New Product Development for Microfinance: Design, Testing, and Launch
Monica Brand ACCION International
This work was supported by the U.S. Agency for International Development, Global Bureau, Economic Growth Section, Microenterprise Development Office, through funding to the Microenterprise Best Practices (MBP) Project, contract number PCE-C-00-96-90004-00.
This research was supervised by Maria Otero, Executive Vice President of ACCION International and a research leader on the evolution of credit methodologies for the Microenterprise Best Practices project. The author would like to acknowledge the invaluable insight and guidance provided by her colleagues at ACCION—Carlos Castello, Sonia Saltzman, Cesar Lopez, and Steve Gross—in creating and editing this document. In addition, special and sincere thanks go to Craig Churchill (Calmeadow), Beth Rhyne and Heather Clark (USAID Office of Microenterprise Development), Robin Bell (Development Alternatives, Inc.), and all the banks, CDFIs, and MFIs (listed in Annex A) that were so generous in sharing their experience and time. In spite of these valuable contributions, this work is the responsibility of the author and, as such, any omissions or errors are strictly her own.
This technical note, the second of two on new product development,1 describes the process microfinance institutions (MFIs) must undertake to expand their product lines. The note picks up after the MFI has evaluated the feasibility of introducing a new product and is ready to proceed with the development process, which includes design, testing, and product launch. Specifically, this note illustrates how MFIs: #
Gather the institutional resources and commitment necessary to successfully design, test, and launch the product; Undertake preliminary market research to segment the market and solicit focused feedback from target customers; Design a product prototype, to be used in the pilot test; Conduct a pilot test, to refine the prototype and determine if launching the new product makes sense; Develop a marketing strategy and internal systems to successfully launch the new product and manage its on-going refinement; and Understand the factors contributing to successful product development.
The companion technical note, “New Product Development for Microfinance: Evaluation and Preparation,” is an important prerequisite, helping MFIs to decide whether or not developing a new product is an appropriate strategy. It describes the factors that an MFI’s management should consider in determining whether new product development is suitable for the institution’s particular stage of growth and the market realities it faces. Both technical notes focus on the process of new product development, irrespective of the actual features of the products developed. Accordingly, both technical notes—like the entire product development process—are part of a continuum. The goal of the notes, and the key to success, is to have the MFI institutionalize a continual process of product refinement based on market forces. Becoming more attuned and responsive to client needs is a critical part of an MFI’s methodological evolution, financial viability, institutional soundness, and social impact. These product development technical notes tackle an issue confronting practitioners in the microfinance field by providing ideas and strategies for expanding the reach of microenterprises in an efficient and effective manner. Currently, models of systematic or 1
New product development includes the introduction of new financial services (such as savings or insurance), new product features (such as loan terms, amortization schedules, and interest rates), and tangible products (such as smart cards).
iv methodical approaches to develop new products...