Transforming mass customisation from a marketing instrument to a sustainable model at Adidas

Abstract

miadidas (my individual Adidas) is the mass customisation offering of Adidas AG, a leading international sporting goods corporation. Introduced in 2000, the programme allows customers to co-design a custom athletic shoe according to fit (size and width), performance criteria (insole, cushioning, outsole characteristics), and style (colour combinations, custom embroidery), thus providing a service that had previously only been available to top athletes. The case describes the evolution of mass customisation at Adidas and analyses how the company can efficiently integrate the miadidas process into its existing inline (standard) production and distribution processes.

Full text

Int. J. Mass Customisation, Vol. 1, No. 4, 2006 46
3
Copyright © 2006 Inderscience Enterprises Ltd.
Transforming mass customisation from a marketing
instrument to a sustainable business model at Adidas
Klaus Moser* and Melanie Müller
Technische Universität München, TUM Business School
Department for Information, Organisation and Management (IOM)
Leopoldstraße 139, 80804 München, Germany
E-mail: klaus@moser-mc.com
E-mail: melanie.mueller@wi.tum.de
*Corresponding author
Frank T. Piller
MIT Sloan School of Management
50 Memorial Drive, Room E52-513
Cambridge, MA 02139, USA
E-mail: piller@mit.edu
Abstract: miadidas (my individual Adidas) is the mass customisation offering
of Adidas AG, a leading international sporting goods corporation. Introduced in
2000, the programme allows customers to co-design a custom athletic shoe
according to fit (size and width), performance criteria (insole, cushioning,
outsole characteristics), and style (colour combinations, custom embroidery),
thus providing a service that had previously only been available to top athletes.
The case describes the evolution of mass customisation at Adidas and analyses
how the company can efficiently integrate the miadidas process into its existing
inline (standard) production and distribution processes.
Keywords: mass customisation; case study; athletic shoe industry; synergies
connecting mass customisation and mass production; business model.
Reference to this paper should be made as follows: Moser, K., Müller, M. and
Piller, F.T. (2006) ‘Transforming mass customisation from a marketing
instrument to a sustainable business model at Adidas’, Int. J. Mass
Customisation, Vol. 1, No. 4, pp.463–479.
Biographical notes: Klaus Moser is a Consultant of the Boston Consulting
Group (BCG) and a researcher at the TUM Research Centre for Mass
Customization and Customer Integration at the Technische Universitaet
Muenchen. Moser was the founder and coordinator of the first German mass
customisation industry research group, which worked in the area of critical
success factors for mass customisation. Moser’s research focus lies in the field
of mass customisation competencies and the classification of different mass
customisation strategies.
Frank T. Piller is an Associate Professor of Management at the TUM Business
School of the Technische Universitaet Muenchen. He is currently occupied as a
visiting scholar to the MIT Sloan School of Management at the Massachusetts
Institute of Technology in Cambridge, MA. Mr. Piller’s most recent research
focuses on value co-creation between businesses and customers/users, and the

464 K. Moser, M. Müller and F.T. Piller
interface between innovation management, operations management, and
marketing. He has published extensively on mass customisation and has
directed several collaborative research projects in this area.
Melanie Müller is a Research Assistant at the TUM Research Centre
for Mass Customization and Customer Integration at the Technische
Universitaet Muenchen. She is a project leader in the TUM Research Group for
Customer-Driven Value Creation. Her research focuses on topics in the field of
customer interaction and integration within mass customisation, as well as on
open innovation. Müller is an expert in consumer behaviour for mass
customisation and is the lead researcher of various mass customisation research
studies. She lectures on mass customisation and open innovation, as well as
organisation and strategy at TUM Business School.
1 Introduction: mass customisation in the athletic shoe industry
1.1 Market situation and industry structure
The international athletic shoe industry is a rather segmented industry with numerous
brands and manufacturers. In 2004, approximately 710 million pairs of athletic shoes
were produced and sold worldwide. The industry consists of three major players on the
supply side, brand owners Original Equipment Manufacturers (OEMs), manufacturers
(suppliers), and retailers:
1 Brand owners – brand owners (OEMs) focus on spotting new trends, adapting them
to innovative footwear designs, and targeting consumers with adequate products.
Four major brands share about two-thirds of the market. Nike is the market leader
with a worldwide market share of 33.3% (in 2004), followed by Adidas (15.5),
Reebok (9.6), and Puma (6.9). Reebok was acquired by Adidas in summer 2005, but
is planned to continue operating as a separate brand company. The large brands no
longer manufacture by themselves, but rely on outsourcing to large manufacturing
companies in Southeast Asia. Nevertheless, brand owners are in control of the entire
value chain, as the brand name is a product’s most important asset. This makes them
responsible for overall product quality, product innovation, development, service
level, and brand image. Sound prognosis skills, lean contract manufacturing, and
good supply chain management along with a strong brand management are seen as
critical success factors of OEMs.
2 Suppliers – manufacturing of athletic shoes still relies on human labour to a large
extent, even in modern manufacturing settings. In consequence, manufacturing
facilities are almost exclusively located in low-wage Asian countries. Facilities are
located closely to third-tier suppliers of fabrics and synthetics, which also take
advantage of low-wage levels. Manufacturers utilise mass production systems with
standardised processes and large lot sizes; their core competence is high quantity,
low-cost production. The final products are shipped as containerised freight to the
target markets. Most of the manufacturers produce footwear for several of the big
brand owners – even if they are competitors. Manufacturers also play an important

