Project Proposal
March 2005
Develop a Strategic Product to Enhance Minsheng’s Retail Banking Business
Table of Content
Our Perspective on OpenPlan and Recommendation to Minsheng
A. Success Story of OpenPlan
B. OpenPlan, a Strategic Concept for Minsheng
C. Our Perspective on What OpenPlan will Look Like for Minsheng
Proposed Project Approach
Team Structure and Work Plan
Why A. T. Kearney
Appendix
A. T. Kearney Relevant Experience
Selected Resume
Background
The Market Challenges
Margins and commission downward pressures driven by technology advancement
Market share pressure driven by new entrants
The Bank
As a medium size mortgage bank, WoolWich is quicker to market and organizational more flexible but relative lacking of scale.
WoolWich was at a crisis in profitability. Innovative value proposition is required to build sustainable business model
Initiatives- Identifying Customer Needs
Issues to Be Addressed:
Why a customer should have to pay a higher interest rate for borrowing on a credit card or personal loan than they did on a mortgage?
Why customers who normally used the alternative channel to contact their bank should not have access to the same range and quality of service at a branch?
Why long-standing customer still have to fill in another application form when buy a new product?
…..
Success Story of OpenPlan
Open Plan Woolwich Open Plan demonstrated a particular success story in offering fully integrated personal assets/credit product in the UK market
Open Plan provides integrated product platform ...
Sources: Tower Group, . Kearney analysis
The Woolwich Open Plan Product
Savings Accounts
Current Account
Home-Equity Secured Credit Facility
Delivery Channels
Channel Integration Layer
Auto Loans
ABM
Wireless - WAP
Web TV
Branch
Internet Banking
IVR
Saving Products, automated Sweep Functionality
Personal Loans
Over Draft Protect
Credit Card
Borrowing Products,
Mortgage Rate Applied
Mutual Funds
Home Owner Insurance
Life Insurance
Other Products
… and distinct value propositions that meets customers’ needs and preferences
Source：Barclay website; A. T. Kearney Analysis
Home equity can be leveraged for other personal loan (., car loan, credit card) at mortgage rate
Mortgage balance can be daily offset by current/saving account
Auto sweeping between current and saving account
Customer can set objective (., minimum /maximum balance ) which trigger automate sweeping between current and saving account
Up to 12 saving pots is available, can be named which reflect the objective of the saving
No application form is required to buy new product
Traditional and alternative channel provide same range and quality of products
Alternative channel (call center, internet, WAP service) enabled 7/24 service
The Customer
In Control
Accessibility
Tangible
Benefit
Product Features
Seeing the
Whole Picture
Wide product range allow customer to manage their financial needs in one account
Allowing the customer to see the whole financial arrangement on one consolidated Statement
Value Proposition
Open Plan also generated significant value to the bank, in terms of customer acquisition and revenue growth
58% of customers are new
65% increase in lifetime income per customer
(Barclays/Woolwich) products per plan customers vs. customers outside Openplan average of (year 2003)
12 basis point drop in nonperforming mortgage loans
Open Plan was voted the “Best Shareholder Value Strategy” in BT/Institution of Finance Awards
Acquired by Barclays Plc in Oct. 2000
Results
Pilot
Roll Out
# of customers (10K)
290
(1)
Note: (1) break-down not available
Source：Barclay company annual reports and announcements; A. T. Kearney Analysis
Barclays
Woolwich
Woolwich +OpenPlan
4
55
81 M
199
121
78
140
125
265
Intelligent Finance: Similar to OpenPlan, Intelligent Finance (Halifax, UK) also successfully introduced the cash pooling concept to retail banking customers
Credit Card
Personal Loan
Mortgage
Current Account
Savings
Amount subject to interest
于2000年11月30日正式启动的专业互联网/电话银行服务
成为HBOS Group的Halifax plc的一个部门
员工数量：2,500名
Background
Achieved break-even
Customer account reached 820,000
Total assets of ₤
Customer deposits increased to ₤ billion
Represents ~8% of net UK mortgage market
Results in 2003
Price
Up to % AER (variable)
Channel
No physical outlets, service provided via online/phone banking
23,000 Independent Financial Advisor contractor
Product
Can offset mortgage
Option 1 – reduce interest paid for mortgage
Option 2 – increase the interest rate of current/savings account to mortgage level
Growth rate of mortgage loan asset: 22%
Ranked 6th in all 126 Japanese banks in terms of growth rate (Sept. , 2003- Sept. ,2004）
Background
Results
Tokyo Star Bank’s “Deposit Connected Mortgage Loan”
Total asset: 11 Bil.
Total lending: Bil.
Total mortgage loan:.
