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PENNSTATE Timothy W. Simpson Associate Professor Mechanical & Nuclear Engineering and Industrial & Manufacturing Engineering The Pennsylvania State University University Park, PA 16802 phone: (814) 863-7136 email: [email protected] ME 579 - Designing Product Families - IE 579 TR 9:45 - 11:00 a.m. © T. W. SIMPSON

Customization and Product Platforms: 

Customization and Product Platforms An effective product platform enables a variety of derivative products to be developed quickly and cheaply How can we allow consumers to customize a platform to satisfy their individual needs?

Web-Based Platform Customization: 

Web-Based Platform Customization

Spread of Products into American Households: 

Spread of Products into American Households Source: Cox, W. M., and Alm, R., 1996, “The Economy at Light Speed: Technology and Growth in the Information Age and Beyond,” 1996 Annual Report, Dallas Federal Reserve,

The Internet as an Enabler for Customization: 

The Internet as an Enabler for Customization The Internet enables remote accessibility while delivering rich information content at the same time When information is embedded in physical modes of delivery, there is a tradeoff between reach and richness: Reach is the number of people who can access and exchange the information Richness characterizes the information itself in terms of bandwidth, customization, and interactivity bandwidth is the actual amount of information that can be sent or received customization refers to the extent to which the information can be individually tailored interactivity refers to the extent that people can interact with the information



Source: Reichheld, F.F., and Schefter, P., 2000, “E-Loyalty: Your Secret Weapon on the Web,” Harvard Business Review, July-August, pp. 105-113. E-Loyalty The value of loyalty is often greater on the Internet than in the physical world “word of mouse spreads even faster than word of mouth” Web technologies, when used correctly, reinforce the inherent loyalty found in most on-line customers In apparel e-tailing, new customers cost 20%-40% more for pure-play Internet companies than for traditional retailers with physical and on-line stores On-line customers are looking for “a Web site I know and trust”, a long-term relationship, and convenience Having lowest cost and broadest selection not as important

The Internet as an Enabler for Customization: 

The Internet as an Enabler for Customization This tradeoff between reach and richness, shaped the way that companies communicated, collaborated, and interacted with customers, suppliers, and distributors. The Internet enables economic activities that are characterized by “instant information flows, the delayering of value chains, the emergence of new intermediaries, and the shifting of economic rules and market dynamics” (Shaw, 1999) Many assert that the “computer-mediated market will accelerate the process of customization through its technologies” Intel recently opened, a company that will support mass customization of electronic products on-line


Online Product Customization: 

Online Product Customization Despite all of the optimism, Shaw (1999) states that “how to capitalize on the full potential of electronic commerce is still an open question” “One of the critical aspects influencing the success of electronic commerce will be the effectiveness of the interface interacting with the consumers” (Shaw, 1999) Since Internet commerce is still rapidly evolving, it is unclear what factors will influence people to buy products over the web Source: Shaw, M. J., 1999, "Electronic Commerce: State of the Art," Handbook on Electronic Commerce (Shaw, M., Blanning, R., et al., eds.), Springer, New York, pp. 3-24.

Building the Perfect E-tailer: 

Building the Perfect E-tailer Design an easy-to-use web site Craft cheaper customer-acquisition programs Average of 110% of revenues spent on marketing in 1999 Build expertise in merchandising Choosing the right products to sell is a fine art Leverage the real world Need a combination of clicks, bricks, and slicks (catalogs) Create new revenue streams Be willing to customize services and advertising Build a bullet-proof order fulfillment system Create a killer data-analysis system Hire a dedicated customer-service force Source: Berman, D.K., and Green, H., “Cover Story: E-tailing,” Business Week, Oct. 23, 2000, pp. 32-33.

In-Class Activity: 

In-Class Activity Each group will be assigned some of the following sites: Examine your company’s on-line product offering and customization process to answer the following: How easy is it to find the customization page? What is the extent of the product variety being offered? What is the point of customer involvement (Duray’s 4 stages)? What type of customization is being (Pine’s 4 types)? How is the customization being achieved (Pine’s 5 steps)?

Results of Customer Involvement: 

Results of Customer Involvement Customer Involvement Product Variety Information Technology Production Planning Fabrication Assembly Delivery Unique fit Combinatorial Combinatorial Tailored- to-order Assembled- to-order Made- to-stock or JIT Order processing Order processing, scheduling Point-of-sale Inventory Adapted from: Duray, R., and Milligan, G. W., 1999, “Improving Customer Satisfaction through Mass Customization,” Quality Progress, Vol. 32, No. 8, pp. 60-66.

Four Types of Mass Customization: 

Four Types of Mass Customization Transparent Collaborative Adaptive Cosmetic Representation No Change Change No Change Change Product Adapted from: Gilmore, J. H, and Pine, J. B., II, 1997, “The Four Faces of Mass Customization,” Harvard Business Review, Jan-Feb., pp. 91-101.

Pine’s Five Steps to Mass Customization: 

Pine’s Five Steps to Mass Customization Degree of Market Turbulence Degree of Organizational Turbulence Customize Services Embed Customizability Create Point-of-Delivery Customization Provide Quick Response Modularize 1 2 3 4 5 Sources: Pine, B. J., II, 1993, "Mass Customizing Products and Services," Planning Review, Vol. 22, No. 4, pp. 6(8). Pine, B. J., II, 1993, Mass Customization: The New Frontier in Business Competition, Harvard Business School Press, Boston, MA.

Web Sites for In-Class Activity: 

Web Sites for In-Class Activity 1) Computers: Dell - Gateway - Apple - 3) Automobiles: Ford - BMW - Jaguar - 5) Jewelry: Mondera - DeBeers - 2) Clothing: Lands’ End - Shirtcreations - Americanfit- 4) Bicycles: Cambria Bicycles - Cannondale -

Internet-based Product Platform Customization: 

Internet-based Product Platform Customization Comparisons of Internet-based MC strategies within and between industries can be useful in establishing general trends and guidelines for effective Internet-based product platform customization The Internet will accelerate the process of product customization through its capability to: reach a broader customer base enhance consumer interaction improve customer satisfaction Therefore, companies should develop product platforms and product platforms to be consistent with their desired Internet-based product offering to enable customization





Niches within SUV Market Segment: 

Luxury Cars Small Cars Wagons Midsize Cars Sports Cars Vans & Minivans Trucks Convertibles Niches within SUV Market Segment

Customized Products within SUV Niche Market: 

Customized Products within SUV Niche Market Luxury Cars Small Cars Wagons Midsize Cars Sports Cars Vans & Minivans Trucks Convertibles Lincoln Navigator Ford Excursion Mercury Mountaineer Ford Expedition


“Cruising for Cars Online”: 

“Cruising for Cars Online” “65% of car buyers will turn to Internet for pre-buying information this year (up from 25% in 1999).” - J.D. Power & Assoc. “In nearly half of new-vehicle sales, shoppers consulted the Internet during the buying process.” - Gartner Group “New- and used-car sales initiated over the Internet will rise to 20% of all U.S. sales by 2002.” - Gomez Advisors Volkswagen recently offered 4000 limited editions of its New Beetle in Vapor and Reflex Yellow that could only be purchased online through their web site (but deals had to be completed through a Volkswagen dealer) Source: Burnham, R., Road & Track Road Test Annual 2001, pp. 6-7.


Slide30: Over 30 states prevent automobile manufacturers from selling directly to customers FordDirect is available in 9 states (CA,DE,GA, MA,NV,NJ, TN,TX,WA)