Transforming mass customisation from a marketing instrument 46
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role in the final stages of a new shoe model’s design process. Once a new design has
been developed and approved by the brand, manufacturers are initially responsible
for adapting it to a manufacturing specification and finalising the product layout.
3 Retailers – up to now, most customers only purchase athletic shoes via retail outlets.
Brand owners support retail activities with advertisement and point-of-purchase
promotions like displays and demonstrations. There are different types of retailers:
specialised athletic shoe shops (mostly in the running segment), general sportswear
outfitters, and conventional footwear retailers (which also carry shoes other than
athletic footwear), department stores, and discounters. For all types of retailers, top
athletic shoe brands act as a pull factor and represent a ‘must have’ in their
assortment mix. In order to enhance their brand image, leading brands like Adidas,
Nike, or Puma have started to open company-owned flagship stores over the past few
years. For the first time ever, this allows them engage in close, direct contact with
their end-consumers.
1.2 Competitive challenges
After some years of decline and decreasing sales volumes (which did, however, not affect
sales figures in dollar terms due to increasing average prices), 2004 was a promising year
for the international athletic shoe industry. US industry revenue rose 4% as a result of
increasing prices and larger sales volumes. Despite a weak market in Europe, a positive
development in Latin America and Asia confirmed an overall optimistic trend. Still, all
major athletic shoe brands are faced with similar competitive challenges.
First, traditional borders between market segments have been blurred. Starting in the
late 1980s, sports and fashion began to merge. Athletic shoes, which used to be shoes just
for athletes, advanced to trendy footwear for every occasion. Simultaneously, traditional
shoe products adopted more and more athletic aspects, and big fashion brands penetrated
the athletic shoes market. ‘Street fashion’ evolved as a new market segment in the
footwear sector with products depending on an appealing design and a strong brand
image. This development provided a new competitive position for traditional athletic
shoe brands such as Adidas, Nike, or Puma.
Second, technological innovation on the product level is still of highest importance. A
major driver in this regard is the development of jogging as a common sport. Sales in this
market segment have increased more than 50% since 2000. During the same period,
the industry was able to increase the retail price level in about the same range,
making running shoes one of the largest sources of revenue today. Consumers have been
willing to pay this premium due to a steady stream of innovations on the technological
level in this segment, e.g., better outsoles, innovative cushioning systems, or new
fixing mechanisms.
Third, all major brands face the challenge of a rapidly growing product variety
and assortment complexity. Customers of athletic shoes can roughly be classified
into professional athletes, recreational sportsmen, fashion-oriented consumers,
convenience-oriented consumers, and bargain hunters. Each customer type prefers certain
styles and retail outlets. Professional athletes focus on the fit and functional aspects of
their shoes, which are sometimes even hand-drafted for them by the manufacturer.
Recreational sportsmen are the conventional target group of specialised retail outlets.
Their focus lies on the latest technology, e.g., cushioning systems or material. They are

