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Categories:Regulation

Time for finance to get ‘back to basics’?

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If the boom years felt like the most extravagant party for a generation, then the post crisis years are the hangover that we just can’t shake off. Banks have shouldered much of the blame for our current economic woes, reflected in historically low levels of trust – Ipsos MORI research from June 2011 found that less than a third of consumers (29 per cent) trust bankers to tell the truth.

Faced with high levels of consumer cynicism, there is now a greater need than ever for the industry to prove that it can really deliver on its promises to consumers.

We believe these difficult market conditions have strong implications for how banks approach the development and positioning of new products, especially in terms of Believability and Uniqueness, two key measures which are used to predict the success of new products prior to launch.

Product Believability is critical for gaining consumer adoption and is highly correlated with purchase intent, but for some time we have seen new banking product propositions achieve very low scores for Believability, even on claims relating to ‘standard’ service commitments.

The industry has always struggled to provide deeper and more compelling reasons to believe their claims which go beyond quoting league tables and performance statistics but it seems the problem in more acute than ever. Even products with score an ‘average’ believability against our norms are performing well in the current climate. Therefore, if consumers do not believe that the brand can deliver the benefits articulated in the proposition why should they believe more complex promises that go beyond the industry standard?

If consumers are sceptical about new products this also has a knock-on effect for Uniqueness. A product with low Believability and high Uniqueness scores is not a winning combination. Few people buy a product that is different from anything else on the market without believing it will deliver on its promises, particularly at a time when most consumers have a more cautious mindset when approaching the risk/reward trade off. 

Searching for the clear blue water, differentiating from competitors in important areas has been such a key element of product development for so long that a different approach seems to go against all rational thinking. However, financial services firms operate in such a crowded, competitive market that true product differentiation has become exceptionally difficult and in difficult economic times, do consumers actually want different, or do they want safe?

Rather than focusing single mindedly on product propositions that are really unique and different, the industry may be best served by developing products which score well against the norm on consumer Need Fulfilment and Value. Indeed, we have found that products which address consumer needs ina straightforward, incremental way are rated as more believable and trustworthy compared to really unique and different innovations. For Uniqueness, a more average score may actually be beneficial – not so low that it lacks imagination but not too high for consumers to worry about the risk and not believe the claims.

Products such as these are not ‘breakthrough’ or ‘game changers’, but in at a time when financial institutions are struggling to convince cynical consumers that they can be trusted, they may offer the best hope for iterative innovation and steady progress until confidence is restored.

Joe Marshall is Head of Industry and Services at Ipsos MORI

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