There is a saying: “If you do not know where you want to go, any destination is a good one!”

It is important to track the performance of a product or service, but first, a manager must know what is expected of each product for a determined period. As discussed in the Sales Management module, it is very important to set targets for any business in a challenging but realistic way: ‘Paper accepts any number!’

When a product or service manager sets targets without proper analysis, they can over-shoot or under-shoot the real potential of their product or service. Either way, it can cost them their job. Setting an unrealistically high target will be a short-lived affair as soon as soon as the bank realises that it cannot deliver it. Being a ‘sand bagger’, by always trying to set lower targets to over-achieve them, will not last forever either. Product managers must do their best to maximise the potential of the product by building targets in a challenging and realistic way.

To do so, the product or service manager, as the expert, must understand the market that they are in, knowing its size, the competition, their share of the market, their products and services features (their characteristics, prices, and processes), and their strengths and weaknesses.

Using this knowledge, the product manager realistically evaluates the chance of growing their proposition. Setting targets cannot be a wish list.

For example, imagine a product that because of the bank’s operational inefficiency must be priced at 20 per cent above the market leader, in a price-led or price-sensitive market. The chances of growth must take that weakness into consideration. They can always try to build on other attributes to attract new customers. However, in a price-sensitive market this is not an easy task. Or they can focus on a market niche but need to know that such a decision will also limit their growth potential and must be taken in consideration.

If this appears to be common sense, it is not. Experienced senior managers make unrealistic growth predictions based on an ignorance of the market’s size and its characteristics, and assuming that they can achieve the same or better than their competitors.

When the executives realise that they have a problem, the bank starts an exercise of market and competitor ‘discovery’, which usually leads to another problem.

Competitor comparison becomes an obsession, and all decisions are made to resemble or be better than competitors. This is when those responsible for the bank’s revenue forget THE CUSTOMER. Banks waste money on nonsense projects that disconnect their DNA from their customers. The bank at this point loses loyal and valuable customers and gains customers that will try any new ‘perceived’ option, not necessarily with the same value profile as the customer that just left.

New and Existing Customers

Another point for any product or service manager to be alert to is that it is fundamental to manage any business having in mind three aspects: acquisition, maintenance, and attrition.

There is no point in trying to bring in thousands of new customers per day if the bank is not deepening its relationship and profitability with the existing customers. Normally, existing customers have already achieved a certain level of relationship maturity, providing a known monthly return to the bank. Neglecting such an important stream of revenue makes no sense, as it takes months, often years, for a new customer to reach the same level of return, and with no certainty of it happening. Any action made by a bank must take in consideration the existing profitable customer base.

Potential has a due date

Another important aspect for a product or service manager is to understand who are the customers that bring value to the bank. Any acquisition effort must set a due date for those new customers to provide a return to the bank, otherwise the bank must stop investing in them. Lots of banks carry tens or even hundreds of thousands of long-term loss-making customers. Often these long-term, non-profitable customers are the most demanding to deal with but give no real return to the bank. The bank must know them and act on that information, either taking actions to improve the return, or by reducing the cost to serve them.

Goal Setting

Back to setting goals. We have discussed that it is important to know the market, competitors, and customers to set realistic business goals, translated into products and services targets. Product managers also need to understand the bank’s delivery, processing, and service capacities.

It is not just a matter of concluding that if the credit card market size is one million cards, the main competitor has 250,000 cards, and the product manager’s bank has 120,000 cards that they can simply grow their portfolio through better underwriting and pricing. (For example, one that results in losses 15 per cent lower than the market average, allowing them to price 10 per cent below the market average). The bank cannot assume that because of such advantages it will be able to acquire the difference between its current portfolio and its main competitor in 12 months!

To acquire such a level of new credit cards requires a massive sales effort that is translated into marketing investment, sales team labour hours, marketing and technology personnel, and the need for operational and credit systems and investments to process and service the volume of new cards. The next question must always be “What is the bank’s current sales, marketing, operational and credit capacity?” Once the product manager understands this, they know how much the bank can grow. The bank may decide to invest in each one of those capabilities to create more capacity, but it takes time. The product manager needs to remember that normally the market doesn’t stand still, and a bank’s competitors can come up with new and innovative ideas. This is another variable in the equation.

Considering the market size, competitors, customer characteristics, sales, processing capacity, allows the product manager to build a plan for the next period. The plan must be as detailed as possible. It must be based on the market and economic scenario, detailing geography, distribution channels, operational and service requirements, and include targets on acquisition, maintenance, and attrition, and must include people, channel, and processing capacity. The numbers that are produced will affect the various related areas of the bank.

Sales, service and customer management numbers will be translated into each distribution channel, such as the website, ATMs, the call centre, and branches. Once the product manager provides support services teams such as Operations, Credit and Risk and Compliance with product target numbers, they will build their own numbers. This is the reason the plan and target must be challenging but realistic, otherwise the cost of over-optimism can be big – while over-pessimism or ‘sand bagging’ can cause lost opportunities because of a lack of capacity management.

A basic product or service plan must provide outputs for all the areas mentioned above and must be as detailed as possible, as in this example of a Product Plan for X product:

Product Plan for X
Sales by channelUnitsUnits
Call Centre240,00020,000
Social Media24,0002,000
Sales Force180,00015,000
Contacts by channelQuantityQuantity
Call Centre5,400,000450,000
Sales Force900,00075,000
Web Chat10,200,000850,000
SLA waiting timesWait timeWait time
Call answering15 seconds15 seconds
Branch service2 minutes2 minutes
Teller10 minutes10 minutes
Web Chat22 seconds22 seconds

The above table is a simplified version of what is expected every year and adjusted periodically (for example, every quarter) for each product or service sold.

The above table shows what is expected to be sold for Product ‘X’ yearly and monthly by each sales channel, as well as the expected year and monthly contacts from the product holders per channel. In the last rows, we have a list of Service Level Agreements (SLAs) with channels and sales on the waiting time in each service and sales channels.

Let’s now move on to look at Service Level Agreements in more detail.