466 K. Moser, M. Müller and F.T. Piller
innovation-aware and often show a high willingness-to-pay. Fashion-orientated
consumers, on the other hand, are very much driven by peer recognition and seek the
latest designs, which are often available at fashion boutiques or high-end department
stores instead of at traditional athletic retailers.
Since all customer types represent valuable market segments for branded athletic
shoes, brand owners have to fulfil a broad variety of consumer needs. Variety is also
driven by different country and retail strategies. Assortments are strongly influenced by
the local country subsidiaries of all retailers, taking local styles and design preferences
into account. Within one market, assortments are further localised at the retail level. The
assortment of a brand for one specific retailer can be totally different than the assortment
of another retailer in the same city. The objective of this differentiation is to prevent
direct price competition. As a result, variety has exploded. Assortments of several
thousands of different Stock-Keeping Units (SKU) per season are the norm, not an
exception. Given that the internal planning and merchandising process takes about 18
months while the average product life cycle of many end-products is much shorter, one
can estimate the extent of planning complexity faced by the OEMs and their suppliers.
Despite heavy investments in supply chain management and enterprise resource planning
systems, such complexity causes errors and faulty planning. The results are huge
overstocks, discounts to get rid of shelf warmers, and unsatisfied customers unable to
find what they want when a specific popular variant sells out fast. These developments
have made make forecasting and planning activities more difficult than ever.
1.3 Mass customisation offerings of major sporting goods brands
The situation described above makes mass customisation an appealing strategy in this
particular industry. Producing shoes on demand would reduce the forecasting complexity
on the end-product level. It would also add an important service component to the
relationship between consumers and the brand. Until recently, most brands had only
direct relationships with a small, elite group of VIP customers – top professional athletes.
Direct connections with end-consumers did not exist. Product development was based on
information about consumers generated by external market research providers and trend
researchers. In regard to transactions, the brand owner was separated from its customers
by a network of local subsidiaries, wholesale retailers, and retail partners.
Mass customisation is able to overcome the challenges presented by the current
market structure. It is a useful strategy to escape the increase in product variety and, at
the same time, to better fulfil customer needs and build closer customer relationships.
And actually, the athletic shoe industry is one of today’s most developed industries in the
consumer domain in regard to mass customisation (see Table 1): almost all large brands
have launched a mass customisation programme within the last decade. Nike was the first
with its programme Nike iD in 1998 already. At the Nike iD website, consumers can
choose between some styles of different standard models and get their name or other
letters printed on the shoe (for more information see http://nikeid.nike.com). A new
offering is that of Puma, which also offers different options in regard to aesthetic design.
However, unlike many other companies, the individual product range is distributed via its
own flagships stores and is based on an in-store configurator (for more information see
www.puma.com). Currently, the product offering is being tested in eight different
countries (test period from June to December 2005). Considering the information
presented in Table 1, one can see that mass customisation in this industry primarily

Transforming mass customisation from a marketing instrument 46
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regards the aesthetic design and product style. This might reduce the fashion risk and
provide a new dimension of differentiation from competitors for the first time. Yet
customisation at the level of aesthetic design does not only address the demands of the
core segment of many athletic shoe brands, people who actually use athletic shoes for
sports. Today, Adidas is the only OEM offering a mass customisation programme that
combines fit, function, and aesthetic design. This programme will be discussed in more
detail in the following.
Table 1 Examples of mass customisation for sneakers on the US market
Brand, name of the
customisation programme,
year of introduction
Customisation options, price
range, distribution channel Scope of programme
miadidas
(http://www.adidas.com)
since 2000
Retail-based
Custom fit and design
Price range: 140–160 USD
Six shoes (two running shoes, one football,
tennis, indoor, and basketball shoe,
respectively)
Three areas of customisation: fit (length and
width of each foot), performance (outsole
and midsole options, and seasonal upper
materials), and aesthetic design
Converse
(http://www.converse.com/
converseone)
since 2004
Internet-based
Aesthetic design
Price range: 60 USD
Three shoes (high and low Chuck Taylors,
and Jack Purcells)
Custom colour and embroidered lettering
Nike iD
(http://www.nikeid.com)
Since 1998
Internet-based
Aesthetic design
Price range: 50–80 USD
Fifty-one shoes (31 for men, 17 for women
and three for kids), six bags, five watches
and three golf balls
Custom colour and lettering
Puma Mongolian BBQ
(http://www.puma.com/
mongolianbbq)
since 2005
Retail-based
Aesthetic design
Price range: 100 USD
Individual style by combining different
parts of the shoe on kiosks installed at
selected Puma locations
Very tactile with a DIY flavour
Reebok
(http://www.rbkcustom.
com) since 2005
Internet-based
Aesthetic design
Price range: 60–80 USD
Two shoes
Custom colour and patterns
Vans
(http://shop.vans.com)
since 2005
Internet-based
Aesthetic design
Price range: 50–60 USD
Two shoes
Custom colour and patterns
Timberland
(http://www.timberland.com/
customboots) since 2004
Internet-based
Aesthetic design
Price range: 170–180 USD
Six shoes (two for men, three for women,
two for kids)
Many colour options.
FootJoy GolfShoes
(http://www.myjoys.com)
since 2003
Internet-based
Custom fit (limited) and
aesthetic design
Price range: 140–165 USD
Popular golf shoe
Custom colour and individual length and
widths for both right and left shoes
JG Customs
(http://booktown.com/
jgcustoms) since 2003
Internet and retail-based
Aesthetic design
Price range: 300–400 USD
DIY approach (small user company
modifying standard Nike shoes with its
own creations)
Real personalisation, hand painted, small
batch sizes
Source: Piller (2005b)

