Mass Customization in the Hospitality Industry: Concepts and Applications
Companys shifting from mass production to mass customization
Examples of Mass Customization in Hotels

By
Connie Mok, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, USA
Alan T. Stutts, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, USA
Lillian Wong, Department of Hotel, Catering, and Tourism Management, Hong Kong Vocational Training Council, Hong Kong
Fourth International Conference "Tourism in Southeast Asia & Indo-China:  Development, Marketing and Sustainability" 

June 24-26, 2000 
Mass production as a paradigm of management has dominated the world industrial production since World War II. With shifting demographics and changing consumer tastes and preferences, mass production far homogeneous markets is not enough to keep businesses going. This paper discusses the paradigm shift from mass production to mass customization, its conceptualization and applications in the hospitality industry.

INTRODUCTION

Mass production as a paradigm of management has dominated the world industrial production since World War II, and it has fettered the tremendous growth in American economy in the twentieth century. With shifting demographics and changing consumer tastes and preferences, mass production for homogeneous markets is not enough to keep businesses going. In the present business world, organizations are facing tremendous forces to change to stay ahead of competitors. The companies that responded properly and quickly to changes are now beginning to master a new frontier in business competition. These companies found that not only can higher quality yield lower costs, but so can greater variety. In 1993, Pine stated that:
 

"Customers can no longer be lumped together in a huge homogeneous market, but are individuals whose individual wants and needs can be ascertained and fulfilled. Reducing life-cycles and fragmenting demand can yield powerful advantages. Leading companies have created processes for low-cost, volume production of great  variety,  and  even  for  individually customized goods and services. They have discovered  the  new  frontier  in  business competition: Mass Customization." (p.6-7)

Mass customization is arising in direct response to the turbulence that has splintered the mass market. One sharp-eyed observer who spotted the coming of mass customization long ago is perhaps United States' best known futurist, Alvin Toffler (INC. 1998). As far back as 1970, Toffler wrote in Future Shock about "destandarized" goods and services that he forecast the United States would produce in "great variety." Speaking recently to INC by telephone, Toffler said that mass customization will proceed with a kind of gravitational force because, as American become more affluent, they have wanted greater individuality. People now can afford it partly because technology makes it cheaper.  Michael Cox, chief economist at the Federal Reserve Bank of Dallas, in concurrence with Toffler lamented that "If you don't customize, you're going to lose business in today's marketplace." (Wall Street Journal, April 29, 1999, pp. A1)

Nowadays, virtually all companies recognize the need to be customer driven by providing superior service to satisfy customers' needs.  But as customers and their needs grow increasing diverse, unnecessary cost and complexity are inevitably added to operations. Companies around the world have embraced mass customization in an attempt to avoid those pitfalls of trying to meet every customer's need (Gilmore and Pine, 1997; Martin, 1997; Schonfeld, 1998; Knowles, 1997). Readily available  information  technology  and  flexible processes permit them to customize goods or services for individual customers in high volumes and at a relatively low cost (Gilmore and Pine, 1997).

Little has been published in the hospitality and tourism literature about this important production concept. Therefore, the purpose of this article is to discuss the conceptual underpinnings of mass customization based on literature review and to examine the applications of mass customization in the hospitality industry so as to stimulate future discussions and research.

CONCEPTS OF MASS CUSTOMIZATION

Definitions

Mass customization is neither a simple strategy to undertake organizationally and operationally, nor is it a simple concept to comprehend. Hart (1995) defined mass customization by using two distinct definitions:

  1. The visionary definition: The ability to provide customers with anything they want profitably, any time they want it, anywhere they want it, any way they want it.
  1. The practical definition: The use of flexible processes and organizational structures to produce varied and often individually customized products and services at the low cost of a standardized, mass production system.
According to Hart (1995), the goal in the first definition will rarely be achieved by an organization. It was considered a transcendent, absolute idea that exists solely as an ideal. The goal in the second definition is not the "anything-at-any-time" promised by the visionary definition. It is "to ascertain, from the customer's perspective, the range within which a given product or service can be meaningfully customized (i.e. differentiated) for that customer, and then to facilitate the customer's choice of options from within that range." He lamented that the concept of producing tailor-made or partially tailor-made goods or services according to customer desire, with very short cycle times and mass production efficiencies, is a more realizable goal than that offered by the visionary definition.

