Global Economic Crisis

Demographic Dimensions

Geographic region – Pacific, New England, South Atlantic, Mid-West, etc.
City, County, or SMSA (size) – under 5,000, 5,000-9,999, 10,000-14,999 etc.
Age—infant, under 6, 6-11, 12-17, 18-24, 25-34, 35-49, 50-64, 65 and over.
Sex—male, female
Family size—1-2, 3-4, 5 and over.
Family life cycle—young, single; married, no children; young, married with youngest child under 6; young, married with children; older, married with no children; older single; other.
Income—Under $5,000, $5,000 read more »

The new product manager for a regional bank located in Memphis, Tennessee, found that a recent study of the Memphis metro area indicated that 45 percent of the sample expressed interest in purchasing an asset management account during the next year. The product manager found from recently published census data that there are currently 10,500 households that would qualify as targeted customers for the new product. read more »

One of the crucial pieces of information needed at this stage of development is the products’ estimated market potential. Without sufficient market potential there is little likelihood that the new product will succeed. “Sufficient” market potential is a relative concept—smaller banks may require less potential for a successful introduction than their larger counterparts. However, whatever the size of the bank, an estimate of market potential is extremely important at this point.
read more »

Please read the following description of a new banking product we are thinking about offering in the near future. After you have read it and understood it, please answer the following questions.

Are there any features about the product you just read about that you find hard to believe?

read more »

Extent to which the concept is realistic attempts to capture a similar perception as the credibility dimension. Consumers are used to being disappointed with product promises that raise their expectations but in actuality do not deliver. To the extent that the concept is believable and realistic, consumer reactions should be more positive.

read more »

Usefulness of the concept is an allied dimension. Do the targeted consumers perceive the concept as useful? If not, there is little likelihood that the product will succeed in its present form. A key concern here is that if it is not perceived as being useful, can it be made to be more useful?
read more »

Like very much 1: 2: 3: 4: 5: 6: 7: Dislike very much
Very willing to try the concept 1: 2: 3: 4: 5: 6: 7: Very unwilling to try the concept
Very Useful 1: 2: 3: 4: 5: 6: 7: Very Unuseful
Very Important 1: 2: 3: 4: 5: 6: 7: Very Unimportant
Very Practical 1: 2: 3: 4: 5: 6: 7: Very Impractical
Very Believable 1: 2: 3: 4: 5: 6: 7: Very Unbelievable
Very Realistic 1: 2: 3: 4: 5: 6: 7: Very Unrealistic
Very Unique 1: 2: 3: 4: 5: 6: 7: Very Commonplace
Very Interesting 1: 2: 3: 4: 5: 6: 7: Very Uninteresting

read more »

1. A brokerage service through which you can make stock, bonds, etc, transactions
2. The service does not recommend securities or provide advice on market conditions
3. Services
Completing transactions
Providing stock market information
You can use your checking account for transactions
Monthly statement
Margin account – this allows you to borrow against the value of your securities.
4. Brokerage fees are 50 percent to 70 percent less than full-services brokerage fees

read more »

Money Market Checking ($2,500 Minimum Balance)
1. You can write an unlimited number of checks
2. Your can make transactions
in person
by phone
by mail
by an instant cash card (ATM card)
3. Your interest earning s are tied to money market rates
4. FDIC insured
read more »

Please circle the appropriate number corresponding to how you feel about each product attribute. Answer from your perspective relative to the use of an Asset Management Account.

read more »

This type process is particularly suited we believe for many bank products. A basic problem for bankers is in the actual development and deployment of a product to the market and the subsequent removal of the product from the market because of unmet expectations. Most banks with which we are familiar resist pulling products from the market. read more »

Our preference is, where possible and economically feasible, to use the product test marketing approach prior to introducing the product to the full market. We favor this approach not only in terms of ultimate cost to the bank but also because it enables the bank to evaluate true market responses to the product. In this way the various manipulations in the marketing mix may be considered. Up to this point, market responses have necessarily been limited to the product concept. Thus, this approach also lets the bank know what competitive reactions are likely to be.

read more »

