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Chapter 3 Information Systems, Organizations, and Strategy 127

on its Web site, such as Google Maps. By purchasing PayPal, an electronic pay-
ment system, in 2003, eBay made it much easier for customers to pay sellers
and expanded use of its auction marketplace. Apple created the iPod, a unique
portable digital music player, plus a unique online Web music service where
songs can be purchased for $.69 to $1.29 each. Apple has continued to innovate
with its multimedia iPhone, iPad tablet computer, and iPod video player.
Manufacturers and retailers are using information systems to create products
and services that are customized and personalized to fit the precise specifications
of individual customers. For example, Nike sells customized sneakers through its
NIKEiD program on its Web site. Customers are able to select the type of shoe,
colors, material, outsoles, and even a logo of up to eight characters. Nike trans-
mits the orders via computers to specially equipped plants in China and Korea.
The sneakers cost only $10 extra and take about three weeks to reach the cus-
tomer. This ability to offer individually tailored products or services using the
same production resources as mass production is called mass customization.
Table 3.3 lists a number of companies that have developed IT-based products
and services that other firms have found difficult to copy, or at least a long time
to copy.

Focus on Market Niche
Use information systems to enable a specific market focus, and serve this
narrow target market better than competitors. Information systems support
this strategy by producing and analyzing data for finely tuned sales and
marketing techniques. Information systems enable companies to analyze
customer buying patterns, tastes, and preferences closely so that they
efficiently pitch advertising and marketing campaigns to smaller and smaller
target markets.
The data come from a range of sources—credit card transactions, demo-
graphic data, purchase data from checkout counter scanners at supermarkets
and retail stores, and data collected when people access and interact with Web
sites. Sophisticated software tools find patterns in these large pools of data and
infer rules from them to guide decision making. Analysis of such data drives
one-to-one marketing that creates personal messages based on individual-
ized preferences. For example, Hilton Hotels’ OnQ system analyzes detailed
data collected on active guests in all of its properties to determine the prefer-
ences of each guest and each guest’s profitability. Hilton uses this informa-
tion to give its most profitable customers additional privileges, such as late

TABLE 3.3 IT-ENABLED NEW PRODUCTS AND SERVICES PROVIDING
COMPETITIVE ADVANTAGE
Amazon: One-click shopping Amazon holds a patent on one-click shopping that it licenses to
other online retailers.
Online music: Apple iPod and The iPod is an integrated handheld player backed up with an online
iTunes library of over 13 million songs.
Golf club customization: Ping Customers can select from more than 1 million different golf club
options; a build-to-order system ships their customized clubs within
48 hours.

Online person-to-person payment: PayPal enables the transfer of money between individual bank
PayPal accounts and between bank accounts and credit card accounts.

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