The Challenges of Introducing New Financial Services Products & Services
Financial services Marketing Directors experience their greatest occupational high when they are able to realize their vision of bringing a product or service innovation to market. The dream of every Marketing Director is to develop and implement the offering that will generate incremental sales, enhance profitability and help their company achieve a leadership position. Unfortunately, very few get the opportunity to fulfill that dream and experience the same euphoria that great inventors like Benjamin Franklin or Thomas Edison must have felt.
We have actively monitored the financial marketplace for a considerable time and have determined that the failure rate of innovative financial products and services can run in excess of 80%. Despite these odds, the search for the next big idea lives in the hearts and minds of almost every worthy Marketing Director.
A Cluttered Marketplace
Only a few decades ago, the vast majority of new financial products and services introduced into the marketplace were successful. In today’s cluttered competitive environment, however, most financial product and service categories have matured and are over-represented. Now, to become a marketplace success, a new product usually has to take market share from already established brands.
Financial product and service categories have become so saturated that market structures exhibit what economists call monopolistic competition. This apparent oxymoron describes a market characterized by intense price competition, the lack of single dominant brand and competitive differentiation based primarily on brand perception rather than performance.
Orchestrating A Successful Product Debut
The activities surrounding the introduction of a new product or service are as important as its design or pricing. Experienced marketers create well-planned and effectively orchestrated product debut campaigns that include:
- Pre-launch activities in the marketplace that build anticipation and interest, simultaneous with internal activities that provide enthusiasm and support for the forthcoming launch.
- Launch activities that build visibility and momentum.
- Post-launch activities that sustain the interest and momentum and serve as the foundation on which the firm can build an ongoing, cumulative marketing process.
There is a high cost associated with new product failures. We have done a number of autopsies on failed financial product and service introductions and have identified the following key issues as the major drivers of success or failure for new financial products and services:
- Positioning and Messaging. Customers buy expectations, not products and services and always hope for new approaches that offer promise and fulfillment. Market messages that address these customer preferences are more likely to resonate in the marketplace.
- Naming. A good name can serve as a marketplace banner that generates greater visibility—and acceptance. A name that communicates benefits gets extra mileage and provides opportunities for more effective, lower-cost branding.
- Sufficient Budget. Most organizations underestimate introductory marketing costs. Our rule of thumb is to budget appropriately for an effective launch—then add more to the budget.
- Market Intelligence. We can learn a lot by examining the missteps of others and learning to anticipate problems. This is one area in which ignorance is definitely not bliss.
- Relevant Marketplace Differentiation. What many companies introduce as “new products” are actually near-copies of competitors’ offerings and represent “more of the same” to their target markets. With no competitive advantage, these companies need an exorbitant budget to generate excitement and buy even a modicum of success.
- Distribution Strength. Even the best products or services fail without adequate distribution and sales support. It is human nature to resist change and stay with what is known to work. Therefore, distribution channels require training, motivation and effective sales tools if they are to embrace a new product.
- Brand Consistency. Maintaining the confidence of its customers is critical to the success of any financial services organization. It is especially important, therefore, that the attributes and messages associated with any new product are strategically consistent with the sponsoring company’s brand identity.
- Reliable Marketplace Testing. While consumer products marketers devote considerable resources to focus groups, we believe that this market testing technique is neither appropriate nor cost-effective for financial services marketing. Focused one-on-one interviews with distribution channel representatives and target market prospects provide a more in-depth and intimate reading of the financial needs and wants of the marketplace.
The Bottom Line
The vast majority of new financial product and service offerings are not successful. We have found that most of these costly disappointments can be attributed to the sponsoring organization’s failure to
- identify and appeal to marketplace needs and wants
- provide relevant differentiation from more established brands
- effectively establish and motivate distribution channels
- create messaging that resonates with target markets
- live up to expectations.
The pitfalls are obvious, and yet financial services marketers fall into them over and over again. As Walt Smith’s beloved comic strip character, Pogo the Possum said, “We have seen the enemy and he is us.”