.