One of the big promises made with the advent of technology in the world marketplace was that manufacturers gained the ability to offer consumers customized products, thus minimizing expensive inventories and maximizing sales without abandoning the cost structures of mass production.

Manufacturing has adopted the idea, but banks have been slow to, mostly using technology to field mass-produced financial products. This seems counterintuitive; the premise of investing is self-motivated investors doing what they think is best for them, an approach ill-matched to most banks' strategy.

One reason for slow adoption: Mass customization requires a successful data warehouse implementation, an enterprise-wide system to feed it and a variety of slice-and-dice tools to analyze the output-an expensive proposition. Another: An Industrial Age mentality in the boardroom, fixated on a centralized, command-and-control business model.

But the idea is spreading. Banks like Cleveland-based KeyCorp have in the past year been using mass customization to match customers with-and offer them-specific financial products, instead of telling them to order only from the menu.

Using this approach since early 1997, responses to marketing campaigns have doubled and in some cases tripled, says Joann Boylan, an svp at the bank's Key Services Corp. subsidiary. "The global strategy is that we understand who our customers are," she says. "For each customer, we have lined up a set of leads-product sales or relationship sales-that we have targeted for that customer. Those leads are centrally-generated and available to any channel the customer uses to do business with us. (This way), we can make any bank interaction a marketing and sales opportunity."

Key profiles each individual, she says, applying the relationship models that show whether customers use a particular product or service that the bank is looking to market. The system can then score them as to how receptive they would be to it.

Key uses mass customization to offer its consumer and business customers most every product in the company quiver. Key's primary data feeds are the product accounting systems that track customer bank transactions.

Customers are sorted into four categories."We look at age, income, number of employees if they're a business, to get one cut; we also look at them from a profitability perspective and tier them according to higher and lower value households," says Boylan.

The logic for mass customization seems compelling, but stumbling blocks do exist. Circumstances that could crimp its continued spread: ongoing industry consolidation, which bogs down the effort by continually adding new data sources and computer systems, thus changing the fundamentals of the data-gathering-and-analysis system. "The consolidation wave may swamp mass customization for a number of years, just because it's so enormous," says Craig D. Elderkin, a partner at Chicago's Diamond Technology Partners. "If you've got to wait awhile for it to take root, that means someone else will steal the march on them, and banks will find yet another reason for their market share to decline."


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