In a world of evolving regulation, rapid digitisation and changing customer preferences the role of the product manager is becoming more important than ever before. These pressures are demanding more of product managers to centre on the customer by reducing the complexity and risk of their portfolios and to make it simpler for customers to interact with their bank in a digital way.
To some extent, better product management practices are codified through the Design and Distribution Obligations (DDO) which financial product issuers and distributors will need to comply with by 5 October 2021. DDO is ultimately centred on designing and selling products that meet customer needs, and ensuring products deliver on what is promised.
For product managers addressing DDO is only part of the solution. Product managers must:
When leveraged as part of a holistic product management process, DDO and product simplification together can help drive growth for banks by centring on the customer with a simpler set of digital ready products.
DDO codifies some aspects of good product management, for instance through a customer focus in product design and sales (target market determinations [TMD]), measuring value and product success (TMD triggers, reporting obligations) and ultimately simplifying product portfolios to ensure that only products that deliver what is promised and are suitable for the target customer remain on sale.
However, to truly focus on the customer and drive growth, reduce risk and reduce cost, banks need to propel towards and embed best practice product management. This cuts across the bank’s value chain and brings together a customer focus, product strategy, systems, processes, data along with risk and regulatory facets.
To reduce the risk of product mis-selling, it is a business imperative that there is a customer focus in the development and sale of products. In particular, TMDs and measuring whether products actually deliver value for customers need to be documented to ensure fairness and suitability of products for the identified customer group.
Leading product managers are customer-led, for example by bringing their target customers along the product development journey, co-designing products through testing and gathering direct insights and behaviours to ensure products will meet real and evolving customer needs.
A simplified product portfolio streamlines DDO compliance – this is its net strategic impact. Banks need to look beyond this to achieve a customer focus and drive growth. This means, sales processes need to be streamlined, product collateral simplified, customers migrated and products completely removed from the ecosystem. Further, banks will need to leverage data to truly understand the economics of individual products, and product simplification needs to be bank-wide. Migrating customers to more suitable products when others are grandfathered will help to reduce risk, compliance and servicing costs. Banks will also need to consider reducing distribution channels as one way to manage product mis-selling risk, oversight and monitoring efforts.
DDO requires banks to leverage existing and new triggers to assess when a product is not performing as intended. Quality data, clear and reliable processes and controls will be necessary to ensure issues are detected and resolved in a timely manner.
Bringing together a holistic feedback loop across research, product, marketing and distribution will enable banks to move towards best practice product management. Taking this further, product managers must be proactive in absorbing real-time data on how their products are performing for customers, rather than waiting for incidents or complaints to happen.
Moreover, embedding voice of the customer data in daily processes will equip product teams to respond with agility to market and customer changes. This ultimately helps to reduce costs and drive growth by informing when to iterate or pivot.
Most importantly DDO ensures there are feedback loops for customers when products are not operating as intended. Further, end-to-end accountability for distribution, servicing, product performance and pricing is being driven away from operational teams and re-established into product and sales teams.
Best practice product management entails linking product design and decisioning to the bank’s customer outcomes and sales governance frameworks. This aligns product strategy and customer needs with sales strategy, product marketing and execution. Targeted customer-centred metrics should then be used to measure the performance of the product throughout its lifecycle, with problems anticipated, not reported. These metrics could include measuring customer engagement across digital channels, how customer product use and retention changes when new products are released by a bank, responsiveness and action in response to customer feedback etc.
To effectively respond to regulatory change, digitisation and changing customer preferences, banks need to move beyond siloed DDO and product simplification programs and embed these programs into a holistic product management approach across the value chain. Leveraged together, this will ensure a high-performance product portfolio that truly focuses on the customer and enables growth.
This article is part of KPMG's Major Australian Banks: Full Year 2020 Results Analysis.
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