Communications of the ACM

Communications of the ACM

Using Choiceboards to Create Business Value

By Pratyush Bharati, Abhijit Chaudhury
Communications of the ACM, December 2004, Vol. 47 No. 12, Pages 77-81
10.1145/1035134.1035137
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The millennium has witnessed an increasing skepticism about the powers of information technologies (IT) to create business value, leading to sluggish investment in new IT. Generating business value using IT is a challenge in this environment, and the creation of a satisfied and an empowered customer has become increasingly important. Here, we describe an emerging technology called choiceboards that allows customers to design their own product and services. Choiceboards are interactive, online systems that let users custom-design products by choosing from a menu of attributes, components, prices, and delivery options [9].

Choiceboards are an important part of Dell's Web-based direct ordering system. On Dell.com, customers start with a basic configuration defined by a processor model and speed, and then go on to specify the full configuration of a personal computer with their choice of hard drive size, memory, monitors, printers, and multimedia add-ons.

Here, we provide a framework called the choiceboard pyramid that businesses can use to acquire competitive market advantage. The framework relates four factors—company strategy, consumer characteristics, service, and systems—and allows for the definition of two interrelated spaces: the experiential space and the customization space.

The experiential space is the interaction between the consumer, the choiceboard system, and the resultant experience that the consumer encounters. The choiceboard helps answer the question: How do you ensure a positive experience for the customer?

Strategy helps select the customer segment to serve, which in turn helps identify the choiceboard service the customer would most appreciate. Understanding the nature of service space—a space of customization possibilities—helps answer the question: How do you select the appropriate customization for the customer?

Choiceboards are becoming popular in a wide variety of industries including toys, recruitment, finance, wireless technology, travel, apparel, and telecommunication gear. On VermontTeddyBears.com, children have multiple teddy bear options from which they can select add-ons such as shoes, glasses, and color. At travel sites such as Travelocity.com, customers receive information on hotels and rentals cars as well as flights. Sites such as GEFinancialLearning.com and Cisco.com provide training, with the choiceboards giving users feedback as to the consequences of their choices. The Cisco site employs a tool, Product Advisor, which assists users in network design and installation using Cisco products and solutions.

While choiceboard systems such as Dell.com initially only offered product information, some systems have graduated to providing product advice. Point.com uses a choiceboard system to help customers buy service plans and wireless phones based on their budget and service profile. Some choiceboards allow users to have a vicarious experience with the product they have customized. At LandsEnd.com, customers spend a few minutes answering questions on weight, height, and body shape. They can select colors, styles, and pocket options for the apparel they desire. The system then generates a customized image of the apparel. The firm is gearing up its choiceboard system to help customers order custom-made jeans, slacks, shirts, and swimsuits. Similarly, at LaneBryant.com, customers can generate 3D models of themselves using a virtual model technology called 3D@LB, and try on, in a virtual sense, tops, jeans, and business clothing.

For firms, choiceboards offer savings on labor and in transaction processing. Also, the technology is becoming a significant mode for differentiation in the crowded marketplace [9]. For customers, choiceboards have allowed the service model to shift from supplier-provided service to more empowering self-service. Customers can create their own designs and express customized choices without human intervention. Choiceboards allow customers to migrate from being product-takers to product-makers in markets such as the automobile market, where they are offered a fixed set of options (with some variation as to add-ons and features). But with choiceboards, customers can interact with the system to precisely describe what they want so suppliers can deliver the product with minimum delay. They cease to be passive recipients and become active designers.

Choiceboards are essentially augmentative communication systems, where customers and producers interact through provision of product data and choices, requests, comments, and actual orders. They allow a producer to provide product features in a one-to-many interaction, while customers respond in a one-to-one interaction [3]. For businesses, choiceboards are becoming an accurate source of real-time data on consumer preferences and buying patterns. The basis of decision making at Dell, for example, has shifted from speculation to actual knowledge of customers' preferences. Pull-based systems such as Dell's, where customers initiate orders, contrast with push-based systems, where companies guess as to what might appeal to customers, and deliver the merchandise to distributors and retailers months ahead of the actual sale. Such forecasting is an inaccurate process leading to a huge inventory that buyers often refuse to purchase, and results in sales, rebates, dealer incentives, and giveaways. The pull-based system has allowed Dell to integrate its production line with those of its suppliers. The cross-firm integration has shifted away from silos to a system where real-time information is collected and distributed across the process-chain, and services are delivered to customers in the shortest possible time [10].

