Designing Products To Meet Consumer Needs

1. Designing Products To Meet Consumer Needs Contractual Savings Conference May 3, 2002 Craig Alvey Nationwide Global

2. Agenda • The Product Development Framework • Drivers of Product Design • Customer Needs

3. The Product Development Framework

4. Drivers of Product Design External • Legislative and Regulatory • Economic Environment • Distribution Requirements • Customer Needs • Competition Internal • Strategic Goals • Profitability • IT Capabilities

5. Customer Needs • Identify the Customer • Segment Customer Groups • Define Needs of the Target Segment

6. Example: US Employers Sponsoring Defined Contribution Plans Trends in Product Customization • Choice • Personalization

7. Current Trends • Expanded investment options • Increased access to information • Availability of transaction capability (24 / 7 / 365) • Increased education and investment advice

8. Segmentation: Desire for flexibility increases with plan size while the need for “handholding” begins to diminish • Less than 50 employees • 51 – 100 employees • 101 – 250 employees • 251 – 2,500 employees • 2,501+ employees

9. Example of a Customer Segment’s Needs / Expectations 51 – 100 employees • May have a person semi-dedicated to overseeing the plan • Education is the key selection factor • Ease of administration is mandatory • Accurate and time recordkeeping required • Multiple fund families • Internet • Brokers, agents, other intermediaries

10. Expected Future Trends • Pace of change will not slow down • Influenced largely by individual participants • Service customization and choice • Choice and control • Self directed brokerage accounts • Open architecture product design customer driven

11. Example: Individual European Customer Needs • Private retirement savings needs (State pension systems struggling to support growing population) • International or U.S. company only with local presence • Conservative investment options • Insurance cover: supplemental income death benefits • Call Center with hours beyond traditional business day

12. Customer Needs • Clarity and transparency (taxes, fees and charges) • One-to-one relationship with trusted advisor • Assess internet account information (not in place of paper reports and transactions • Advisor should be knowledgeable, experienced and technologically savvy • Product Provider should be well known, stable company with strong financials

13. Risk and Investing • Savings viewed as short-term • Investment implies longer-term (future) • Consumers trust individual, as opposed to specific companies • More financially sophisticated tend to trust advisor less • Current desire for conservative investments • Quality versus quantity of investment options

14. Leads to Identification of Product Design Options The Customer’s Ideal Unit Linked Product Company • Multinational, well known • Western Europe • Must have local presence and abide by local laws Fees • Appropriate to insurance level and range of funds

15. Product Design The Customer’s Ideal Unit Linked Product • Seen as an investment product with minimal insurance components • Offer at least a death benefit which equals a return of premium • Other components may be added as individual prefers (“modular approach”)

16. Product Design The Customer’s Ideal Unit Linked Product Funds • Quality, not quantity • Offer local, European, and Global/US funds Service • Opportunity for face-to-face • Internet access • Fund switches at least monthly • Electronic and paper transaction confirmations • Quarterly and annual statements

17. Product Design The Customer’s Ideal Unit Linked Product (cont’d) Call Center • Staffed with knowledgeable representatives • Act as conduit for provision of advice and execution • Open beyond normal office hours

18. How To Identify Customer Needs Ask Them • Concept Test • Surveys • Secondary Information Competitors’ Designs

19. Conclusion • Drivers of Design • Strategic Goals • Product Design • Test and Monitor