468 K. Moser, M. Müller and F.T. Piller
2 miadidas: the mass customisation programme of Adidas
2.1 Company background
Since the 1930s, Germany’s Herzogenaurach-based Adidas AG is one of the leading
providers of sporting equipment. After facing turbulent times in the 1980s and early
1990s (the company was forced to declare bankruptcy in 1990), Adidas managed a
turnaround by focusing on market needs and re-establishing a strong brand image from
1993 on. Once again, the company became a leader of product innovation, and also
created a number of new market segments based on a differentiation of assortment and
styles. Over the last years, Adidas did rather well and secured its leading position in the
worldwide sports industry (turnover increased by 3.4% in 2004). Since its acquisition of
Reebok in 2005, Adidas is the world’s second largest sports company. Today, three
company divisions target different customer types: The ‘sport performance’ division
offers products for sportive people and athletes. ‘Sport heritage’ focuses on fashionable
street wear in the footwear segment. The third division, ‘sport style’, is linked to the
future of sportswear. It focuses on Adidas’s fashion leadership in the market for upscale
fashionable products.
Traditionally, all Adidas products have been sold by retail partners. In 1999, Adidas
began establishing its own retail outlets, primarily so-called concept stores in larger
metropolitan cities. By mid-year 2004 already, 15 Adidas flagship stores had been
opened. These shops support the establishment of direct contacts between Adidas and its
customers, and serve as a brand-building activity. However, according to Adidas CMO
Erich Stamminger, sports retailers will remain the most important distribution channel in
the future.
Table 2 Overview of company data
Name Adidas AG
Address Adi-Dassler-Str. 1–2
91074 Herzogenaurach
Germany
URL www.miadidas.com
Year of foundation 1949 (mass customisation introduced in 2000)
Number of employees 15 686
Industry Sports industry
Products Athletic shoes, apparel, gear
Markets Worldwide
Source: www.adidas.com
2.2 Adidas’s mass customisation offering
In 1998, the product development team of Adidas had already assumed that
implementing custom manufacturing could become a promising option to manage the
costs of variant explosion and broad product assortments due to the growing
heterogeneity of demand. An initial internal pilot initiative was started during this time.
The project group (led by Christoph Berger, who later became the head of the

Transforming mass customisation from a marketing instrument 46
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customisation unit), developed its first customisable product range and launched it in test
markets in 2000. This market test went very well, and the customisation offering was
therefore introduced as its own product unit on Adidas’s most important international
markets. Dubbed miadidas (my individual adidas), it is now one of the leading mass
customisation offerings in the industry. Its target group are (semi-)professional athletes
and recreational sportsmen who regularly and earnestly pursue sports. The price for a
custom pair of miadidas shoes lies at around 30% to 50% above the price of the
comparable inline (standard) product.
Figure 1 provides an overview of the process structure behind the miadidas value
chain. The process starts in a dedicated retail unit where customers and retail personnel
interact in an intense co-design process. Customisation options include the fit (size and
width), performance criteria (insole, cushioning, outsole characteristics), and the aesthetic
design (colour combinations, custom embroidery). This degree of customisation had
previously only been available to football stars like David Beckham, or top running
athletes such as Haile Gebrselassie. After an individual order is placed, it is sent to the
national sales system where it is forwarded to the international sales system and the
manufacturer. After order processing, the custom shoes are made to order in one of
several Chinese factories. After production, the shoes are shipped to the retailer
responsible for informing the customer of its arrival. The overall delivery time is around
three weeks. The process ends when the customer comes back to the retail store to pick
up the shoes.
Figure 1 The miadidas fulfilment process
Source: Berger (2005)

470 K. Moser, M. Müller and F.T. Piller
2.3 Stages of development
Since its launch in 2000, the miadidas programme has been continuously developed.
From phase to phase, the distribution, manufacturing, sales and product strategy
were altered and adjusted according to past experiences. The different phases are
described below.
• Piloting
The first phase was characterised by the miadidas pilot project in 2000. The aim was
to evaluate the feasibility of the offering during a two-month trial period in which
one model of custom (football) trainers was offered at six different events around
Europe. The overall feedback by customers and participating retail partners was very
positive and formed the foundation for the following phases. In different local
markets, the pilot helped evaluate the possible degree of available variety and the
perception of this totally new kind of shopping experience from the consumer
perspective. Knowledge gained in this stage was used to reengineer the sales and
backup processes, as well as the product models, and to update the system to its
present appearances (Seifert, 2002).
• First rollout
In the second phase (2001), two further models were offered (for running and
tennis). In addition to selling the miadidas shoes at special events, sportswear
retailers were also asked to participate by testing the product offering. More than
1000 retailers applied to host one of the several miadidas tours; 100 were ultimately
selected. Evaluation of this second phase was very positive. Most participating
retailers called for a continuation of the miadidas programme. However, within the
Adidas corporation itself, the programme was still regarded as an experiment
and pilot.
• Growth and expansion (third and fourth phase)
After a positive evaluation of phase two, the decision was made to establish miadidas
as a permanent offering within the Adidas product range (third phase, 2003–2004).
The line of products was enlarged to its current scope of four kinds of sports
(football, running, tennis, and indoor). In addition to the Adidas-owned concept
stores, more retail outlets were added (fourth phase, 2005). Adidas also started to pay
more attention to the commercial side of miadidas by introducing volume and profit
targets for the participating regional sales departments. During this phase, the first
units were introduced on a permanent basis in selected outlets as part of a shop-in-
shop solution (see Figure 2).
• Sustainable business model (fifth phase)
miadidas’s recent position within the overall strategy of Adidas is to support the
brand image and enhance the other (inline) products in the performance range. The
objective is to create a unique brand experience. Adidas wants to position itself
as an innovative player on the market and improve relationships with its users.
This marketing-orientated strategy has paid off well: today, miadidas is widely
accepted as the best brand supporting activity the company has ever had (and a
marketing tool that is actually generating profits instead of just making a dent in the
marketing budget).

