In The Beginning

 by: Jay Nagdeman

The greatest occupational high that financial services Marketing Directors experience is bringing a vision to market through a financial product or service innovation. Seeking to experience the same euphoria that great inventors like Benjamin Franklin or Thomas Edison must have felt, they follow their dream of implementing a financial product idea that they believe will generate significant incremental sales. Unfortunately, that dream seldom becomes reality.

We have been monitoring financial product launches for over two decades and now recognize that the failure rate of financial products and services is well in excess of 80%. Despite these odds, the search for the next big financial product idea lives in the hearts and minds of almost every worthy financial services Marketing Director.

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 financial services marketing environment, however, virtually all financial product and service categories have matured and are over-represented. Now, to become a marketplace success, a new financial 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 in which no single brand dominates, where price competition can be intense and where differentiation among competitors is not so much in performance as in brand perception.

When planned and orchestrated effectively, the product launch activities surrounding the introduction of a new financial product or service can be as large a factor in its success as its design or pricing. Experienced marketers know that:

• Pre-launch activities should build anticipation and interest, while internal activities should provide enthusiasm and support for the forthcoming product launch.

• Product launch activities should build visibility and momentum.

• Post-launch activities should sustain the interest and momentum and serve as the foundation on which the firm can build a sustained, cumulative marketing process.

There is a high cost associated with the failure of new financial products. We have done a number of autopsies on failed financial product and service launches and have concluded that the following key issues are the major influences for new financial product and service success or failure:

• People always hope for new and better concepts and approaches that offer promise and fulfillment. Therefore product launch positioning and messaging should fully recognize that customers buy expectations, not products and services.

• Do not underestimate the importance of a product name. 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 effective, lower-cost branding.

• Most product launch costs are underestimated. Budget appropriately for an effective launch—then add more to the budget.

• There is much to be learned from the product launch mistakes of others. It is essential to understand precedent and learn to anticipate problems. Ignorance in this realm never results in bliss.

• Create relevant differentiation in the marketplace. Me-too products and services might be new to your company, but represent “more of the same” to your target markets. With no competitive advantage, you will need an exorbitant budget to generate excitement and buy success.

• Even the best financial products or services will fail without adequate distribution and sales support. Line up distribution muscle before introduction and ensure that your distribution channels understand the product’s benefits and are sufficiently motivated.

• Financial products and services, regardless of how they are branded, will always be tied to the sponsoring company’s image and reputation. It is especially important, therefore, that the attributes and messages associated with the new product are strategically consistent with the brand identity of its sponsor.

• Understand that success follows truth. Create a compelling value proposition and make every effort to exceed expectations.

After a financial product or service has been developed, marketplace testing is the next essential step. However, we firmly believe that the focus groups on which consumer products marketers lavish resources are neither appropriate nor cost-effective for financial services marketing. Instead, focused one-on-one interviews with distribution channel representatives and target market prospects provide a more in-depth and intimate reading of the needs and wants of the marketplace.

The reasons behind the high rate of financial product and service failures are often the same: failure to identify and appeal to marketplace needs and wants; failure to provide relevant differentiation from more established brands; failure to effectively establish and motivate distribution channels; failure to create messaging that resonates with target markets; and failure to live up to expectations. The pitfalls are obvious, and yet financial services marketing professionals fall into them over and over again. Pogo said it well: “We have seen the enemy and he is us.”