In a recent article, I wrote about the challenge of commoditization of our product lines and how banks can respond with value-added product packages, mass customization, and service differentiation.

Other industries have been subjected to similar pressure and have undergone major transformations, moving from an assembly line, mass production mode to mass customization mode. Consider these examples (as outlined in Joe Pine's book "Mass Customization"):

*The automotive industry was characterized by highly standardized products, commodities distinguished only by price. Today, the industry exhibits a high degree of innovation in both product and process. In some Ford models, you could choose interior acoustic characteristics similar to those of a small jazz club, a concert hall, or other venues. Mercedes Benz can give you 13 controls for adjusting their cars' environment to your personal taste.

*From a single-product, single-platform mode, the information technology industry changed to a proliferation of products in terms of size and features, ranging from mainframes to client-server architecture with ever- decreasing life cycles.

*Phone service moved from "one size fits all" to more than 150 features to permit a completely customized phone service in each customer's home, mixing features such as call waiting, call forwarding, caller identification, voice mailboxes, etc.

*The days of "one shampoo fits all hair" are over. We now have shampoos for all kinds of hair, different pH balances, with or without conditioner, etc. We have cough medicine for different types of coughs, and we have more than a dozen kinds (not sizes, but kinds) of diapers.

*Even in the breakfast cereal business, product life cycles have become much shorter, featuring short-lived niche cereals such as Ghostbusters and Batman. In addition, variations on a theme are abundant, as in the Cheerios or Chex lines.

*Remember the days when you could not order a McDonald's hamburger without the pickle? Today, you can. The McDonald's product line is customized and regionalized. Operators around the system offer sub sandwiches, oatmeal, soup, cappuccino - whatever the environment requires to meet the customer's needs. McDonald's has undergone a paradigm shift from a fully and rigidly standardized product line to one that's mass- customized.

The banking industry has a lot to learn from these changes. We are characterized by fragmented markets and a history of providing standardized services.

Our product line has become increasingly commoditized, and with that development, profitability has declined. We need to move to being an industry driven by information about both customer and product profitability.

We need to be able to identify all the services used by a potential customer, the profitability associated with those services, and the cross- selling opportunities with the very best customers.

The banking industry needs to follow the American Express example, mining a data base repeatedly to tailor products and services to each individual. By so doing, it would decommoditize its product line, creating added value for its customers and widening margins for itself.

One example of such an effort is the mortgage product offerings at Roosevelt Bank. No product is more commoditized than the mortgage. It is offered through brokers, banks, and PC networks; underwritten in many cases to secondary market standards that are consistent and inflexible; and differentiated by price alone.

At Roosevelt, we moved away from the plain-vanilla mortgage. There is no value except for price in the nondifferentiated product. Instead, we built a cafeteria product plan for customers, which offers them different product features at different prices.

Roosevelt's mortgage product is but one example of how banks can transform themselves from fully standardized production units to cafeteria- style, mass-customization distribution outlets. It is essential that banks make this transformation if they want margins to grow in the era of ever- compressing spreads for fully commoditized products. Ms. Bird is chief operating officer of Roosevelt Financial Group, St. Louis.

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