LET'S START WITH THE TRUTH: PRODUCT REDESIGN IS NOT EASY.
But as community FIs compete for valuable deposits and face lower acquisition rates for important lead products like checking accounts, a thoughtful product redesign might be exactly what you need to help retain and grow your business.
Perhaps there is an opportunity to draw in new business with a more attractive deposit account that could fill a valuable gap in your product line. Or, it may be time to revamp your entire product mix, reconfiguring the features and benefits you offer in a way that would change your business for the better.
To make it easier to move forward and ensure success, here are a few strategies from the product redesign team at Galapagos:
1. There isn’t a one-size-fits-all solution for you—or for your customers. Don’t jump into a product redesign without knowing your customer and your market opportunity.
“We always start the product redesign process by gathering both customer and market data to determine gaps and opportunities,” said Jacqlyn Burde, Strategy Executive at Galapagos Marketing. “The foundation of all of our product recommendations is built by studying the distribution of the current account line-up and looking at market potential for growth. Understanding the customers you have, and what types of prospects are available within your footprint, is what drives a strong recommendation.
“Identifying your product gaps and customer needs will help to justify the inclusion of a particular feature/benefit in your lineup. Conversely, if you don’t do a competitive review, and are mistaken in thinking you have a unique or differentiated lineup, your rollout will not yield strong results.”
2. Don’t assume that you can buy it better than you can build it.
Many banks are surprised to discover that it actually may take longer, cost more, and be more restrictive to buy from a third party than to put in the initial work yourself to build the products. Ensure that you understand the buy vs. build options and set realistic expectations before you proceed.
3. Don’t begin the redesign project until you define what success will look like. Clear up any assumptions from the start.
Start by establishing your redesign goals—and ensure that everyone is on the same page. You might be interested in increasing fee income or perhaps you want growth and are willing to give up fees to get that. If you have multiple goals that clash, you won’t get far.
It’s also beneficial when your internal team has a clear picture of how far they want to push. It helps us successfully work within those parameters. We have had clients say, “Don’t let core system limitations persuade the recommendations,” while other clients ended up objecting to many potential solutions because they didn’t want to deal with the implications to their core.
The same holds true for deciding what you are willing to pay for acquisition (either by reducing account fees or paying higher interest).
4. Don’t underestimate the value of a strong offer that’s also logical and easy to understand.
While the data element is very important, it’s also critical that the end result is a strong offer. Don’t make your accounts illogical. For example: Why would there be higher fees on a non-interest-bearing account than a standard account? Why would there be a high minimum direct deposit requirement for an electronic-only account when it may be prohibitive for the very audience you’re targeting? Be thoughtful and consider who the account target is when designing the account.
5. Be sure to consider the unforeseen consequences of your product design choices. Consider the following:
Will your revised product offering confuse the customer?
Are you making your bank or credit union all about “free” and undervaluing what you offer—an increasingly important issue as FIs work to reposition themselves around advisory capability.
Is there a chance your changes will lead to attrition? (One Midwest bank incurred a 34% attrition rate in the first year of new free checking accounts opened.)
6. Don’t just make it about a checking account product. Perhaps it’s the household relationship that you need to consider.
Some organizations define success by a simple number (we want to add 500 checking accounts), but Galapagos has helped clients focus on adding certain accounts that develop quickly into broader relationships and prove to be more successful.
“We worked with one eastern U.S. bank and recommended that they add a relationship checking account,” said Stephen Willard, Senior Data Analyst at Galapagos Marketing. “With that change, they experienced tremendous growth in both checking and loan relationships. The average deposit relationship for these households is 6x greater and their average loan relationship is 10x more than their other consumer checking households.”
7. And don’t be too narrow in what you define as a “product” when you configure a new offering.
Channel convenience has become a primary driver in selection and may take precedence over rates, price, and other features.
8. Don’t shortchange employee training.
You can design the greatest products in the world, but if your sales team isn’t on board your success will fall flat. The frontline staff needs to know the new products inside and out, understand how they work, and importantly, why customers should be interested.
9. Don’t forget to properly map a customer-friendly process for account migration.
Whether you will be moving customers to new accounts automatically or letting them self-select, make sure you have considered the implications and mapped the product moves and the steps to success.
10. Build in enough time to create and implement a thoughtful communication program, one that includes simple and effective ways for existing customers to learn about and open these accounts.
Be prepared to effectively sell this account in the ways that matter to the customer or prospect. That means that you are adding it to your online account opening selection, promoting it effectively in your branches and your digital space, and marketing it through your onboarding and CRM programs. Don’t rely on it to sell itself just because it’s on the product list, and don’t make it more difficult than it should be to get started.
We encourage you to consider whether a product redesign belongs on your organization’s “to-do” list. If you are willing to accept the challenge and avoid these pitfalls, the end result could be an extremely valuable solution that achieves your business goals and also makes your customers happy.
Interested in discussing your product strategy or the need for new products? Contact Jacqlyn - firstname.lastname@example.org
Planning for a conversion? Many of the same pitfalls apply. Contact Dan for more tips on a successful outcome - email@example.com
Been through this yourself? Share your own “Pitfalls to Avoid” with us. We may add them to the list.