Financial Marketing's Time:

The Era of Mass Customization

By Benjamin Wheeler

Customization in business has been around for thousands of years. In the Middle Ages, knights had their armor customized to fit every curve of their physique, their coat of arms engraved by the hands of highly skilled artisans. It was all for a king's ransom, of course. For centuries, tailors have also made small fortunes customizing suits for gentlemen of means. Customization was probably the best sales tactic in the history of free enterprise.

On the other hand, mass production is relatively new. Henry Ford, the inventor of the assembly line, said, "You can have any color you want, as long as long as it's black." Mass production often meant a superior product for a great price for average folks who couldn't otherwise afford a product or service. So it's no wonder it actually flourished and became the rule instead of the exception.

In the 21st century, though, mass production has evolved so much, it's taken on entirely new capabilities. Many industries can mass produce customized products and services. Consumers now have many options to choose from. They can go online at miniusa.com to customize cars or shoes at vans.org. Women can also alter their handbags at micustombag.com

But what exactly does mass customization mean for financial consumers? For one, it means better customer service. If a product is made specifically for me, or I at least perceive it that way, I feel better serviced and am more likely to become a loyal customer. I will have less of a need to look further if my individual needs have been satisfied.

It creates more demand for a company's products and services and less of a need to market on price. Mass customization creates value-added, which is perceived as well worth the extra expense.

Marketing can be done for individuals on a one-to-one basis. A company employing a mass-customization strategy still needs broad advertising messages to communicate its brand promise to mass markets. It must fulfill the promise with highly individualized follow-up messages and personal service that will transform initial interest into contact and a long-term financial relationship.

There are huge opportunities for consumers who are crunched for time. As our society has evolved from traditional family units with just one worker to those with two workers or single parents, this crunch has grown even greater. People have less time to stand in line at a bank or sit down with a financial advisor. Financial companies that can service this group (about 60 to 70 percent of the population) in the same way they are already being serviced by the likes of peapod.com for custom groceries, Dell for custom computers and many automobile manufacturers (including Ford) for custom automobiles.

Forget everything you learned in Marketing 101. Marketing should be done individually. In the same way the iPod has revolutionized the way we listen to music, one-to-one marketing in the financial services industry will result in companies doing a better job of educating consumers to make their own decisions. They can model their own futures with dramatic interactive experiences, rather than bar graphs and pie charts.

An online experience may take the individual consumer into a hypothetical dramatization of their financial future, giving them a context for financial decisions. They can virtually experience buying a house, supporting their kids, or saving for college, retirement or long-term care. In the end, a customized financial plan will not happen entirely online, but through a collaborative dialog with a financial advisor or personal banker. With an integrated customization strategy, consumers can be educated on their own to make solid financial decisions they are more prepared to act on.

As a result, more "fence sitters" will become clients with assets under management. Mass customization will not replace a financial sales force. Instead, it is a system with which more qualified leads are generated and more clients acquired to form longstanding financial relationships.

Companies should begin by hiring outside experts with an understanding of their culture, products and services, and marketing. Ask experts to assist implementation of a customization strategy with your company's customer marketing team. This should be a team of all-star representatives from operations, finance, legal, IT, marketing and sales which is empowered to make decisions.

The end goal is to change the way business is conducted with customers while retaining the current customer base. It's a Herculean task, but it's entirely doable if there is a will to stay competitive and take advantage of opportunities that truly exist. This should include weekly meetings where people have goals and a division of responsibilities. An outside expert is necessary to keep track of things and be an unbiased guide who can help the team make the right decisions. He or she should also be an advocate who supplies an expert opinion that lends credence to the project.

Companies should focus on one area that has great promise and expand from there. For example, rollover IRAs or refinanced mortgages are areas, which if properly customized, can generate better results more economically than traditional marketing models.

Take a look at how different financial services industries can utilize this strategy.

Banks and investment firms must do more than just give their customers a financial dashboard, oh which they can find all their banking and investment information on one website. The personal banker-advisor will take on a new role as a 24/7 point person who engages clients personally in a highly customized experience. JPMorgan Chase does a good job with this strategy by leveraging its elite heritage of private banking and bringing it to their customers. Taking this a step further in the future, tech savvy customers will be encouraged to load all their information into an aggregate dashboard, allowing them to see other accounts from outside firms, as well as insurance and mortgage companies. What would be seen as a service by their customers will also be another way to establish a financial planning dialogue.

