Types of new product performance: evidence from the consumer financial services sector

Using the results of a large survey of new consumer financial services, this research investigates the benefits that new products bring to a company. It is argued that merely assessing sales, market share, and profits (“product benefits”) ignores such wider reasons for developing new products as developing a market or improving customer loyalty (“company benefits”). Three distinct dimensions of performance are identified: sales performance (e.g., sales and market share); profitability, and enhanced opportunities (longer-term company benefits). All are related to success. However, it is found that highly successful new products must produce multiple benefits. It is also found that approximately half the value derived from the introduction of the new products is derived from company benefits. As such, these wider benefits should be used as performance measures for new products. When evaluating new products, firms base the evaluation almost entirely on financial criteria (e.g., revenue, profit, or profit margin) or other such closely related measurable items as sales volume and market share (Griffin and Page, 1993). However, using financial criteria alone takes a very narrow view as to the extent of benefits to the company of developing new products. It has been found that many products are specifically launched to complement existing products, to use company resources more fully, to broaden or improve the company image, to diversify, or to grow into new markets (Shipley, Edgett, and Forbes, 1991). Therefore, it can be argued that these are the important benefits that a new product brings to a firm, not the level of sales or profitability. As such, these wider benefits should be used as performance measures for new products. However, this is only slowly gaining acceptance in practice. Even “failures” in financial terms can be considered to be successful if these wider benefits are taken into account. For example, Maidique and Zirger (1985) found that in a number of cases, new product failures contributed “to subsequent successes by augmenting the organization's knowledge of new markets of technologies or by building the strength of the organization itself.” Similarly, Souder (1988) modified the definition of technical failure in new product development projects to “high” and “low” failures, depending upon the extent of technical knowledge gained. This article considers the importance of these wider benefits of new product development in the context of new services. These wider benefits are termed “company benefits” to distinguish them from financial and sales-based benefits (termed “product benefits”). Company benefits accrue to the firm as a whole; whereas, product benefits are measured in relation to the individual product. To date, there has been virtually no attempt to study empirically the wider range of measures of performance (Hart, 1992). However, given “the notion that superior performance requires a business to gain and hold an advantage over competitors” (Day and Wensley, 1988), it is vital to understand these benefits. This article explores the nature of these benefits and reports the results of recent empirical research into the performance of new consumer services. The consumer services a sector chosen for examination is financial services. Specifically, this research identifies the different types of benefits new service products are producing for firms; explores the relationships between company benefits, product benefits, and new product success, and assesses the relative importance of different types of benefits.