So: Is this the same, something fundamentally different, or something in between?
The starting point for mass customization and personalization fundamentally is the same: To turn customers’ heterogeneous needs into a competitive advantage. Or, as Bas Possen, a Dutch mass customization pioneer states his as the vision of his company (customax.com): "In general, too little use is made of the advantage that all people are different."
Bruce Kasanoff provided a good definition of personalization during his keynote at the MCPC 2009 conference in Helsinki:
"After years of trying to simplify [the definition of] personalization, I finally got it down to two words: Personal = Smarter. The more you customize, the smarter you get. The smarter you get, the more competitive you become. It really is that simple. Doing it, of course, takes a lot of work."According to Bruce's definition, personalization is using technology to accommodate the differences between people. Done right, it's a win/win strategy for providing a better outcome for both the service provider and the individuals involved.
For example, if a doctor gives a patient a test to determine which treatment will work best for her before the treatment starts, that's personalization. Likewise, if a company gives their clients the option to tell their service center when and how to contact them, that's also personalization.
Mass customization then could be seen as a process for implementing personalization.
Stan Davis, who initially coined the term in 1987, refers to mass customization when
“the same large number of customers can be reached as in mass markets of the industrial economy, and simultaneously […] be treated individually as in the customized markets of preindustrial economies”.
B. Jospeh Pine II then defined mass customization in his 1993 seminal book as
“providing tremendous variety and individual customization, at prices comparable to standard goods and services” to enable the production of products and service “with enough variety and customization that nearly everyone finds exactly what they want”.
A pragmatic definition was introduced by Mitchell Tseng and Roger Jiao (2001). According to them, mass customization corresponds to
Often, the mass customization definition is supplemented by the proposition that the individualized goods do not carry the price premiums associated traditionally with (craft) customization. However, we found that consumers are frequently be willing to pay a price premium for customization that reflects its increment of utility. Hence, I today opt for not including a price proposition into the definition of mass customization.
“the technologies and systems to deliver goods and services that meet individual customers’ needs with near mass production efficiency.”
Also, mass customization does not demand lot sizes of one. Custom products can be produced in larger quantities for an individual customer. This frequently happens in industrial market, when, for example, a supplier provides a custom component that is integrated in a product of the vendor.
Indeed, one of the biggest lessons from my past research is that there is no one best way to mass customize. Take, for example, the widespread belief that mass customization entails building products to order -- a belief that also I followed for a long time. But today I agree that this is not necessarily true.
Customers are looking for products that fit their needs, and they do not necessarily care whether those offerings are physically built to their order or whether those items come from a warehouse – just as long as their needs are fulfilled at a reasonable price.
Consider, for example, the success of style-matching services like MyVirtualModel, Zafu, or Intellifit: These services provide consumers with a customized assortment fitting exactly their needs – created out of a set of standard apparel items. Or take the example of Pandora Radio. Every user of this internet radio station will praise its ability to customize a really individual stream of music, different for any particular user. Pandora creates a custom music delivery system by matching standard songs to a user's preferences.
So: Are these examples personalization or mass customization? Both? In some respects, personalization is a goal and mass customization is the way to accomplish that goal. Mass customization means to create processes and capabilities for aligning an organization with its customers’ needs.* The resulting offering may be called a "personalized" offering from the perspective of the customer.But we need to be careful about defining or debating semantics. Both personalization and mass customization push a company towards being more responsive to the marketplace and thus being more nimble. Both result in a firm that can react faster and more effectively to volatility. Both enable a company to build defendable competitive advantages, because both require a firm to track, understand and accommodate the needs of its customers.
In the end, it is not the term, but the result and value created by applying these concepts. The core point I want to make here is that mass customization should not be seen as a dedicated business model or a specific form of competitive strategy.
*Note: In our last year's paper in the MIT SMR, Fabrizio Salvador, Martin de Holan and I introduced three fundamental capabilities which characterize mass customization: The ability of an organization to identify the product or service attributes along which customer needs diverge (solution space definition), the ability to reuse or recombine existing organizational and value-chain resources (robust process design), and the ability to help customers identify or build solutions to their own needs (choice navigation).