Transforming mass customisation from a marketing instrument 471
Figure 2 A mass customisation sales unit of miadidas
Source: Berger (2005)
This value proposition for miadidas, however, is not sustainable on a long-term basis. A
mass customisation operation that solely serves a marketing purpose is neither scalable,
nor a serious business unit in comparison to other offerings. Yet even if miadidas would
exponentially grow within the next decade, it would still only make a minor contribution
to the total sales volume of 110 million pairs of shoes per annum. miadidas’s sales are not
seen as large enough in order to justify the implementation of a completely independent
process organisation. In such, Adidas’s management has realised that it must integrate the
miadidas process more deeply in the existing inline (standard) production and distribution
processes (literature on mass customisation has addressed this demand for integration
between a mass customisation and mass production programme in the past (cf. Berger
et al., 2005; Kotha, 1995; Piller, 2005a; 2006)). Product development, manufacturing and
logistics of the custom footwear programme have to be integrated in existing mass
production processes. Furthermore, sales in permanent locations gain significance. The
sales process for custom shoes must become part of the existing distribution network;
special retail events and tours become less significant. Although the selling of miadidas
requires a separate unit for configuring the individual shoes, exclusive miadidas stores
will be not sustainable. However, the standard assortment and fulfilment process might
also benefit from a deeper integration in a mass customisation programme. Against this
background, the remaining case will examine how miadidas’s processes should be
enhanced and further developed in order to make mass customisation a sustainable
business model for the athletic shoe giant.

472 K. Moser, M. Müller and F.T. Piller
3 Re-defining Adidas’s mass customisation strategy
The success of miadidas builds on five distinctive capabilities for mass customisation.
Managing the product development process and mastering custom manufacturing and
logistics are two capabilities that take place without any direct customer interaction, but
are closely aligned to the mass production system. On the other hand, customer
interaction (co-design), customer relationship management, and the generation of
aggregated customer knowledge all take place in direct interaction with each customer of
a miadidas product. In the following, we will analyse how mass customisation and mass
production can be further connected within these five areas.
3.1 Product development and the miadidas product architecture
The underlying concept of miadidas is a modular product architecture allowing
customisation within the three dimensions of fit, performance and aesthetic design. The
fit dimension is characterised by a large number of length options and up to four available
widths depending on the shoe model. The resulting combination of possibilities far
exceeds the number of sizes in the inline programme. However, customer’s feet
measurements are matched to an existing length/width-combination and no individual
lasts are produced. The performance dimension permits customisation of outsoles,
midsoles, and upper material. The third dimension, aesthetic design customisation, allows
individual colouring of different shoe elements resulting in up to 140 possible colour
combinations depending on the shoe model. In addition, individually-selected embroidery
finalises the miadidas customisation. Figure 3 provides an overview of these
customisation options for one specific miadidas shoe (the Pretador Pulse, a football shoe).
Figure 3 Customisation options for one example miadidas shoes
mi fit:
• individual length
• 2–4 widths
mi performance:
• outsoles
• midsoles
• sock liner
• upper materials
mi design:
• up to 140 colour combinations (base, accent,
highlight colours...)
• personalisation (embroidery; name, player
number)
Source: Berger (2005)

