Dissertation Writing Help in New Product Development Strategies in Financial Services
Executive Summary on NPD-New Product Development Strategies in Financial Services
Innovation and NPD in financial services overview
- A recent global study by A.T. Kearney and the Tower Group revealed that many bankers view retail innovation as a costly effort with few early mover advantages,since competitors can easily replicate new products and services.
- A recent BCG survey revealed that although innovation is a top three priority for62% of financial services companies, 61% of managers are not satisfied with the return on their innovation investments. At the same time 62% plan on increasing those investments.
- Tesco’s efforts to make its home grocery service more accessible to blind customers has resulted in revenue in excess of £13 million per annum, revenue that was unavailable to the company when the website was inaccessible to blind customers.
- Companies that build and sustain competitive advantage have an integrated process in place designed to generate new ideas, evaluate them, take the best ones forward and manage new launches to achieve profitability.
- Recent benchmarking studies have revealed that the more successful companies do,indeed, do things differently. At the business unit (BU) level, these organisations have been found to master three critical success factors that drive the performance of new services. These three drivers are strategy, resource commitment, and process.
- A successful innovation process involving IT Integration between Royal Bank of Scotland and NatWest is contributing more than £400 million in annual recurring cost savings.
- Close to 60% of the service organisations that are members of the Product Development Management Association (PDMA) identify themselves as having either no product development process or an informal approach. Similar results are reported for financial institutions in the United Kingdom, where less than 45% of the companies have written guidelines for their development processes.
- There are three cornerstones for effective new service development to consider:strategy, resources, and process.
- Strategy, means tying new service development to the corporate strategy and goals,identifying areas of focus for service development, taking a long-term thrust, and ensuring that the innovation strategy is clearly communicated throughout the company.
- Resource allocation is another familiar success factor that means having enough of the right people and adequate development financing in place.
- Process – more specifically, a high quality development process that guides innovations from idea to launch – is less recognised as a critical success factor.
How to develop NPD for financial services
- Depository banking products are on the whole a lot quicker to develop than credit based products
- There are four types of innovation for financial services: new to company innovations; product innovation; market innovation and process innovations or product modifications.
- Different types of innovation require different treatment, both in terms of the strategy needed to support them, and the way in which the strategy is implemented.
- Research consistently shows that a successful new product has a good synergy between the product and the target market. This involves marketing research, identifying the critical product characteristics that will fit the market and making sure those characteristics are incorporated and communicated to the market correctly
- Financial performance for new products is determined by six key factors: marketing synergy; a market driven new product process; effective marketing communication;customer service; managerial and financial synergy and launch preparation.
- The majority of survey respondents said they had insufficient resources for marketing research.
- 100% of all respondents who engaged in an intensive planning stage for new product development also cited complete success in achieving their strategic objectives,while only 69% of those who engaged in a low intensity planning stage cited success on the same measure.
- Banks have to re-think themselves as consumer brands and become aware of how customers experience their services.
- Projects that feature solid up-front homework more than double their success rates from 39% to 82%.
- Many project failures arise from deficiencies in the pre-development stages as insufficient time and money is spent on the up-front tasks in the typical new service.
Creating and managing a market-driven NPD process
- The majority of survey respondents said they had insufficient resources for marketing research.
- 100% of all respondents who engaged in an intensive planning stage for new product development also cited complete success in achieving their strategic objectives,while only 69% of those who engaged in a low intensity planning stage cited success on the same measure.
- Banks have to re-think themselves as consumer brands and become aware of how customers experience their services.
- Projects that feature solid up-front homework more than double their success rates from 39% to 82%.
- Many project failures arise from deficiencies in the pre-development stages as insufficient time and money is spent on the up-front tasks in the typical new service.
Marketing communications for new products
- There are two special problems associated with intangibility for financial services: in making the product difficult to grasp mentally, it compounds the already complex consumer decision-making process when purchasing. Second, it means that products cannot be displayed or demonstrated to customers, posing problems in the advertising and trial of products.
- Brand building in the finance industry is essential to ensure survival. Why? The successful entry of powerful non-financial brands into the market, capitalising on their strong brand identities and deep customer relationships, is forcing financial institutions to examine the worth of their own brands and the coherence of theirbrand strategies.
- Financial brands are unsuccessful because they are not placed high on the agenda,fail to embrace change, fail to involve staff in key decisions and do not have a significant point of difference from competitors.
- Using a new product for brand building works best when there is a dominant competitor
- Using a new product to improve positioning works best when customers’ needs are fairly static.
- The competitive advantage that works best for increasing sales volumes and profitability is doing something customers could not do before (newness). For creating strategic opportunities or achieving strategic objectives, delivering better quality or value for money work best.
- Around 75% of all new financial products take more than six months to develop.
- The most common strategic objective is that of improving revenue or developing new income streams.
- Most new products are developed with a competitive advantage based upon offering unique features, attributes or benefits to the customer.
- The greatest perceived resource deficiency in developing new financial products is with marketing research skills. Lowest deficiencies are in management skills, funding and customer support.
- The NPD process for financial product may be improved by running a process that screens the development of new products and also runs a test market study.
FINANCIAL SERVICES -Building a profitable culture for NPD success - By Dr. Charles Beard and Sarah Dougan.
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