Looking Before You Leap: Key Questions That Should Precede Starting New Product Development
This document examines the growing appreciation amongst MFIs of the need to deliver client responsive products. The authors note that increasing levels of competition in many markets have highlighted the importance of a market-driven approach to microfinance and state that there is little doubt that the microfinance industry will follow the trend of the commercial world towards a market-driven approach. Although many MFIs are looking at new product development as a way of responding to their clients' needs they often do not understand the complexity and cost of product development. This paper outlines some of the basic questions and issues that MFIs should address prior to embarking on the product development process:
- Motivation;
- Commitment;
- Capacity;
- Cost effectiveness and profitability;
- Simplicity;
- Minimise confusion, complexity, and cannibalisation.
The document concludes that product development is an essential activity for market-responsive MFIs.Effectively conducted, systematic product development will result in products that are popular with clients - even in very competitive environments - and more cost-effective operations for MFIs. More client-responsive products will:
- Reduce drop-outs;
- Attract increasing numbers of new clients;
- Contribute substantially to the long-term sustainability of the MFI.
In the long-run those MFIs which do not embark on a systematic product development process will suffer the fate of all businesses that do not respond to their clients' needs.
