The following is the second of two opinion pieces written by the Monitor Company on how the tourism industry can become more competitive. The first article was published on Saturday.

*** Businesses around the world accept as gospel that competitiveness requires individuals and companies to "focus on the customer.'' Yet, some firms are finding that becoming "customer focused'' is making them less competitive.

How can this be? What implications does this have for the way Bermuda goes about restoring its competitiveness? A brief review of history helps to unravel this paradox. In the decades following World War II, the leading competitiveness concepts were mass marketing and scale-driven production. Most manufacturing industries embraced the wisdom that producing very large numbers of relatively few varieties decreased costs while increasing quality. Marketing departments emphasised discovering "average'' or "universal'' needs in order to design products to have the widest possible appeal. Customers were educated to expect and ask for the same products and services as everyone else.

Service industries, including tourism, generally adopted this philosophy.

Hotels grew bigger; restaurant and lodging chains emerged offering reliable, standardised levels of service; media advertising became more common; and, as a result, vacations became more affordable for increasing numbers of people.

Most competitive firms offered the same high quality services to all of their customers.

By the mid-1980s, two important trends caused leading companies to rethink and replace the mass marketing approach. First, increasingly affordable and powerful information technology enabled new, ''intelligent'' manufacturing and service processes which reduced economies of scale and opened new methods of distribution. Second, customers began to demand and reward products and services which more closely reflected their individual preferences. As a result, leading companies found that in this new environment they earned premium prices not by standardising products and services but by customising them. To use some already overused jargon, the "information age'' and "niche markets'' have shifted the goal from mass production to "mass customisation.'' Tourism is experiencing this change worldwide. Even small companies have voice mail, use database marketing, deploy self-managed work teams and experiment with the Internet. Leading destinations ask local and multinational companies to emphasise rather than diminish local character. High-end travel agents and tour operators demand for their clients not just good service, but packages of services tailored to match their clients' specific needs.

What does this mean for Bermuda? First, many public and private sector groups may find they must change the ways they collect and analyse information about customers. Understanding the "average'' visitor will not help to market or deliver customised services in the future. At the other extreme, anecdotal observations, such as a conversation with a visitor or a letter to the editor may provide helpful clues about specific visitor needs but will not reveal whether the guest commenting on her taxi ride or breakfast is representative of one, ten, or ten thousand visitors.

The most powerful, often unexpected, insights derive from dividing visitors into groups which share similar patterns of needs; we call these groups segments. We have found that grouping visitors by age, income, occupation, home state, or even favourite hobbies and activities does not yield sufficient competitive advantage. After surveying more than 1,000 US travellers, Monitor grouped the respondents according to how similarly they prefer to plan, purchase and enjoy their vacations. We now have profiles of twelve different types of potential visitors for Bermuda to pursue, and this information is being made available to the entire Bermuda tourism community.

Second, every firm in Bermuda must be skilled at collecting and understanding detailed information about these customer segments. Many companies will want to complement their current customer response cards or informal "how was our service'' with methodical testing of very specific elements of their visitors' experiences. The 12 customer profiles have been developed as an example of the level of detail which any business, from the largest hotels to individual taxi drivers and shopkeepers, may use and should use to make important decisions to improve the value of their services.

Third, Bermudian firms must use the wealth knowledge about customer segments to choose which visitors to target and which not to target. This is the essence of good strategy; by focusing more closely on the needs of specific types of customers, companies will generally find that they become more efficient, their customers reward them more, and they are better able to train, compensate and retain skilled employees at a much higher rate.

We have met with companies in Bermuda and destinations around the world which practice these principles and understand that it is not enough to focus on "the customer.'' Instead, they have learned how to focus on the right customers.''