April 01, 2013
I first saw the term “Mass Customization” in The Experience Economy (B. Joseph Pine II and James H. Gilmore, Harvard Business School Press, Boston, 1999). The book explores how businesses can shift what they sell from commodity (sold on lowest price) to experience (charge a premium). Starbucks is a great example. You can sell coffee beans as a commodity. You add roasting, flavoring, other processing, packaging, etc., and the commodity becomes a good and you can charge more for it. You brew it, add a person to serve it in an establishment and it becomes a service and you can charge even more.
Then you have Starbucks, with its sensory environment of warm woods, cozy nooks, wi-fi, music and a friendly barista to make your grande your way. We all know what we’re willing to pay for a cup of coffee today as a result of the Starbucks experience.
I bring up Mass Customization because it’s key to delivering personalized experiences cost effectively, and it’s playing out so successfully in the fast-casual segment (which Mike Sherer explores in "Quick, Comfortable And Customized"). Chipotle, Piada, Roti and so many others have figured out how to deliver a customized and satisfying foodservice experience often for substantially lower operating costs than most full- and quick-service restaurants. They’re able to keep food costs down with a limited menu of foundation ingredients, which they mix and match to order. Labor costs are lower because they need more assemblers than cooks, and no servers at all. Tucking into strip malls and end caps, on campuses and airports, they often have smaller footprints, less equipment and less storage.
As Pine and Gilmore say, “Mass Customization bids return to an axiom frequently ignored in the world of Mass Production: Each customer is unique, and all deserve to have exactly what they want at a price they are willing to pay. Customers once were willing to subsume their uniqueness to benefit from the low prices of standardized offerings, but no longer.”
Subsume uniqueness? Today’s customers? No way, not when a better offer is an app and a map away on the iPhone. Mass-customized, fast-casual is a wonderful genre of foodservice. I’m just glad it’s proving profitable for the folks delivering it.