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From Mass Markets to Mass Customization

Marketing & commerce have reached an inflection point

There was a time long ago when we all saw the same TV commercials, no matter if we were a cat-obsessed old woman or a tech-obsessed teenage boy. Similarly, we all saw the same billboards when driving down the highway, regardless of our final destination, who we were, or any of our other unique characteristics.

While those days are behind us, marketing still isn’t perfect. We still receive Instagram ads for products we certainly have no interest in ever buying. We still have products competing for our attention that are in no way relevant to us, even if marketing has become more “personalized” than it was 50 years ago.

But things are about to radically change.

Whereas in the past, mass production and mass markets dominated how producers of goods connected with their buyers (see: marketing), we are now entering the era of mass customization.

Marketing and commerce are getting personal, and consumer shopping experiences will change for the better as a result.

The Era of Mass Markets

Throughout history, innovation has created growth, which at its fundamental form is just using the same inputs to create more and better outputs.

Growth, for most of history, has taken the form of more stuff. Think food production, the assembly line for automobiles, and most factory-produced commodities.

Decades of mass consumerism in the US enabled businesses to produce more, faster, and for cheaper prices. And for the most part, this worked well! There was never really a concern about the demand side of the equation — if you could produce more, there would be people to buy it.

And in the world of marketing, this is exactly how advertising worked. More ads, bigger ads, and just getting the ads in front of more eyeballs.

Generally speaking, this strategy worked because for as long as we can remember, the human population has increased rapidly. As long as the pool of buyers grew, all you had to do was get more people to know that your product exists, regardless of their personal needs and preferences.

But, as the saying goes, if you try to be everything to everyone, you’re everything to no one.

In the next century, population growth is expected to slow (and even decline), all while it becomes easier for anyone to start a business, creating more competition on the supply side. And yet, the world economy will continue to grow.

Aside from producing more products, brands will grow by getting smarter about what products they produce, who they produce them for, and how they most efficiently reach each individual customers’ preferences. The more hyper-relevant products, experiences, and advertisements are to each customer, the less resources are wasted on individuals who may have no interest in the product or service at all.

As we enter the next era of AI, mass production will go the way of the dodo. Welcome mass customization.

The Shift to Mass Customization

Mass customization combines personalization with the same low unit costs associated with mass production.

Historically speaking, customization was something you paid up for.

Want a custom color for your new sneakers? That will be more expensive.

In the marketing world, the more hyper-targeted the ad, typically the higher the CPMs (and therefore more expensive ads).

Since customization harmed brands’ abilities to realize the benefits of economies of scale, they had to charge more to realize the same margins.

But we’re now entering a world where marketing can get smarter. As brands gain a better understanding of their customers and a more holistic view of their shopping behavior, they can now be proactive, rather than reactive, in offering products, ads, or experiences to them that the customers would uniquely like.

This element of personalization not only makes consumers feel more connected and valued, but it actually reduces waste too. For example, if a brand offers a generic 10% off discount to all customers, they are probably unlikely to redeem that reward because it’s perceived as not very valuable if it’s a common occurrence, and thus most of those discounts go wasted (plus you probably lose some people who leave the program due to spam).

But if you’re selective about what rewards you offer, who you offer them to, and when, the hit rate of redemption of those rewards will be far higher. Higher redemption rates signal aligned incentives.

If my favorite restaurant is offering a discount or special benefit on my favorite items, I’m more likely to take advantage of that offer than if it’s generic and common.

A great example of a brand using personalization for mass customization is Stitch Fix. Rather than sending every customer a box with the same clothing that they think will appeal to the most number of people, they personalize the recommendations based on information they have about their customers. Each customer’s box is unique to them, taking into consideration their specific style and taste.

The best part about effective mass customization is that it creates a self-reinforcing loop, so long as feedback is seamless.

Stitch Fix’s personalization feedback loop compounds over time to create better customer experiences.

If a brand is implementing personalization in their loyalty program, they must reward customers for providing feedback, thus keeping the loop intact and improving the effectiveness of future campaigns.

Brands who can keep customers engaged within those feedback loops can continue to provide more relevant products & rewards, and thus drive more repeat purchases, all while creating a better customer experience. The result is a more effective utilization of marketing dollars.

AI and its Impact on Marketing & Brand Loyalty

Behind the scenes, AI is doing all of the legwork. Whereas in the past anything even remotely at this level would have required a team of data analysts prone to error, AI can sift through vast amounts of customer data faster than a New York minute, and for much cheaper.

It provides the benefits of tailor-made customer experiences and the uncovering of insights previously undiscoverable, without the negatives of increased cost, time, and effort that customization would have historically required.

It’s the modern equivalent of the barista who always remembers how you like your latte.

As we’ve discussed before, the next generation of brand loyalty will no longer just be about spending dollars and getting points. It will be about creating better relationships with customers, providing incentives to gather more and better data on them, and understand what makes them tick.

It will be about curation and making shopping fun — it will be more than just shopping, but a rewarding and playful experience that adds meaning, beyond just being purely a transaction.

Gone are the days of being bombarded with irrelevant ads, where the customer loses by being annoyed, and the brands lose through wasted ad spend.

Instead, brands can implement new technology to provide a finely tuned selection of products and services that align with your interests as a consumer, and it can even create new fun and engaging ways for you to take actions (such as personalized quests) that lead to rewards that you uniquely perceive to be more valuable.

The personalized touch that AI enables will make all of this possible and accessible to any brand.

At Hang, we’re equipping brands to prepare for this future wave of mass customization by building next generation loyalty programs. These programs are designed with the right incentives in mind to create stronger feedback loops, collect better first-party data to better understand customers, and personalize experiences.

The result? The best of both worlds. All the benefits of scale, without the increased costs and resources that were traditionally required for customization.

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