Fragmented Demand and Customization

This article from Strategy+Business is the opposite end of what I posted about product line management. Rather than segment the market to discourage competition, the article looks at how consumers themselves fragment a market into segments which could limit a company's ability to focus on one segment and thus customize it's product for those consumers.

The striking customer popularity and financial success of Southwest Airlines, Nucor Steel, and Commerce Bank have led many business executives and corporate strategists to proclaim that focus is the only viable approach to fending off competitors and achieving above-average shareholder returns. We disagree. Focus has natural limitations. At some point in a firm's evolution, its focused market — whether premised on geography, product, service, or segment — must inevitably become saturated.

The challenge for companies is not achieving a single point of focus. It is harmonizing multiple points of focus. No company is immune from the new customer mantra: "I want what I want." In industry after industry, customers are demanding ever-higher levels of customization — products and services tailored to their needs. And they're confident that, in an economy characterized by greater and greater information transparency and laden with information technology and operational advances that make customization possible, they stand an excellent chance of getting it — from inside or outside their existing supplier base.

You have to register to read the whole thing, but it is a good article. The key point, in my opinion, is that customization is useless unless you truly understand how it is benefitting your customers. Don't customize because you want to focus, customize because it adds value for your customers.