In essence, mass customization is a hybrid technique by which a company churns out products in typical assembly-line fashion yet can add unique features  to individual  orders  (Martin, 1997; Falkenberg, 1998).  This requires  a  flexible manufacturing system that anticipates a wide range of options. However, due to the vast differences in customer preferences, mass customization, too, can produce  unnecessary cost and complexity. Therefore, it is crucial that managers must examine thoroughly what kind of customization their customers would value before they adopt this new strategy.

DECISION FACTORS - AN ANALYTICAL FRAMEWORK

Should companies pursue a mass customization strategy? Hart (1995) further identified four key decision factors:
 

1. Customer sensitivity. The first question companies need to ask themselves is: Do your customers  care  whether  you  offer  more customization? If the answer is no, the mass customization potential is limited.
2. Process amenability. This is a multifaceted area. The first obvious question is: Does your process technology, which exists in your area allow you to customize your product or service to individual customers? If it does, the next question is how extensive an overhaul is required to incorporate this technology into your existing process and how much investment will be required? Another part of process amenability is marketing. Since the goal of mass customization is products or services tailored to individual customers, an important question for companies to ask is: Does the marketing department have access to the level of detail regarding customer needs and the capacity to analyze such information? A third consideration is design. Is your company capable of translating custom needs into actual specifications? The last consideration under this factor is production and distribution. Partly depending on the form and nature of product or service, the flexibility of the production system to handle mass customization is a critical point here.
3. Competitive environment. The major question here is: Are there competitive forces that would enhance or detract from the advantage your company would gain from implementing mass customization? In other words, would you be the first in your market with a mass-customized product? How long would it take for competitors to react? And how will your competitors' customers react?
4. Organizational readiness. The last decision factor requires an honest assessment of your company's culture and resources.  Is your company able and ready to capitalize on the opportunity inherent in mass customization? Organizational  change  requires enlightened leadership,  open-minded management,  and financial resources. Hence, mass customization strategy is unique to the company developing and implementing it. There is no "cookie-cutter" approach to creating such a strategy. Mass customization strategy that works for one company might not work for another company.

FOUR APPROACHES TO MASS CUSTOMIZATION

In 1997, Gilmore and Pine identified four distinct approaches  to  customization,  which  are collaborative, adaptive, cosmetic, and transparent. They advocated that when designing or redesigning a product, process, or business unit, managers should choose an approach or a mix of some or all of the four approaches to serve their own particular set of customers.
 

1. Collaborative customization. This approach follows three steps: first to conduct a dialogue with individual customers to help them articulate their needs; second, to identify the precise offering that fulfills those needs; and third, to make customized products for them. Collaborative customization is most appropriate for businesses whose customers cannot easily articulate what they want and grow frustrated when forced to select from a plethora of options.
2. Adaptive customization.  Adaptive customizers offer one  standard,  but customizable, product that is designed so that users can alter it themselves. This approach is appropriate for businesses whose customers want the product to perform in different ways on different occasions, and available technology makes it possible for them to customize the product easily on their own.
3. Cosmetic customization. This approach is appropriate when customers use a product the same way and differ only in how they want it presented. in other words, the standard offering is packaged specially for each customer.
4. Transparent customization. This approach is appropriate when customers' needs are predictable or can easily be deduced, and especially when customers do not want to state their  needs  repeatedly.  Offerings  were customized within a standard package for individual customers.

To sum up, collaborative customizers change the product itself in addition to changing some aspect of the presentation while a cosmetic customizer changes only the presentation of the product. A transparent  customizer  uses  a  standard representation to mask the customization of the product and finally adaptive customizers change neither the product nor the representation of the product but they provide the customer with the ability to change both the product's function and/or its presentation to meet their needs.

PIONEERS OF MASS CUSTOMIZATION

For the purpose of this article, it is important to look beyond the hospitality industry for ways to mass customize products and services in order to learn from other industries. Based on literature review, the following section discusses how some companies in the hospitality industry, as well as other industries mass customized their products and services. First, let's examine a few specific companies and see how they shifted from mass production to mass customization. They are summarized in Table I.

