When launching a new product, many factors impact the success of the product: timing, marketing, ease of use, availability, price… I could go on. But, across the board, one factor makes or breaks the success of a new product: Relevance.
Now more than ever, a product not designed to fit into the lifestyle of the customer will fail. The only question in those cases is how long it will take! While this is true for any industry, this is particularly the case for the financial services industry. Additionally, as FinTech changes the landscape for financial services companies, the need for new and innovative products is significantly increasing.
After years of working with financial institutions, I’ve noticed a few consistent barriers to innovation:
- Risk—financial firms are inherently built on risk-based concepts, and when their bread and butter is minimizing risk, it can severely inhibit innovation
- Regulation—designed to keep financial firms in check when handling other people’s money, the focus for innovation turns inward rather than outward
- Blind expertise—experts typically build products for other experts, or internal partners, and not for customers
The result of these barriers is inward innovation. New innovative products are based on the needs of the firm rather than those of the customer. When risk comes into play, the offering becomes watered down or so heavily layered with disclaimers to mitigate risk that the offering becomes ineffective. Regulation turns the goal of innovation into a game of how to stay profitable but still stay within the written law. Blind expertise is my term to explain the folly of smart folks who design a product that is actually very relevant to customer needs but the terms or language used to sell or describe the product is focused on how it works internally rather than on the benefits to the consumer. Some good examples of blind expertise are sweep accounts, managed accounts and alternatives.
The folly here is the name—the product makes perfect sense to the experts and actually is a great concept, but to laymen, the product is confusing and too technical to understand the benefit to them.
Overcoming the Barriers
New product development needs to be a continuous pursuit where well-developed processes and procedures facilitate innovation. Start with consumers’ wants, needs and lifestyle. Designing products to fit those criteria are inherently better positioned for success.
A good example of how firms may need to reimagine products is in the insurance industry. People buy life insurance for after they pass. However, we know there are many other demands on our money as we go through life—like getting sick or taking early retirement. We worked with a client that heard that complaint and developed a life insurance product that allows people to adjust payments to fit what they can or can’t afford at that time in their life.
This is a great example of a company recognizing the need to fit into its customers’ life and taking customers’ concerns into account to make the product more attractive and affordable for them.
The Golden Rule: Relevance Is Key
Over the many years that I have been conducting research, I have found that success is solidly built on relevance. When developing, testing and launching new products, the one question whose answer should always be yes is: Is this product relevant to the desires and lifestyle of my customers?