The issues to be addressed in this chapter can be divided into two broad areas: (1) advanced concept testing and (2) product test marketing. Each of these tests of market acceptance has advantages as well as disadvantages, but each has its use and application based on the circumstances of the product and the bank in question. read more »

Bankers should make a concerted effort to move their organizations toward the organic orientation insofar as new product development activities are concerned. While we do not suggest that banks abandon their efforts to develop a higher degree of operational efficiency, we do suggest that the typical bank structure does not support the new product development framework as outlined in this text. read more »

Organizations with a mechanistic orientation need to favor vertical specialization and control. This stresses rules, policies, procedures, and specific techniques for decision making, and it develops elaborate and well-documented control systems backed by centralized staff. read more »

We have introduced the notion that the field of play had changed and is continuing to change for banking at an increasing pace. Further, we have indicated that, too often, current banking structures serve to inhibit the type of responses necessary to survive and prosper in times of fast-paced environmental change. read more »

Most banking products do not lend themselves readily to trial. It is not possible to try small sizes of a bank product or service at reduced prices. Potential buyers instead are forced to go through a cognitive trial of the new product where they imagine how the new product/service will benefit them or help solve a problem. Since trial is typically cognitive, bank promotional efforts at this time should aim at helping them try the new product/service. read more »

While the concept of innovation diffusion focuses on markets and the acceptance of new products by aggregates, the adoption process has as its focus the individual and the process by which s/he moves from awareness of the new product to full-scale usage of it. The implications of the adoption process are that the promotional message must change in order to accomplish different adoption objectives on the part of the individual.

read more »

As was indicated earlier, some of the information needed to evaluate a product concept must come from the marketplace. This is an important juncture because this is the new product’s first exposure to the marketplace.

read more »

The decisions management makes one each of these five issues leads to the formulation of a structure that will hopefully facilitate achievement of purpose. No two banks need to address all five issues in the same way for each to perform well. Consider a bank that has loosely defined job descriptions, wide spans of control, considerable departmentalization, and decentralized authority. read more »

The strategy of an organization has been defined as a two-part process: (1) determination of the basic long-term goals and objectives of an organization and (2) the adoption of courses of action and the allocation of resources necessary for carrying out these goals. Strategy is the pattern of decisions that shapes and reveals an organization’s objectives, purposes and goals, produces the principal policies and plans for goal attainment, and defines the business in which the organization plans to engage. A statement of strategy will generally characterize the product line and services offered, the markets and market segments to be served, and the delivery systems to reach those markets. Strategic direction is a top management function. Top management must set the course of future product-market match-ups and set the direction of the bank.
read more »

There are numerous structures for organizing to accomplish new product development. The actual structural configuration, as we have discussed, is relatively unimportant. What is important is that the new product development function take a central role in planning for new products rather than being allowed to occur spontaneously.

read more »

Another organizational structure is the committee, usually a group with heavy support and representation from top management. Members of the new product planning committee usually include representatives from all major functional areas—marketing, administration, personnel, lending, trust, and so on. After a product has successfully passed through the introductory stages of development, the marketing and management responsibility is taken over by another organizational unit—possibly a product manager or a new product department.
read more »

The First National Bank & Trust Company, a $5 billion bank, was examining the viability of the concept of an asset management account as part of its product mix. Concept tests suggested significant market acceptance and potential for the concept. The concept was tested with two different annual maintenance fees: $120 and $360. The component services of the AMA included:
read more »

This information can be used to set prices for individual component products, predicated on a first-year penetration of 300 accounts at $120 or 250 accounts at $360. The three-step procedure that follows shows how the prices can be established to reach a break-even situation.

STEP ONE: Calculate revenue surplus or deficit at $120 annual maintenance fee with a market potential of 3000 accounts and a penetration rate of 10 percent (300 accounts).
read more »

There comes a time when managers must make a conscious decision to confront the issue of designing an organization’s structure—that is, the way activities are put together and interrelate to provide for the accomplishment of the organization’s stated purpose. The challenge of designing an organization to function effectively has confronted managers since the discovery of the potentially synergistic effects of group effort. read more »