Fast-Food

Now, let's look more closely into how the hospitality industry mass customized products and services.  Much  has  been  said  about  the standardizing forces of McDonaldization in the wider society (Love, 1986; Royle, 1995; Taylor and Lyon, 1995; Ritzer, 1993; Lyon, Taylor & Smith, 1994). Fast-food restaurants and other McDonaldized systems are mass production systems, which were built upon the belief that in the world of mass production,  consumers  accept  homogeneous products. Their acceptance facilitates market growth and the reduction of prices through economies of scale, which in turn leads to a greater price gap between mass-produced  goods and  that  of customized goods. As with other mass producers, the fast-food industry has reached the limited of the old paradigm. In 1995, Taylor and Lyon reported mass  customization  as  an  alternative  to McDonaldization. They recognized that fast-food companies, including McDonald's, have experienced the same sources of discontinuity as other mass producers, creating extreme pressure for change. Burger King was the first one to embrace the principles of mass customization - "Have it your way!" and "Sometimes you've gotta break the rules!" The focus then was on burgers and fries but later shifts testified that this was only the start. Using McDonald's as an example, it can be seen that standardization is still a characteristic of its operations. However, its menu has been expanded
not only to suit local tastes and preferences but also to offer more variety. Pizza, fajitas, breakfast burritos, submarine sandwiches, spaghetti and meatballs, carrot and celery sticks were included in some menus. Internationally, for McDonald's in France the menu is written in three to five different languages, usually, French,  German, Italian, Belgian, and Japanese. Some menu items, which are offered in France, are not available in the United States. These items are bagels, red seasoned potato wedges with dipping sauce, cakes and pastries, scones and croissants. The drinks offered are also different. Dr. Pepper and root beer are not offered while Orangina, an orange flavored carbonated drink, beer and wine are available for purchase. For the breakfast menu, McDonald's in France also offers a fruit salad and scones. Salad and dessert choices are also varied, as the chef salad is served with salmon and shrimp, and eclairs, brownies, muffins, and beignets are included in the dessert menu. Pork is not used in Muslim nations. Big Macs in India are prepared with mutton. Soups are offered in Hong Kong operations. Beverage cup sizes are much smaller in Asian countries' McDonald's, and there is no refill. One may argue that this is product differentiation, but why do we differentiate product? To suit customers' needs! For McDonald's to have radically expanded it output variety, it underwent a paradigm shift characterized by shorter development and production cycles, flexibility, autonomy, process innovations and the adoption of a true customer focus (Crawford-Welch, 1994; Pine, 1993).
 

Table 1. Examples of Paradigm Shift
Companies
Mass customization approach
Dell Computer Dell Computer uses the collaborative approach and assembles computers to customer's exact specifications. In 1998, Dell sells around 6 million US dollars worth of built-to-order PCs a day. Dell passed IBM in early 1998 to claim the second spot in PC market share.
British Airways The London-based airline plans to deliver top-notch customer service to its first-class frequent flyers through streamlining its supply-chain process. Understanding passengers' needs beforehand makes it possible for BA to deliver individualized items for passengers on each flight just before takeoff.
Ritz-Carlton Ritz-Carlton uses software to personalize guests' experience by linking to database filled with quirks and preferences of half a million guests. Any bellhop or desk clerk can find out whether a guest is allergic to feathers, their favorite newspaper, or whether they like extra towels. The company stores guest information in a database and uses it to tailor the service to each guest on his/her next visit. This is a way to transparently customize for those customers who do not want to be bothered with direct collaboration.
Planters Company Planters chose cosmetic customization when it retooled its old plant in Suffolk, Virginia. As an example, Wal-Mart wanted to sell peanuts and mixed nuts in larger quantities and 7-Eleven did. In the past, Planters could produce only long batches of small, medium, and large cans giving customers only these few standard packages which may not meet their requirements. Today, Planters can quickly switch between sizes, labels, and shipping containers, responding to each retailer's desires on an order-to-order basis.
Regent, Hong Kong In the fine dining restaurant, the hotel cosmetically customizes paper napkins and matchbox by printing their customers' name on them. Although personalizing a service in this way is cosmetic, it is of value to many customers.
Lutron Electronics Lutron's customers can adapt its lighting systems to maximize productivity at the office or to create appropriate moods at home without having to experiment with multiple switches each time they desire a new effect. The customer can quickly achieve the desired effect by punching in the programmed settings.
ChemStation ChemStation produces industrial soap after independently analyzing each customer's needs. It formulates the right mixture of soap for each customer, which goes into a standard tank. The company learns each customer's usage pattern and delivers more soap before the customer has to ask. This approach eliminates the need for reordering. This is the transparent approach since the customer does not know which soap formulation they have or how much is in inventory but they know the soap works and is always there when they need it.