The choiceboard pyramid framework is related to Karl Albrecht's Service Triangle [1] and Parasuraman's Service Marketing Triangle [2]. As Figure 1 illustrates, it is composed of strategy, customers, service, and systems:

Strategy is a distinct formula for delivering a unique service that helps a firm differentiate itself in the market [6]. It is built around asking such basic business questions as: In what business is the firm engaged in? Am I selling PCs or am I selling business solutions that use computer software and hardware? Am I selling apparel or am I trying to make my customers feel good about themselves in the context of dresses? The differentiation is achieved in the context of some particular customer segment.

Customers. A strategic conception in the context of choiceboards leads to questions such as: Who are my customers? How sophisticated are they in using computerized tools? What are their needs; for example, are they children buying toys using home PCs or are they engineering professionals buying networking gear using a high-speed connection from the office? What makes them choose my business? What makes them go to my competitors? What value elements are important to my customer? The most important step in strategy building is market selection, which first involves dividing the market according to some relevant industry scheme. A market segment is a set of customers who are alike in how they perceive and value a product. The segmentation can be done along several dimensions: demography (income, age, education, tastes, and consumption pattern), geography (location and cultural specificity), lifestyle (career-oriented women versus at-home moms) and product-use patterns.

Service. A strategic conception defines not only a market segment, but also the nature of the service to be delivered. The uniqueness and the differentiation power reside in providing a value element that the particular customer segment values and considers superior to that delivered by other firms. The service delivered by a choiceboard is one of self-service and the benefits are intangible. The experience needs to be positive so the firm stands apart from its competition.

Systems. The system delivers a particular service to a specific customer segment. The system consists of an information processing and manufacturing component that produces customized products. (A discussion of this system is beyond the scope of this article.)

Different element combinations of the pyramid framework define crucial relationships for managers to understand. The experiential space—the space of possibilities of various choiceboard experiences—is driven by strategic choice of market segment to serve and the manner in which the firm intends to differentiate itself. It leads us to the question noted earlier: How do you ensure a positive experience for the customer?

Strategy assists in selecting the market segment to serve, which, in turn, helps to identify the choiceboard service the customer may most appreciate. The service space—a space of customization possibilities—is driven by the market segment and leads to the second question noted earlier: How do you select the appropriate customization for the customer?

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Ensuring a Good Customer Experience

Figure 2a illustrates how customers and systems co-produce the service in choiceboard systems. Executives need to understand how customers experience this self-service at choiceboard sites [8]. Important elements of this experience are its intangible aspects, its real-time aspects, self-service, and the degree of system assistance [8].

Intangible aspects. Physical goods are usually high in search attributes that a customer can determine before buying a product such as color, weight, reliability, and maintainability. In contrast, services are heavy in experience attributes, which can be discerned only during consumption. For the choiceboard experience, issues such as time spent, ease of search, and user interface are relevant. Because services are inherently more difficult to evaluate, customers are often influenced by tangible aspects of the service system. The quality of a Web site and its attributes are likely to be taken as surrogate measures of the service quality. Designers of choiceboard systems should focus on the Web interface, its color, style, ease of navigation, and functionality, since these factors play major roles in how the system is experienced.

Real-time aspects. Services are delivered in real time and customers must be physically present to receive them. The perceived quality of service is realized at the "moment of truth" when the service provider and the customer encounter each other. The encounter may be dispersed over several instances or it may occur at once. Customers are increasingly time-sensitive and time is an important dimension of service evaluations.

With choiceboards, the service production occurs in the presence of the customer, and as a result, errors made by the system cannot be remedied immediately. No service personnel can guide the customer if the system malfunctions or if it is too complicated. Firms employing choiceboards need to deploy a system that is always available, reliable, and easy to use, even for novices.

Self-service. Here, the customers do not directly confront any service provider, but instead operate equipment to access a service. In many cases, self-service provides more convenience. For instance, choiceboards are available around the clock, and the service delivery can be self-paced. But the shift to high-tech can be unpleasant to non-computer-savvy customers, who may require training, continuous guidance, a user-friendly interface, and easy telephone access to employees who can answer questions. A sense of "high-touch" may be provided by the use of music and video snippets, interactive capabilities, and software agents that mimic human behavior.

Degree of system assistance. Choiceboards began with PC suppliers, who provided a well-defined menu of choices. The role of the customer included providing the complete specifications for the products they wanted. However, in many purchase situations the problem is sufficiently complex that a customer is not competent enough to provide these specifications. This is a common occurrence in investment and engineering decision making. The functionality of choiceboards has evolved and with embedded decision support software they can undertake an advisory role. Similarly, for many products and services, customers must experience a product or service in a vicarious or a virtual sense before purchasing it. This is a common situation for fashion items, where choiceboards are now providing 3D modeling tools and software.

