TY - JOUR

T1 - Product Innovation and Consumer Choice in the UK Financial Services Industry

AU - Costanzo, Laura

AU - Ashton, John

PY - 2006

Y1 - 2006

N2 - Purpose – Within the UK, low levels of saving has been a continuing policy concern for both government and financial regulators. Why individuals save less than might be expected has been increasingly associated with an inability of many financial services consumers to comprehend product quality and to undertake appropriate choices. The role of firms in area this debated through examining the product choices presented to consumers by financial services providers.Design/methodology/approach – We examine two aspects of poor consumer decision making, yet to be fully explored in the wider regulatory literature. Initially, we review how financial services providers consider product innovations and the marketing strategies they pursue in constructing their offerings to consumers. Secondly, we assess a popular financial product, the interest bearing deposit account, to examine what savings product choices are actually presented to consumers. These areas are explored through semi-structured interviews undertaken with semi-structured interviews of financial services managers and through a review of the entire product offerings to the interestbearing deposit market.Findings – We report that savings markets are characterised by high product turnover and short duration. Consumers in the UK, alike many developed nations, and often unfamiliar with, and lack confidence when, buying savings products. Example consumers often have difficulties when making product comparisions. Faced by so much proliferation of undifferentiated products, consumers find it difficult to make a straightforward comparison between products. Research limitations/implications – It is concluded that further public education, a greater understanding of how firms present product choices to consumers and how consumers perceive such choices are areas demanding further research and consideration. Originality/value – Consideration of how firms make decisions with regard to product innovation and savings problem more generally is an area demanding further investigation from a range of disciplinary approaches. Finally, given the perceived high importance of financial services to individuals and the national economy at large, some scrutiny should be placed on the issue of the highprofitability of the financial services industry and how this is reflected into product innovations and,therefore, differentiated quality choices presented various categories of consumers.

AB - Purpose – Within the UK, low levels of saving has been a continuing policy concern for both government and financial regulators. Why individuals save less than might be expected has been increasingly associated with an inability of many financial services consumers to comprehend product quality and to undertake appropriate choices. The role of firms in area this debated through examining the product choices presented to consumers by financial services providers.Design/methodology/approach – We examine two aspects of poor consumer decision making, yet to be fully explored in the wider regulatory literature. Initially, we review how financial services providers consider product innovations and the marketing strategies they pursue in constructing their offerings to consumers. Secondly, we assess a popular financial product, the interest bearing deposit account, to examine what savings product choices are actually presented to consumers. These areas are explored through semi-structured interviews undertaken with semi-structured interviews of financial services managers and through a review of the entire product offerings to the interestbearing deposit market.Findings – We report that savings markets are characterised by high product turnover and short duration. Consumers in the UK, alike many developed nations, and often unfamiliar with, and lack confidence when, buying savings products. Example consumers often have difficulties when making product comparisions. Faced by so much proliferation of undifferentiated products, consumers find it difficult to make a straightforward comparison between products. Research limitations/implications – It is concluded that further public education, a greater understanding of how firms present product choices to consumers and how consumers perceive such choices are areas demanding further research and consideration. Originality/value – Consideration of how firms make decisions with regard to product innovation and savings problem more generally is an area demanding further investigation from a range of disciplinary approaches. Finally, given the perceived high importance of financial services to individuals and the national economy at large, some scrutiny should be placed on the issue of the highprofitability of the financial services industry and how this is reflected into product innovations and,therefore, differentiated quality choices presented various categories of consumers.

U2 - 10.1108/13581980610685658

DO - 10.1108/13581980610685658

M3 - Article

VL - 14

SP - 285

EP - 303

JO - Journal of Financial Regulation and Compliance

JF - Journal of Financial Regulation and Compliance

SN - 1358-1988

IS - 3

ER -