Lodging

It was pointed out that the hospitality industry has generally preferred to keep wages low, thus avoiding the need for technological innovation, particularly in the actual delivery of its services (McIntosh  and  Goeltiner,  1995).  Although technology has been used extensively in a supporting role to enhance performance and effectiveness, (e.g., computer reservation system, air control technology, accounting system) there has been a great reluctance to replace human service providers with technologically driven alternatives (Mcintosh and Goeldher, 1995). However, in recent years, some "tinkering" of mass customization has occurred in selected areas in the lodging industry. Some examples are summarized in Table 2. As seen from these examples, mass customization is made possible by technological applications.
 

Table 2. Some Examples of Mass Customization in Hotels
Area
Example
Rooms Auto-Wake
Front Office Flexible Self check-in, Self-check Folio Review, Self check-out
In-room Entertainment Video (PPV, On-demand), Video games/Casino Games, Internet Connectivity
In-room Vending Honor Bar, Micro-Based Dispensing
Guest Information Systems In-Room Information Links
Source:The Hotel Room of the Future: Putting Mass Customization Concepts into Practice

Could you ever imagine selling guest rooms that customers could personally customize, down to their favorite wall art, prior to check-in? The hotel guest room of the future project, sponsored by Conrad N. Hilton College at the University of Houston, is developing ideas to assist hoteliers' globally to mass customize the hotel product to better meet individual  customer's  need  by  mastering technological change. The premise of this project is that a hotel guest room should be divided into zones that include work,  entertainment and relaxation/rest; technology can then be introduced into each zone that enhances  the  guest's satisfaction. The project believes that technologies must be considered which impact upon: ergonomics, temperature, light, sound, exercise and diet; and variation of such technology that are responsive to the guest's principle purpose for using the room, work or leisure or a combination of both; and also consider the physiological,  psychological and sociological needs of the guests.

There have been ample discussions about the aging global population and its implications for future marketing strategies and service provisions. This new demographic trend suggests new features in the hotel room that caters specifically to the needs and preferences of the senior travelers. These new features, made possible by technology include:

  • ergonomically-designed furniture that facilitates standing from a seated position with the aid of a weight/height sensing cushion or provides support to a tired back through sensors that adjust to the most comforting back support; 
  • blankets that utilize the same fiber technology as found on the space shuttles heat shield and thus will respond to body temperature retaining or expelling heat to maintain a comfortable temperature and more restful night's sleep; 
  • alarm clocks that awaken the guest to increasing light levels that begin with the light daybreak to a full daylight, for those whose hearing may riot be as sharp as it was in the past.
The applications of virtual reality are also a unique feature of the future hotel room. The project is examining the applications of video walls that would replace or perhaps supplement windows in guest rooms, allowing the room's occupant to select the scenery that would be most complimentary to her/his activity in the room. For the business traveler in the work zone it might be sights and sounds that are most stimulating to the busy executive's  productivity,  transferring  to  the entertainment zone with sights and sounds from his/her favorite sporting event or concert; and finally to the relaxation/rest zone, where the stress business traveler can unwind with the sight/sounds of family or a favorite vacation spot.

With all that is said about high-tech, the bottom line is that guests want a room that is comfortable and adaptable to their particular needs. Many guests' expectations are not particularly high-tech. All guests want a good night's sleep which may mean paying attention to the soundness of the mattress being provided: what type of mattress does you guest prefer? According to the Westin sleep study conducted for the chain by a New York-based research firm, the main criticism by 27% of respondents was that hotel mattresses are too soft. For another 21 percent, the number one complaint was that mattresses are too hard. There are two concepts - one utilizing springs and the other air -are being studied that will allow guests to adjust the firmness of each side of a bed. Other than the mattresses, guest of the future hotel room will be provided an assortment of pillows ranging from soft to firm and some or all hypoallergenic.

