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The Lexford Notebook. Effective product governance. The foundation of customer centricity.

The concept of customer centricity – roughly defined as a proactive focus on customer needs, delivering solutions and providing lifetime customer value - is a phrase that has become more commonly used in recent years, and while intuitively makes sense, is more elusive in defining what it means in practice.


What exactly does a customer centric firm look like? What decisions and actions does it take to implement customer centricity? What motive wins in a customer centric vs profit trade off? How is customer centricity measured? Are all typical questions that need to be considered as part of a customer strategy to deliver a financial product manufacturer’s customer centric vision.


An effective approach to realising this vision, or at least moving towards it through tangible action, is through the product governance process. What might be considered a risk management process or one that at least can feel procedural and even bureaucratic, might be better expressed as a major strategic route to delivering a significant part of a firm’s customer centric vision.


Take for example the core questions product governance seeks to address:


  • Are our products being designed, developed and maintained to meet identified target market customer needs. Not are we retrospectively rationalising products to a customer’s needs, but are we identifying a group of customers and designing them a product to meet those needs. Then monitoring whether this continues to be the case through the lifetime of the product and adapting the product if not.

  • Are we then ensuring that we are distributing the products to those identified customer target markets and not to customers outside of those markets.

  • During what can be a long-term relationship between the customer and the financial services firm are the customers experiencing good outcomes from product ownership. For example, customers are clear on the product’s purpose, any regulatory changes are implemented effectively and there are no hidden charges or unfair barriers to exit.

  • Customers receive value for money for the product they buy. More so than just a pure cost:benefit analysis, but considering the broader offer, including service quality and distribution approach. Reflecting not just product costs, but full costs to purchase, for example platform and adviser fees. And focusing not just on quantitative benefits but qualitative as well, such as the emotional needs a product may meet.


In addressing these fundamental questions of meeting target customer needs, ensuring product distribution to those customers, providing good outcomes and value for money, product governance plays a vital role in implementing risk management in a firm, but as importantly ensuring what must be a major element of any customer centric vision is delivered.


What then does this mean for the role of the Chief Customer Officer and the customer team? Where product teams are responsible for implementing product governance and compliance for ensuring the process is effective, it’s clear a customer centric firm should involve the customer team with a central role in the governance process as well.


For example, there is a major role in identifying the customer target market and understanding those customer’s needs and how they might be addressed through product design and development. Inputting into the design of product governance frameworks (e.g new product approval, product review, value for money and product closure) to ensure they are assessing priority customer concerns effectively. Assessing the outcomes of the governance frameworks and influencing actions to take as a result, to ensure customers are receiving good outcomes and value for money.


By taking a major role as part of the governance process or indeed taking accountability for the outcomes customers are receiving, the Chief Customer Officer can have a tangible customer focused impact and ensure the virtuous circle of customer focused product and wider proposition improvement.


This virtuous circle starts with improving customer outcomes, leading to improved market reputation and brand strength, to customer/adviser recommendation, and in turn more product sales, with the resulting sustainable profitability allowing further product investment.


What then can be seen as an onerous risk mitigation process, should actually be regarded as potentially the most effective mechanism to achieving a firm’s vision of customer centricity. As such, effective product governance should be considered a central element to any financial services product manufacturer’s success.


Approach for financial product manufacturers:


  • Determine what customer centricity means for your firm and how this will positively impact customers.

  • Ensure the product governance process is appropriate for assessing those outcomes in the customer proposition.

  • Engage with the customer team so they are closely involved in the governance assessment and have an appropriate level of influence.

  • Consider using a customer committee for reviewing product governance assessments, agreeing actions and ensuring improvements are made.

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Lexford provides specialist advisory and solutions to financial services firms, with a particular focus on the insurance sector. Our Product Governance solutions include:


  1. Our free product governance self-assessment framework for financial product manufacturers.

  2. A full suite of product lifecycle governance frameworks (new product approval, product risk assessment, product governance review, product closure and value for money),

  3. Consultancy support to enhance your product governance approach.

  4. We are also developing a digital product governance platform, Product GovX, to empower the governance process.


Contact richard@forske.com for further information.

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