CHAPTER VI

PRODUCT
DEVELOPMENT AND
PEOPLE

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Learning outcomes
On completion of this chapter, you should be able to:
▪ Illustrate the importance of introducing new financial services
▪ Analyse the process followed to ensure new services are appropriate
and are introduced effectively
Learning objectives
While working through this chapter, you will learn how to:
▪ Explain the importance of new product development
▪ Illustrate how introducing new financial services differs from
introducing new physical products
▪ Distinguish core and non-core attributes of products \ services
▪ Examine the concept of the product life cycle

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 1. Introduction
• New product development (sometimes abbreviated to NPD)
is important for maintaining customer satisfaction through
changes in the market, refreshing or extending the product
range, and adapting to environmental opportunities and
threats.
• These will all contribute towards the success of a company's
long-term business strategy.
• New products may be genuinely innovative, but 'newness'
may also mean 'adapted', 'repackaged' or 'introduced' in a new
market.

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A new product is:
• One that opens up an entirely new market
• One that replaces an existing product
• One that broadens significantly the market for an existing product
Paradoxically, old products can be deemed to be new products if:
• It is introduced to a new market
• A different marketing approach is used
• A mix variable is changed – for example, a new price is set, or a
new distribution channel is used

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2. The importance of new product development
There are four main reasons for introducing new
products and services:
▪Changing customer needs
▪Technological changes
▪Long-term business strategies
▪Competitor actions

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3. Introducing new financial products
➢Difference between introducing new financial products and other
physical products
-Speed of introducing new financial products
-Development costs of new financial products
➢ Customer need or improving customer experience
➢New products and product amendment examples
➢Mergers

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4.Core attributes and non-core attributes
➢Core attributes: financial services products described about the
monetary input, outputs, time frame and risk . The monetary input is
usually the sum invested and any fees, the output is the return, the time
frame is the amount of time that the product is usually kept for and the
risk is the risk of loss. These are regarded as core attributes which
customers consider when deciding which product or service to buy.
➢Non-core attributes: Opportunities for new product development
may arise through the use of non-core attributes. These are
alternative features, over and above the core features which some
customers may find attractive. They offer opportunities for a financial
services business to differentiate itself from other financial services
businesses.

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CASESTUDY

Bank of America currently offers its US customers an Advantage Checking (Current) Account. This
carries additional features designed to attract customers including:

 Discounts on safety deposit boxes

 Free additional linked savings accounts

 Fraud protection insurance for debit card purchases

 A programme of charitable sponsorship linked to spending

None of these benefits are core to the checking account and as such represent non-core attributes of
the product.

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5. The product development process
New product development (NPD) follows a series of stages in most cases.
▪ The stages of new product development

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▪Creative thinking for idea generation
▪Brainstorming is a commonly used technique for
getting a large number of ideas from a small group of
people in a short amount of time.
▪ Nominal group technique (NGT) is a structured form
of brainstorming with up to 10 participants and an
experienced facilitator (or up to 3-4 groups of up to 10
participants, with a spokesperson for each group and a
single facilitator overall).

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Standard procedure is as follows:
Various forms of the procedure can be undertaken; however, the classic form uses the
following steps:
1) Anonymous generation of ideas, in writing by each nominal group member
2) Round-robin recording of ideas allows each person in turn to read out one idea
3) Serial discussion working through each idea in a calm and controlled measure
systematically asking for questions or comments
4) Preliminary anonymous vote on item importance is usually carried out (5) Further
discussion and voting takes place if the voting is not consistent
NGT is based on three fundamental, research-based principles:
a. 'Nominal' groups are thought to generate better quality ideas than interacting groups
typical of classic brainstorming
b. The 'round robin' element provides encouragement and equal opportunities for all
members to contribute
c. Reliable communication requires that the recipient's understanding of a message be
checked with the sender, especially in the case of 'new ideas' being put forward

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▪Six thinking hats is an important and
powerful technique for creative thinking.
It is used to look at decisions from a
number of different important
perspectives.

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6. Identification of new product opportunities
There are several methods of identifying new product opportunities. This section explains
some of the more common methods.
➢The common sense approach
➢Direct communication with customers
➢Focus groups are groups of customers who are invited to one or a series of meetings to
discuss particular issues or ideas. There is usually a facilitator present to lead the
conversations and to ensure that discussions are kept on track and to time.
➢Attribute rating is a useful method for establishing the strengths and weaknesses of
current products with a view to adapting them to either improve the product or to improve
the customer's experience. Customers are asked to rate particular attributes of a product
on a scale of,

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➢Conjoint analysis is another method based
on attributes. For this method, it is the
combination of attributes which is analysed.
This method is particularly useful for
financial services as many financial services
have several price attributes.

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 7. Testing new products
Before launching a new product across the network, it is useful for the
financial services business to test the interest and uptake of a product on
a 'test market'. The test market could be a particular town or a branch
or a group of particular customers.
❖Key questions to consider are:
• When is the best time to start the market test?
• What size of test market should be used?
• What information are we trying to obtain?
• How long should the test run for?