Industries, which are less dependent on the human interactions have adopted laborsaving technology (Pine, 1993).  As a result, these industries have been able to improve wage levels and enhance career opportunities for employees while keeping costs under control. For example, banks replace human tellers with automatic teller machines, which not only save labor costs but also offer 24-hour service year round. This kind of convenience provided to their customers can be considered a great customization (i.e., anytime they want it).

CONCLUSION

History has shown that the business world is in a continuous state of improvement as it strives to become more effective and competitive. The mass production system has dominated the industrial world for many years and it is now moving on to mass customization in recent years of increasing market fragmentation and customer demand. Should the hospitality industry adopt more customization? If the answer is yes, then how does it go about achieving it? By asking these questions, the authors wish to stimulate thoughts and discussions among CEOs and senior executives in the hospitality industry on the direction of the future development of the industry. A full discussion of why and how to mass-customize the hospitality industry is beyond the scope of this article. Besides, it is impossible to provide a standard formula for mass customization for the whole industry. As pointed out above, effective mass customization is organization specific. The understanding of the concept  of mass customization  itself is a prerequisite for mass customization. A successful mass customization strategy of one company, most probably, will not work for another company. Mass customization must be customized to a particular organization's customers, production capabilities, competitive situation, and the new technology available to them.  The authors believe that organizations,  which  are  well  prepared  for customization, will be rewarded in customer loyalty, market leadership, productivity, and profitability.

REFERENCES

Crawford-Welch, S. (1994). Product development in the hospitality industry, in Teare, R., Mazanec, J.A., Crawford-Welch, S., and Calver, S. (Eds.), Marketing in Hosptality and Tourism: A Consumer Focus, London: Cassell.

Falkenberg, L. (1998). Virtually made to order. Money, Vol.1 No.2, pp.60-61.

Gilmore, J.H., and Pine, J. 11(1997). The four faces of mass customization. Harvard Business Review, Vol.75, No.1, pp.91-101.

Hart, C.H.L (1995). Mass customization: conceptual underpinnings,   opportunities and  limits. International Journal of Service  Industry Management, Vol.6 No.2, pp.36-45.

INC (1998). Toffler: Change-or else. INC Vol.20 No. 6, pp.23.

Knowles, A. (1997). Get the complete picture. Datamation, Vol.43 No.10, pp.74-79.

Love, J. (1986). McDonald's: Behind the Arches, London: Bantam.

Lyon, P., Taylor, S., and Smith, S. (1994). McDonaldization: A reply to Ritzer's thesis. International Journal of Hospitalitv Management, Vol.13 No.2, pp.95-99.

Martin, J. (1997). Give them exactly what they want. Fortune, Vol.136 No.9, pp.283-285.

McIntosh, R.W., Goeldner, C.R., and Ritchie, J.R.(1995). Tourism: Principles, Practices, Philosophies. New York: John Wiley and Sons, pp.479-480.

Pine, J.B. (1993). Mass Customization, Boston: Harvard Business School Press.

Ritzer, G. (1993). The McDonaldization of Society An Investigation into the Changing Character of Contemporary Social Life, Newbury Park, CA: Pine
Forge Press.

Royle, T. (1995). Corporate versus societal culture: a comparative study of McDonald's in Europe. International Journal of Contemporary Hospitality Management, Vol.7 No.2/3, pp.52-56.

Schonfeld, R. (1998). The customized, digitized, have-it-your-way economy. Fortune, Vol.138 No.6, pp.114-124.

Taylor, S. and Lyon, P. (1995). Paradigm lost: the rise and fall of McDonaldization. International Journal of Contemoorary Hospitality Management, Vol.7 No.2/3, pp.64-68.
 

Contact:
Professor Kaye Chon
Chair Professor & Head
Dept of Hotel and Tourism Management
The Hong Kong Polytechnic University
Hung Hom, Kowloon, Hong Kong
Telephone: +852-2766-6382
Fax: +852-2362-6422
Email: hmkchon@polyu.edu.hk



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