Transforming mass customisation from a marketing instrument 47
3
While this modular structure allows a high degree of flexibility to meet customer
preferences, its original development is more complex and costly than the design of an
inline shoe. In order to enhance efficiency, all miadidas models are based on an existing
inline shoe, usually the top model within one range, i.e., the Predator is the top football
shoe in the regular Adidas assortment. The original reason behind basing the miadidas
architecture on an existing shoe was motivated by three considerations:
1 Production steps and materials for the custom shoes are already known to the
supplier, thus reducing the complexity of manufacturing.
2 Using the same materials, components, and machinery can achieve economies of
scope during the production and procurement, and also within the new product
development process.
3 Consumers have a clear reference point when considering the purchase of a custom
shoe, both in regard to the performance criteria of the product and its price point.
The product development process for the miadidas programme follows the product
creation process of the mass production lines, a typical stage-gate process. On average, it
runs about 17 months from the original product idea to the start of production and sales.
In the first product development phase (product marketing), product management decides
on a new product concept with regard to its product range, positioning, and contribution
to the brand’s image. Then, initial product ideas are turned into design-oriented concepts
based on sketches. In this design phase, all departments from management, marketing,
design, development, costing, and regional sales are involved. Product concepts are first
presented to key regional sales departments for evaluation. Once a concept is approved,
physical prototypes are produced and evaluated by all relevant departments (development
phase). Final alterations are made. It is during this development stage that the miadidas
team gets involved. Based on the existing prototype of a standard model, the different
customisation options for the model are determined, which define the model’s future
solution space. The final stages of the development process for a miadidas model are
separated from the inline process. In the general commercialisation phase, the prototype
is graded to all adequate production sizes and prepared for the manufacturing process.
This stage is performed in close interaction with the supplier for this particular model,
and the shoe is also presented to the sales offices and all key-accounts (retailers).
Pre-orders are taken, production is scheduled, and procurement of materials commences.
Commercialisation of the miadidas shoe, however, demands some distinctive new
activities. These basically include testing the product features that vary from the inline
product and the development of additional lasts, since the custom shoes are offered in a
larger number of sizes. Shoes sizes and fitting options are transferred to a fitting matrix in
order to determine the sizes of the try-on samples for the selling process (see below). In a
next step, the miadidas unit develops a detailed forecast and sales plan together with the
regional sales departments of those countries where the miadidas shoe is to be offered.
The forecast serves as the basis for planning all purchasing, manufacturing, and logistics
activities. However, unlike inline models, the forecasting of custom products
manufactured on demand can only result in a framework agreement, not in a detailed
production schedule.
When reviewing the product development process of both miadidas and the inline
shoes, it is obvious that there is already a large degree of alignment between both
processes. However, in today’s model, knowledge and experience are transferred from

474 K. Moser, M. Müller and F.T. Piller
the mass production operations to the customisation operations, but not vice-versa. Both
development processes, however, result in two basically identical shoe models; one
version is sold as an inline (mass) product and the other as a miadidas product with a
number of customisation options. Adidas could achieve a strong leverage effect if the
inline products were also interpreted as just (one) configuration within the customisation
space. The industry analysis has shown that specific retail requirements are a major cause
of the variety explosion of standard models. An integrated system in which all variety of
the entire product assortment would be based on one basic product architecture per model
could dramatically reduce the overall complexity. Such a system might be the common
situation in the automotive industries. In the footwear industry, however, this system
would lift product development, complexity management, and the merchandising process
to a new level of business maturity.
3.2 Manufacturing and logistics
miadidas shoes are manufactured by external Asian suppliers. Because of Adidas’s strong
market position, the firm was able to use its purchasing power to acquire qualified Asian
shoe manufacturers for the individual product range – the same manufacturers that also
receive the order to produce the comparable inline (standard) product in huge quantities.
Combining mass manufacturing and mass customisation in one factory provides a
number of benefits, as already discussed in the last section (Seifert, 2002). The
comparatively small sales volumes of miadidas do not justify the implementation of a
separate factory or manufacturing line at the moment. In consequence, the requirements
of a mass customisation manufacturing process have to be fulfilled within the mass
production operations, or in dedicated flexible production systems of the suppliers such
as the sample room. Sample rooms are in fact rather large production facilities with
highly qualified workers and flexible processes. They not only produce the prototypes
used in the various stages of the new product development process, but are also regularly
used for small production batches, special editions, or re-orders. From a mid-term
perspective, though, a sample room is not a stable and cost efficient manufacturing
location for a mass customisation business model.
Beyond the efficiency of manufacturing operations, the coordination of the overall
logistic process plays a central role. This is the only process in which the mass production
and the mass customisation systems are totally different. The logistic process requires the
involvement of different internal departments and several external partners. The
maximum lead time is 21 days (from taking the customer’s order to delivering the
customised shoes). After a custom shoe is configured (see below), a technical document
is generated and sent to a central order processing department (ESC). The system also
generates an order that has to be approved by the national and international order system.
After order approval, the factory receives the official purchasing order together with the
technical document. Simultaneously, the logistic provider (the firm DHL) is informed
about the forthcoming delivery order. After the manufacturing process is completed,
DHL delivers each individual shoe directly to the order initiating retailer, who informs
the customer about the goods’ arrival. At the same time, the central customer service
department receives the technical certificate and the order completion information in
order to be able to handle any customer claims or questions.