In summary, the following guidelines must be considered to ensure a successful customer experience:

• Since the choiceboard experience is intangible and the Web site experience in terms of use and feel often stands as a surrogate for system performance, the system should be transparent. Using the system should require minimal mental processing so customers can fully focus on making their choices.
• Since the system is operating in real time and the user has no access to immediate help in case of malfunction, it should be designed for stability and reliability, with assistance through email and phone provided where possible.
• The system's customer assistance should accord with the type of service ordered. Choiceboards can be purely informational, as when ordering PCs, play an advisory in design situations, or provide a virtual experience for fashion products.

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Choosing the Optimal Customization

Customization, the key goal of choiceboard systems, comes in several generic forms [4] that can be mixed and matched. Customization is influenced by strategy, which determines the nature of market differentiation the firm wants to pursue, and the market segment to be served (Figure 2b). No firm can be all things to all people. Strategy assists in selecting a core customer group, and in identifying and occupying a unique space in the customer's mind. Identifying core customers is critical, as there is a physical limit on the variety of customization a firm can manage.

The core customer group is usually that which provides maximum margins, is most loyal, and provides highest lifetime value. The firm should provide customization according to the preference profile of this core group. Once the core customer group is identified, it is necessary to determine the nature of the customization to be offered. Gilmore and Pine [5] advise four forms of customization: collaborative, adaptive, cosmetic, and transparent.

Collaborative customization. This is relevant to industries such as clothing, household goods such as furniture, and industrial products. For these products, customers experience difficulty describing their ideal trade-offs in terms of comfort, functionality, and price. Providing a representation they can manipulate helps them participate in the design stage, as they play out the possibilities available to them. LandsEnd.com and Millspride.com (kitchen design) use this type of customization.

Adaptive customization. This form of customization creates standardized goods and services that can be tailored and modified by customers to suit their needs. This kind of customization is suitable when the product environment offers an enormous set of possibilities and the existing technology allows customers to customize the product design to suit specific environments. Complex products such as servers and software can be offered with standard design, which customers can then customize. Peapod.com has adopted a similar form of customization that allows customers to create a shopping basket by storing their personal shopping list and then offering suggestions based on this list.

Cosmetic customization. This special form of adaptive customization is relevant when the basic product fulfills the needs of a large customer base, and only the presentation needs to be changed. At VermontTeddyBears.com, children can customize their chosen toy's appearance, and this customization is built over a standard form of the toy.

Transparent customization. This form of customization provides tailored goods and services to customers without them being necessarily aware of it. Web-based customization tools collect data and categorize customers into segments and then present a site in a manner that is transparent to visitors. For example, Amazon.com provides a recommended book list derived from customer buying habits.

In summary, the following are guidelines for selection of appropriate customization:

• Fashion goods and apparel are more appropriate for collaborative customization. Choiceboards for these products should allow 3D modeling to promote vicarious customer experiences.
• Products such as computers, which allow discrete combinations of features, are well suited to adaptive customization. Choiceboards that are informational in nature may have adaptive customization as their basis.
• Cosmetic customization should be considered for toys and furniture. These sites should also have 3D modeling.
• Sites that are visited often and thus allow customer profiles to be developed are suited to transparent customization. Software tools that allow customer segmentation on the basis of purchase and click-through behavior may be considered for adoption. Customized products can be offered to customers without their specifically requesting them.

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Conclusion

Choiceboards provide the foundation for a new business model characterized by a user selecting product and service features from a computerized menu of choices. Firms employing this technology are offering a new value proposition in which the customer is empowered to become a product-maker rather than product-taker. Not only can customers implement their choices, but depending on the application, they can experience how that choice will work. There are multiple ways customers can experience space, choice, and time in the environment of a Web browser [3]. The choiceboard technology empowers customers along two dimensions: experience and customization. There is a gradual evolution toward more experiential choiceboard Web sites and toward more facility for product customization (Figure 3). While VermontTeddyBears.com provides low experience and low customization and Dell.com provides high customization but low customer experience, LandsEnd.com and Cisco.com provide high experience and high product customization. With the increasing power of the technology platform, companies are generally progressing toward the northeast quadrant of the experience-customization matrix (Figure 3). Firms that fail to offer facilities for product experience and customization may find themselves at a competitive disadvantage.

We have described choiceboard systems and their diverse applications, offering a framework managers can use to target the technology to create business value. The framework has four elements: strategy, customer, service, and systems. Taken three factors at a time, the framework generates two important spaces: the experiential space and the customization space. Managers must understand the nature of these two spaces and the various possibilities inherent in them. Such an understanding will help them select the appropriate customization and ensure a positive experience for the customer—two critical factors in creating business value.

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The Digital Library is published by the Association for Computing Machinery. Copyright © 2004 ACM, Inc.

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