As far back as 20 years ago, the bank with the most cash machines won over the most customers. In the era of mass customization, the prize goes to the bank with the best financial dashboard. They have the potential to become media properties that are the assemblers not just of information, but marketplaces for localized legal and accounting services.

On the other end of the spectrum are banks that take advantage of mass customization to design a superior retail experience for customers who are not comfortable with the web, let alone ATMs. For this group, customization means using technology to better serve their individual needs on a more human level. This comes in the form of superior face-to-face service. It is delivered with a human touch in an environment resembling a comfortable living room rather than an institution. With the assistance of a mass customization strategy, elite service once experienced only by the wealthiest individuals can be enjoyed by a mass audience. Large institutions may want to employ both approaches to mass customization.

Credit card companies can make money in new and different ways by designing cards for individuals. Rather than creating profit based on revolving debt and merchant fees, credit card issuers can reposition themselves as strategic media with the ability to target individual customers with highly relevant promotional messages and offers.

Depending on their customer's credit rating and predefined interests, these cards can be designed for individuals to take advantage of discounts like lotto tickets and laundry detergent at the lower end. Discounted travel, deals on health clubs, luxury automobiles, and boats are included at the higher end. By repositioning services, these companies can open new revenue streams and offer value-added, and at the same time be more relevant and better fulfill the needs of consumers.

Imagine the ideal or most profitable traditional credit card customer as someone who racks up a lot of revolving debt paying as much as 17 percent. This is the predicament many of these companies experience as they approach new customers. Currently, a customer who pays off credit card debt every month is not considered an ideal customer. There will always be revolving debt, but it will get less and less as consumers get more financially savvy.

By targeting individual customers, credit card companies can offer a value-added service to their merchant customers. They need to drive traffic to their stores and to cardholders who have the value-added and instant gratification of collecting promotional offers and rewards. By customizing promotions, customers will feel they receive better service, merchants will have more reason to accept the cards and banks more of a reason to issue them.

Insurance companies can explain their products by talking about the individual needs of individual customers. About 87 percent of the marketing challenge is wrapped up in understanding products and their attributes. Subsequently, insurance companies would be well advised to develop better ways of communicating with potential customers. By customizing products and marketing materials and creating an engaging web experience that clearly explains its offerings, the sales force can spend more time closing insurance policy sales and less time explaining the differences.

This is dry material for any reader, but with a little creativity based on some real life scenarios, the need for these products can be dramatized. For example, the benefits of a variable annuity as a savings device versus a term life policy can be illustrated. Customers who clearly understand product offerings are more likely to act than those who are left bewildered. The web certainly lends itself to communicating complex information, but if the audience is older and not technically inclined, then it makes more sense to approach customization in more traditional mediums. Think of brochures with large readable type and face-to-face interaction with a sales force that can connect with individuals and explain things. The medium may even have a comfortable and relaxed environment. Companies can incorporate engaging commercials that lead prospective customers to a web experience that clearly explains individualized products. This should be followed up with a personal phone call to close on a final decision.

Mass customization should be looked on as the revolution it truly is. It needs to be marketed differently than mass marketed products. It also requires not only more thought from every area of a company, but more involvement especially at the highest levels.

For marketing to take full advantage of mass customization, a company has to look at its products and marketing in the same heartbeat. It has to make sure that consumers have a full understanding of exactly what is being offered. The best way for this is with an integrated advertising and branding program that allows them to experience the offering in an engaging way. Burger King did this in the late 70's with the "Have it your way at Burger King now" campaign.

There is absolutely nothing new about mass customization in manufacturing or marketing. What is new is that as technologies evolve and fulfill a great product offering, the experience has been so greatly advanced that marketers need to change the way they interact with consumers. Companies that can manage the change to mass customization and more customer-focused marketing will flourish in this new era. Those continuing to follow the old model of one size fits all will experience severe losses. The parallel is as significant as the one faced 200 years ago with the industrial revolution. The same thing happened in the 1950s with the dawn of the computer age. While trying to get innovation from large financial instutions may seem like a daunting task, sitting by the sidelines and waiting for competitors to take the lead has its own risks.

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