Transforming mass customisation from a marketing instrument 47
5
3.3 Customer interaction and distribution network
From the consumer perspective, purchasing a pair of custom Adidas trainers is a new and
different experience compared to buying standard shoes. The selling process consists of
five stages, which are all performed by a trained sales expert (called product trainer; see
Figure 4). All steps are carried out with the help of a configuration system, a PC-based
sales kiosk leading the customer and product trainer through the entire interaction
process. The system visualises the results and connects the point of sale with the
fulfilment system.
1 During check-in, basic customer data like name, address, and weight are entered into
the sales system.
2 Next, measuring and scanning begins. The customer’s feet are scanned to determine
the exact length, width, and pressure distribution of each foot. Together with the
product trainer, the client reviews the result of the scan on a monitor.
3 Once customers have stated their individual fit preferences, fitting starts. During this
phase, which is the most critical configuration phase, customers are offered a sample
shoe (based on their measurements) from a large number of fitting boots available at
each sales unit. Often, the subjective feeling of the best fitting shoe is different from
the system’s recommendation. In this case, customers can try a slightly different size
until the best fitting shoe is found.
4 Next, in the performance phase, customers choose from a number of performance
options, particularly soles or upper material.
5 In the final design phase, colour elements are selected together with embroidery for
each pair of trainers.
Today, miadidas products are sold via three main channels (see Berger et al., 2005 for a
detailed analysis):
1 Events at selected sportswear retailers – the system is promoted to Adidas’s retail
partners as a ‘retail innovation’ that helps them improve their store’s image and
differentiate them from competitors in their local market. The individual retailer is
responsible for the marketing prior to and during the event, and takes care of the
billing process. The interaction process, however, is carried out by Adidas personnel.
An event lasts about two to four days. In 2005, retail events were held in more than
20 countries throughout the world.
2 Sales events during major sporting events (e.g., major marathons or the Fifa World
Cup) – During these events miadidas is a major means for Adidas to demonstrate
performance and creditability to the core target group of (semi-)professional athletes.
3 Permanent installations at dedicated retail outlets – this channel is the latest
completion of the distribution strategy of miadidas, and will become the most
important future channel. Up to now, the company has already installed 11
permanent units worldwide. These installations are located in both independent
department stores and the company’s own flagship stores (so-called Adidas concept
stores). However, to make miadidas a stand-alone business model, this distribution
network must be further expanded. Even if Adidas would open a large number of its

476 K. Moser, M. Müller and F.T. Piller
own stores carrying the miadidas assortment within the next few years, these shops
would never have the capacity for a scope of distribution anywhere near the existing
distribution network for standard shoes. A long-term sales strategy has to include
sports generalists’ stores, which are currently the stronghold of sales for Adidas.
Figure 5 shows the planned development of the sales strategy for miadidas.
In addition, the sales system provides opportunities for further integration between the
inline (standard) and the miadidas assortment. From the customers’ perspective, both
product lines could be integrated. Consumers looking for a new athletic shoe would
always be able to engage in the miadidas interaction process in regard to fit and
performance, as described above. If the sales kiosk also held information about the inline
assortment of a given store, it could match the customer’s preferences not only within the
miadidas range, but also with standard shoes available at that particular store. For
customers, customisation provides no benefit per se; they simply want a product as close
to their preferences as possible. If an existing inline shoe can fulfil their demands, it just
might be the best solution.
Figure 4 Configuration process
Measuring and scanning Fitting
Performance Aesthetic design and colour selection
Source: Images courtesy of Adidas

Transforming mass customisation from a marketing instrument 47
7
Figure 5 Expansion of the miadidas distribution strategy
3.4 Re-orders and customer relationship management
One of the largest opportunities of a mass customisation system is its ability to generate
constant sales based on re-orders placed by existing customers. miadidas could become
the company’s premier tool for increasing customer loyalty (Pine et al., 1995; Berger
et al., 2005). Customer data such as fit preferences can be used not only to fulfil the first
order, but also to simplify re-orders. The resulting closer relationship could re-kindle
brand loyalty, provide a competitive opportunity for differentiation, and increase the
‘share of customer’ (i.e., the aggregated profits a firm makes with one single customer).
As re-orders can be based on existing data, they can be performed most efficiently over
the internet in direct interaction between the customer and Adidas. For first-time
customers, a pre-configuration opportunity on the internet could also provide additional
benefits. Adidas had not yet implemented an online configuration system for direct
end-consumer usage at the time of writing this case, but plans to do so in 2006.
While an online configurator will be an important enhancement of the recent process,
it may also become a major challenge: who owns the customer data and who will take
re-orders when the first sale was initiated by an independent retailer, when re-orders are
performed online via Adidas’s configurator? From a consumer’s perspective, direct sales
are often more comfortable. But then again, why should a retailer invest in getting a
customer into the system during the first interaction when the fruits of that contact are
likely to be reaped by the brand owner? One possible solution might be the
implementation of a distribution relationship management system (Pfeiffer, 2005). Such
a system allows brand-owning manufacturers to sell directly online to end-customers
while simultaneously preserving the relationships they have established with their
traditional distribution channel partners. During the online purchase process, customers
identify their appropriate offline retailer or distributor who becomes the ‘owner’ of these
customers and follows up with customer service activities. Solving this issue of how a
retailer can be motivated to collect feedback data (after delivering the goods) and share
Events
Sport retailers: specialists (2004/2005)
Retail tours
Performance Concept Stores
Sport retailers : Generalists (2006)
Focus on
marketing
(Image)
Focus on
business
(Volume)
Athlete
service(1)
Phase I
(1) Customised product offering before introducing the mi adidas business
Phase II
Phase III
Phase IV
Phase V
mi adidas

