What do you think BMW customers value: the satisfactory sound of a powerful engine, performance and safety at high speed? Those are plausible guesses, and those were some of the in-going perceptions the people at BMW might have had. When they worked with customers a few years ago to gain a better understanding, however, they got a surprise. The big unmet BMW driver concern was about scratch-free parking. So the product innovation that BMW engineers built into the next model revision was not performance-related, but focused on distance sensors and their dashboard display.
There is an important lesson embedded here about creating real value propositions and lasting customer satisfaction. Don't assume you know what customers want. You need to genuinely ask them. Better yet, you need to engage in a real dialogue, observe daily behaviors, and design an open-minded, joint discovery process. People might not be able to articulate in the abstract and at the outset what they really want. As Henry Ford famously quipped: Had I asked a focus group what they wanted, they would have said "faster horses."
Generating genuine insights and translating them into better service and product offerings is not rocket science. But it is a real discipline that has over the years built evidence-based expertise, approaches, and tools that work. Too often generalist executives ignore this and simply rely on their own anecdotal evidence and gut feelings. I suspect the traditional development field, and more recently the field of impact investing, might be particularly prone to this. After all, they typically start with an impact thesis, a desire to make a difference in a pre-determined area such as education or health. That is good and laudable because it brings in impact-oriented, patient and even subsidized capital to worthy causes, but it also means that the starting point is inevitably on the supply side.
My colleagues at CGAP over the last 18 months have worked in three countries with large banks and design firms to generate demand-side insights and create innovative financial services that better meet the needs of low-income customers at the base of the economic pyramid. These are people typically excluded from the formal financial system and therefore reliant on age-old informal sector mechanisms such as rotating savings clubs (ROSCAs) or money lenders, which can be unreliable and very expensive.
This design work has come up with some really good new ideas. But equally importantly, it has comprehensively documented the process and the tools available to go about generating true client insights. The key is to meet your target customer group on its turf, speak their language, and understand their lives and daily actions -- in our case, how they pertain to financial behavior.
For example, in Uganda, the researchers engaged low-income families in a highly interactive, animated simulation of their annual income and expense cycle. They role-played emergencies to better understand priorities and, for instance, found that parents would rather reduce expenditures on food and other 'essentials' before they cut out school fees. This indicated demand for a target-savings product.
In Mexico, researchers showed families images of different safe-keeping concepts to understand how they might trade-off safety, difficulty of access, and self-disciplining features. It turned out that the image of cash in a brick made cash seem very secure but too difficult to access, whereas the image of cash in an envelope seemed not secure enough and too easy to access. The locked chest with key indicated the right trade-off levels between security and access.
Finally, in Brazil, careful probing uncovered the very real IT security fears Brazilian low income families had vis-à-vis mobile money.
For design teams to be successful in uncovering these insights, they have to be multi-disciplinary, often combining qualitative researchers, such as ethnographers, with generalist designers, business analysts, and technical subject matter experts for technology-based solutions. They work in "war room" like settings, with daily debriefing and synthesis sessions. They rapidly and repeatedly prototype, often with mockups made from everyday materials - like cardboard -- to quickly test consumer reactions to emerging concepts and to get early and frequent feedback.
The novelty aspect of the specific product innovations the teams came up with match the expectations we would have from the human-centered design approach.
In Uganda, the final concepts included "me2me," a specific goals-based mobile savings product that builds in familiarity and use of mobile payments to shift the perception of savings to the concept of a "payment to myself for later use."
In Mexico, one final concept idea was "MisProyectos," a formal banking account that allows for compartmentalization, similar to how Mexican households already used overlapping savings instruments for different savings and liquidity goals.
In Brazil, the work led to a comprehensive customer engagement strategy around a broader mobile wallet ecosystem.
These specific concepts are too recent to report on their market success. Some might fail, perhaps new variations will prosper. The general conviction, however, is that these approaches for generating and translating consumer insights into viable products are big opportunities. The methodology is imperative to achieving the desired impact at the base of the pyramid and is here to stay. Other industries have long confirmed this, and even financial services in more mature countries have stumbled across important success demonstrations.
One of the better known examples might be Bank of America's "Keep the Change Program." Their market research discovered that people were open to a commitment savings device that would sock away small amounts frequently. In response, "Keep the Change" developed an approach that automatically rounded up people's payments and routed the difference to a savings account. Within a year, the program had 2.5 million customers. More recently, it was reported to have attracted 12 million with an additional savings balance of $3.5 billion.
Half of all working-age adults globally have no access to formal financial services. They tend to work and live in the informal economy - not by choice, but by necessity. They need financial mechanisms to create income-generating opportunities, build assets, manage risks and emergencies, and smooth consumption in the face of irregular or seasonal earnings. We need to dramatically accelerate financial innovation that really understands their needs and concerns, behaviors and constraints so that we can more quickly reach more poor people with better products at lower costs so that they have a broader range of choices for financial services that help them improve their lives.
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