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Abstract: It is not suitable to apply characteristics used in service industries such as intangibility, simultaneity, heterogeneity, or perishability when analyzing financial products. When considering the property of media, financial products are intangible, although durable. Therefore, financial products are designed beforehand, and knowledge of product development research is applicable. Further, in financial product development, lead-time reduction and communication are even more critical than tangible products.
Keywords: financial products, property of media, new product development
1. Introduction
When analyzing financial products, it is not suitable to apply characteristics used by previous research in describing service industries, such as intangibility, simultaneity, heterogeneity, or perishability. This paper presents "product classifications" based on property of media. From this point of view, financial product media is intangible, but also durable. Therefore, product development approach used in manufacturing industries is applicable to financial product development because these products can be designed before presenting them to customers.
There are primarily two types of products in the finance industry. First is insurance or deposits, where a customer enters into an agreement at a certain point in time. The agreement is strictly adhered to, and at a stipulated point in time the investment bears returns. In other words, this is a product where "design is completed at the time of contract execution." The product is essentially designed as a "promise to give future purchasing power according to certain conditions," or as a "promise of conditional future cash flow," wherein, the content of the agreement is set at the time that the contract is signed. This is a "sales contract type" product.
By contrast, an example of the second type of product is a mutual fund. These are different from the "sales contract type" products wherein the design is not determined at the time of the contract. Rather, the performance depends on future execution, namely determining detailed design, modifications, and operation. The product design process is incomplete at the time of contract execution. Rather, the design process is the product. In other words, the product design is not a firm promise of future cash flow, but a promise to "deliver fullest execution effort to increase future cash flow." We call this an "execution contractor type" product. The execution in this case involves product...