478 K. Moser, M. Müller and F.T. Piller
this data with the manufacturer will become a major issue for Adidas when scaling-up the
system. Within this context, the definition of a new kind of incentive and provision
system will become necessary.
3.5 Generation of customer knowledge and continuous product evolution
Traditionally, most information on customers’ shopping habits and preferences regarding
trends, design, performance, and fit has been accumulated at the retail level. Adidas was
only able to access this information by surveying retailers (often resulting in a rather
filtered transfer of the information) or by conducting (costly) market research. Mass
customisation offers a unique opportunity to obtain first-hand market research data by
aggregating the data on individual customers to customer knowledge (Kotha, 1995;
Piller, 2006). The results from such an analysis build the basis for improving the
customised product line, as well as standard lines by providing more accurate forecasting
of customer needs and trends. The mass customisation segment can be seen as providing
panel-like market research information. Data such as colour combinations selected in the
co-design process are important in order to improve the appeal of standard models.
Presently, however, this idea is still at a rather conceptual level for the company. A
systematic approach to transfer information from the mass customisation programme to
product planning of the inline product has yet to be implemented.
4 Case assessment
A SWOT analysis of miadidas reveals a set of distinguished strengths, weaknesses,
opportunities, and threats (Table 3). The main advantages of mass customisation for
Adidas are its contribution to brand building and positioning the company uniquely on
the market. Both aspects build a good basis for future growth of the miadidas business.
Challenges can be found primarily within the mass production-dominated processes.
With its mass customisation business, Adidas holds a strong position in today’s
athletic shoe market. No other competitor offers a product with such a high degree of
customisation. The largest competitors in the mass production market, Nike and Puma,
only offer the aesthetic design customisation of athletic shoes. By offering fit and
performance customisation in addition to this, Adidas has tapped the full customisation
potential to dominate the market for mass customised athletic shoes. However, in order to
ensure continuous growth and profitability, the company must continue to examine
current processes and re-design them in order to create the best possible ‘fit’ between the
requirements of its mass customisation business and the mass production value chain. As
already mentioned, miadidas is no longer a pure marketing instrument, but its own profit
centre. As a consequence, Adidas must solve several primary challenges. Through the
integration of various functions and activities along the entire value chain, enormous
efficiency potential could be leveraged. In particular, as outlined above, the integration of
product development, customer integration and sales activities, manufacturing, and
customer relationship management should be pursued. Moreover, the company has to
expand upon its customer interaction processes by introducing another online product
configuration system other than the miadidas shop unit. In doing so, re-orders on the
internet will be made possible, and stronger customer relationships can be built.

Transforming mass customisation from a marketing instrument 47
9
Table 3 SWOT analysis of miadidas
Strengths Weaknesses
First mover advantage, strong learning
curve efficiencies
Dedicated mass customisation business unit
with sufficient resources and competencies
Adequate financial resources for financing
future growth
Close customer contact at the miadidas
shop unit
Less fashion risks, discounts, and
inventory costs
No configuration system available for online
sales
No relationship management system
implemented to facilitate re-orders
Dependence on external partners in
manufacturing and logistics (scalability?)
High logistic costs due to manufacturing in Asia
Unstable processes, unsolved conflicts from
integrating the mass customisation system in the
inline system
Opportunities Threats
miadidas is the only full customisation business
in the athletic shoe industry (three
customisation options: fit, performance, and
aesthetic design)
Possibility to build strong customer
relationships
Access to aggregated market information can
continuously improve inline assortment
Opportunity to turn mass customisation
platform into a major product planning and
variety management tool for the entire division
Unknown market potential for custom footwear
Potentially limited willingness-to-pay for
custom shoes
Rather long delivery times may hinder growth
when new customer segments are targeted
Customisation is losing differentiation appeal as
competitors create similar offerings
Potential channel conflicts about ownership of
customer data
References
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the: MCPC 2005, Hong Kong, China.
Berger, C., Moeslein, K., Piller, F.T. and Reichwald, R. (2005) ‘Co-designing the customer
interface for customer-centric strategies: learning from exploratory research’, European
Management Review, Vol. 2, No. 1, pp.70–87.
Kotha, S. (1995) ‘Mass customization: implementing the emerging paradigm for competitive
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