In this paper, it is argued that the concept of mass customization should not be treated as an alternative strategy to market segmentation. It should be seen as an integral part of market segmentation theory which offers the best way to satisfy individual consumer’s unique needs and wants while yielding profits to companies. Though the overall objective of the concept of mass customization is to recognize individual differences among customers and modify the offerings accordingly, by using the logic of the segmentation theory, this paper argues that mass customization is also not simply equal to segmenting‐to‐one. If all the relevant variables that affect buyer behavior are taken into account, the result is an untenably large number of market segments (finally segment of one). However, practically, creating separate marketing programs for each individual in most circumstances will become extremely difficult, even not feasible, and less profitable. In response to this dilemma, this paper proposes a new concept of “Segment‐based mass customization”. The basic idea behind this concept is that, mass customization is the efforts of reaching a segment unit efficiently and profitably. The efficiency and profitability will be determined by whether the mass customization is based on an optimal segment size, which is subject to the market situation and company resources. Finally, this paper comes up with a series of propositions which are relevant to developing a good customization strategy.
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