Developing successful new products is crucial for credit card and other consumer lenders to meet the needs of customers and stay ahead of competition. Though startup costs in financial services marketing may be lower than in manufacturing, the goal remains to bring profitable new products to market as quickly as possible while avoiding expensive failures and public embarrassments.
For years, credit card issuers have offered varied cross-sell products to customers involving insurance, protection, travel and entertainment. The majority of these have been outsourced from vendors who develop programs and manage the marketing. In recent years, various regulatory and economic reasons have encouraged card issuers to invest in product configurations and marketing of their own product lines.
Developing cross-sell products has been a somewhat new experience for institutions, and few in the card industry follow a defined development process unless sourced from lending products.
Investment in a cross-sell product often competes for capital with potential lending opportunities, so new products need to show strong return on investment to proceed.
Of course, a factor today is the time and cost to provide a Web site that meets customer expectation. State of the art is privileged access with ever-updating benefits that create desire for enrolled customers to log in frequently. In the old days, all that was needed was to print a limited number of fulfillment kits and rev up customer service and retention at a call center. Now a site needs to be operational to test even the initial versions of new products, a requirement that can raise start-up costs and the risk of a new venture.
In searching for guidelines to structure a recent new product development process, I found useful professor Robert G. Cooper’s 2001 text, “Winning at New Products.” This is a sound study of applying design to what many might consider an ad hoc or intuitive process.
Professor Cooper describes the Stage-Gate process, which he helped design in the 1980s and which has been used by product development companies in various fields. Though Stage-Gate involves steps that some might consider standard operating procedure, having a structured checklist can build confidence in decision making.
He describes Stage-Gate as involving several stages of product development for which a “gate” must be passed through to proceed to the next stage based on the project meeting specified standards.
Discovery: The yellow pad step. Ideas are generated from meetings of various constituents including staff and customers who are asked to describe unfulfilled needs and interests. Products without serious flaws pass through Gate 1.
Stage 1: Scoping. Initial homework considers the project’s marketing and technical feasibility. Product concepts at this stage are evaluated simply on broad criteria such as strategic fit, market attractiveness, technical feasibility, regulatory concerns and environmental impact. “Must meet and should meet” criteria are considered on a more rigorous basis in order to pass through Gate 2.
Stage 2: Building the business case. A detailed product definition and development plan are written out. Serious studies are conducted of value proposition for customers, competitive advantage, technical needs, market potential, contribution to firm reputation, regulatory hurdles and sources of risk. An ROI estimate is made based on net present value of revenues and expenses. Upon completion and approval of these criteria points, product plans are ready to go through Gate 3 and into development.
Stage 3: Development. Now begins creation of the product. Request for proposal processes might be conducted for components, administrative vendors selected, contracts finalized, operational sites inspected, operational plans completed, sites built and ad plans formulated. Customer service centers are selected, staffed and trained. Scripting, print material and site content will gain legal approval. Upon verification that all preparations have been made to support operational testing, the program is ready to pass through Gate 3.
Stage 4: Testing. The product is ready for alpha testing by the project team and other employees. The enrollment processing, billing, call center and site will be tested. Upon completion of internal testing, live customers may be asked to perform a beta test to ensure the product works well from a customer’s perspective.
Initial sales will be watched to confirm business plan assumptions for cost per sale, activation rates, operational expenses and enrollment retention. Customer use and satisfaction are evaluated, and variations in features can be adjusted. Upon successful analysis, the program is ready to pass through Gate 4 and into full launch.
Stage 5: Launch. Based on successful internal testing and initial sales to limited numbers of customers, the product is ready for rollout to many potential customers. Throughout launch, performance indicators are reviewed to compare with assumptions from original planning. Changes may be needed to lower operational costs or improve retention. This can help develop future products by providing live results data.