Here is an excerpt from an article written by B. Joseph Pine II for the Harvard Business Review blog. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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Let me tell you a secret for creating the customer-focused organization: focus on the customer! That may sound tautological or even trite, but it has real meaning, because most so-called customer-focused organizations do nothing of the kind. Rather, they focus on markets (anonymous agglomerations of customers) rather than on any real, living, breathing individual customer.

Most recognize that there are no truly mass markets any more. But we must go beyond looking at market segments and niches to embracing the truism that every customer is his own market. Every customer deserves to have exactly what he wants at a price he’s willing to pay, and companies must make that happen in a way that makes them money.
Multiple Markets Within

First identified by Stan Davis in his 1987 book Future Perfect, this progression from mass markets through segments and niches to mass-customized markets doesn’t end there. That notion may seem strange. After all, what could possibly be next after recognizing that every customer is his own market?

There is one more step: recognize that every customer is multiple markets. Customers want different offerings at different times under different circumstances.

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When Stan Davis coined the term mass customization over 20 years ago, it truly was an oxymoron. When I wrote a book on it in 1993, it was, as its sub-title attested, “the new frontier in business competition.” Today, it is an imperative in industry after industry to discover and fulfill the multiple markets within each customer.

To make it work, you must modularize your capabilities. Take your offering — whether a physical good, intangible service, or memorable experience — and break it apart into modular elements like LEGO building bricks. Think about it: What can you build with LEGO bricks? Anything you want, thanks to the large number of modules (with different sizes, different shapes, different colors) and the simple and elegant linkage system for snapping them together.

Then you must work with each individual customer, creating a design experience through some sort of design tool that helps customers figure out what they want. For customers don’t always know what they want, and even if they do, they can’t always articulate it. Recognize also that the most frequent mistake mass customizers make is overwhelming their customers with too much choice. Fundamentally customers don’t want choice; they just want exactly what they want.

Provide a design tool so you can figure out what they want at this moment in time, and then get that information back into operations to do something different for that customer. It can be as simple as Dell’s website configurator or as sophisticated as LEGO’s DesignbyMe, where you download a digital designer to create a virtual design of whatever you want, which LEGO analyzes to sell you exactly the bricks to create that design on your family room floor. Recognize that mass customization is not being everything to everybody; rather, it is doing only and exactly what each individual customer wants and needs. The former is a surefire route to higher costs; the latter can actually lower your costs by eliminating waste in your operations and sacrifice in your customers’ lives.

In addition, don’t forget to remember your customers’ preferences. Create a database of customer profiles so that with every interaction you have with them you can lower your customers’ sacrifice — what they have to settle for to buy from you versus what they truly want and need. Again, this is not because they’ll always want the same thing, the same activity, or the same event; rather, it’s to provide a base from which you can more easily ascertain their current preferences and then fulfill them.

Only then can you hope to fulfill the multiple markets within each customer. Be the one company to recognize them as the unique individuals they always were.

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B. Joseph Pine II, co-founder of Strategic Horizons LLP, is the co-author of the forthcoming updated edition of The Experience Economy with James H. Gilmore and Infinite Possibility: Creating Customer Value on the Digital Frontier with Kim C. Korn. He can be found on Twitter at @joepine.