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Advantages of testing
• Reduces the risk of product failure: the costs of the test would
be far lower than the costs associated with launching an
unsuccessful product
• Opportunity to identify flaws or elements that customers do
not like: thus the product can be tailored to the specific needs
of the target market
• Reduces the risk of loss of credibility: if the bank has a high-
profile launch of an unsuccessful product, then there is the
possibility of damage to the bank's reputation
• Reduces the risk of under-pricing a popular product

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Disadvantages of testing
• Competitors may hear about the new product in advance: this
gives the competition the opportunity to mimic the product or
to develop a defensive product
• Can be expensive to test: the cost of testing should be looked
upon as an investment by the bank
• External factors such as economic conditions may interfere
with the results: for example, if the product is tested in an
area where unemployment suddenly and unexpectedly rises,
then this could affect uptake

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8. The product lifecycle
-The product life cycle concept holds that products
have a life cycle, and that a product demonstrates
different characteristics of profit and investment at each
stage in its life cycle.
-The profitability and sales of a product can be expected
to change over time. The product life cycle is an attempt
to recognise distinct stages in a product's sales history.

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9. People
-We are now going to consider a further P from the
extended marketing mix – people.
-Traditionally, marketers restricted the marketing mix to
4 Ps, with people being a missing element. However, as
organisations realised the vital role played by their staff
in delivering products and service to customers, People
was added as an important part of the extended
marketing mix.

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We defined 'people' in Chapter 2 as all people who directly or
indirectly influence the perceived value of the produce or service,
including knowledge workers, employees, management and
customers.
When we think about the people element of the marketing mix,
we should focus on:
• Delivering customer service
• The process for identifying and meeting customer needs
• Dealing with customer complaints
Therefore, these are the three areas that this section will focus on.

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1) Customer service covers a multitude of things and it can be
difficult to tie it down to a concrete definition of what customer
service is. However, we all know when we receive excellent
customer service and we certainly all know when we don’t
receive it.
A working definition to cover what customer service would be:
▪ Providing those products and services that meet a customer's
financial needs
▪ Giving customers what they want, when they want it
▪ Providing consistent and ongoing backup to customers. For
example, this would include accuracy, reliability and courtesy
amongst others

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❖ There are a number of reasons why service is so important, which include:
• The better the customer service that individuals provide, then the more satisfied their customers will be. Satisfied and
happy customers are far easier and more enjoyable to deal with.
• It is quicker to deal with a satisfied customer, rather than one who is making a complaint.
• Satisfied customers are an important source of referral business.
• Satisfied customers will keep their business with the firm.
❖ There could be a myriad of reasons why a customer experience can be bad, but examples include the following:
• Miserable looking staff ¡ Rude or unhelpful staff
• Untidy/dirty premises ¡ Waiting in a long queue
• Lack of stock ¡ Having to wait for staff to stop chatting to one
• another before they are served
• Staff made commitments that they did not ¡ Staff tried to sell products that the customer
• follow through on doesn't need – just to meet their sales targets
• There are also a variety of reasons why a customer may receive a good experience, but it is likely that some of the
following play a part:
• Pleasant and helpful staff ¡ Attentive and efficient staff
• Staff were interested in what the customer's ¡ Receiving the products/services that met
• needs were customer needs at a price that was reasonable
• Well laid out premises ¡ Dealing with customers quickly and efficiently

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❖Many other factors can compromise the customer experience. We will
consider the following in the rest of this section:
• Queue management
• Greeting the customer/smile/use the customer's name
• Treating the customer courteously
• Thanking the customer at the end of the transaction
❖All of these are things that should be covered in routine, day-to-day
transactions. We will also look at the following elements that should be
provided beyond the transaction:
• Providing privacy and confidentiality to the customer
• Image and presentation of the organisation
• Telephone technique
• Inform the customer of the most suitable way to conduct their
transactions.

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2). Queue management
➢Additional staffing
➢Walk the queue
➢Identify alternatives

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3) Greeting the customer/smile/use the customer's name
-Whilst customers are well aware that the person they deal with will
deal with many other customers in the course of the day, they still like to
feel that the person they are dealing with wants to deal with them on a
personal level. The simplest way to do this is by smiling authentically
at the customer when we meet them.
- What we have looked at so far occurs at the start of the transaction –
where we greet the customer and smile.
- To have the greatest impact, the customer's name should be used at the
start and at the end of the conversation.

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4). Treating the customer courteously
There is a large list of other things that we should do to
demonstrate courtesy. The ones we are going to look at in this
section are:
▪ Appearing attentive
▪ Give the customer your name
▪ Don't chat to colleagues unnecessarily when dealing with a
customer
▪ At the end of the conversation, ask the customer if there is
anything else you can help them with today

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5).Thank the customer at the end of the transaction

6). Providing privacy and confidentiality to the customer

- Verify identity
- Discretion
- Appropriate context
- Document security
7). Image and presentation of the organization
8). Telephone technique

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10.Identifying and meeting customer needs
This approach covers the following areas:
▪ Pre-meeting preparation
▪ Introduction
▪ Explore and listen
▪ Identify and agree the customer's needs
▪ Introduce the product(s) to meet these needs
▪ Overcome objections (objections can occur at any stage in the process)
▪ Closing
▪ Ask for referrals
▪ After care

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❑ The business impact of complaints
▪Opportunity cost
▪Financial loss
▪Reputational damage

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