ROE:21%(Mar., 2004)
Price
Product
Place
Promotion
Offering higher interest rate than competitors
Having offset function with ordinary deposit (JPY, US$, Euro)
Established consultative sales channel named “Financial Lounge” to explain long term benefit of the product
Established call center channel to answer perspective customers’ questions Average number of calling: 3,000 per month
Appealed “First-of-its-kind in Japan”mainly by posters displayed in street corners
Jun. 2001: Lonestar, one of the . PE firms acquired Tokyo Sowa Bank and started Tokyo Star Bank
Feb. 2002: Launched “Deposit Connected Mortgage Loan”
Jun. 2003: Lonestar assigned American CEO who is the first foreigner and youngest(43 years old) in Japanese banks
Tokyo Star Bank
Market rate
(2)
Notes: (1)1US$=105 JPY (2)Dependent on the coverage by collaterals (3)Rates offered by many Japanese banks (4)Exsisting as other products Source: Magazines, Website of Tokyo Star Bank, Interview to call center
(1)
(3)
(US $ )
Example of variable rate loan
Deposit Connected Mortgage: Tokyo Star successfully captured potential customer needs for “the offset” as a first mover in Japanese market
% %%
B. Open Plan, A Strategic Concept For Minsheng
Consumers are willing to consolidate their relationship, suggesting opportunity for integrated product in China
Changing life style of customers require simplify banking activities to improve efficiency
Consolidating financial needs into one bank can also provide customer economic benefit:
Capture benefit of customer loyalty program
Avoid service fee required for cross-bank transaction
With increasing commitment on retail banking business, the ability of bank to offer full range of personal banking service is improving
Even though only a basic integrated product on deposit, success of “Everything in One Card” suggested strong needs for convenience by Chinese customers
Need for Integrated Product -China
Need for Integrated Product – US
Notes: (1) “I would like to do all my business at one institution that can take care of all of my financial needs.”
(2) “I don’t think there is a single institution that can offer all of the banking and investment services I need and do them well.”
Sources: TowerGroup 2002 Primary Market Research
Would Like to Use One Institution …
Doubts One Single Institution Can Offer All Services
70%
45%
Strongly Agree
Strongly Agree
Somewhat Agree
Somewhat Agree
Undecided
Undecided
Somewhat Disagree
Disagree
No Response
Somewhat Disagree
Disagree
No Response
But …
Further, customers are more willing to consolidate their traditional banking product, both asset and credit, in one banking relationship
Note: (1) Survey data on among US consumers who want one-stop shop relationship, percentage of consumers who would include that product into that relationship
Source: BAI and the Cambridge Group ; A. T. Kearney analysis
Needs for integrated product component depends on two key factors: popularity/penetration of the product component in the market, and frequency of the product usage by consumer
In China, the priority on asset and credit product is likely to be even higher since penetration of investment/insurance product is still lower than matured market
OpenPlan reflect this needs as its major features are focusing on assets and credit products
Needs for Integrated Product Component - China
Needs for Integrated Product Component – US (1)
Asset
Products
Credit
Products
Investments
Insurance
In China, the home mortgage grows rapidly and accounts for ~80% of the total consumer loan, making mortgage loan a core consumer loan product that can serve as anchor for integrated product
China Home Mortgage Balance（RMB ‘00 Mn)
Consumer Loan Structure of Four Major State-Owned Banks in 2003
Home Mortgage
Auto Loan
Comprehensive Consumption Loan
Educational Loan
%
Source: XXX
Source: National Bureau of Statistics
CAGR=94%
Integrated relationship products can help banks reach their full potential in terms of profitability via cross-selling
Notes: (1) Ratio calculate from statistics provided by American Bankers Association (as of 31-December-2000). Breakout not available
(2) China Market Daily; analysis
Sources: ABA, Morgan Stanley, Merrill Lynch, UBS Warburg, US Bancorp, Bank Investment Marketing; . Kearney analysis
Profit Per Customer by Products Held –
US Client Example
Number of Products per Customer
(1)
Products per Customer for Retail Banks by Country, 2001
Consumer Loans
Mortgages
Current Accounts & Deposits
Savings, Investments, Protection
Credit Cards
(2)
Minsheng needs a strategic product to further strengthen and grow the retail banking business
Minsheng’s Retail Business Aspiration (1)
Note: (1) Aspiration base on President Dong’s interview published in Jan 23, 2005 on China Security News
(2) same as aspiration for retail loan, assuming objective for retail deposit is also double size in 3~5 years
Source: Minsheng Annual Reports; Jan 2005, China Securities News
Retail Loan / Total Loan
Retail Deposit / Total Deposit (2)
Importance of Key Growth Levers
1
5
unfavorable
favorable
Processing
Distribution
Manufacturing
Simplified Retail Banking Value Chain
Product Innovation
Channel Transformation
Enhanced Service
Value Chain
Effectiveness For Growth
Resource Required
Gap/Opportunity In China
5
3
3
3
3
5
4
2
3
Growth Drivers
Overall
5
If Effectively Leverage Leading Experience
3
3
Selecting a strategic product needs to strike a proper balance among sustainable first mover advantage, scale and profitability…
Minsheng’s Product Selection Criteria & Rationale
Business Scale Enhancement
1
Immediate Profit Contribution
3
2
Importance: High
Rational:
Economy of scale is essential to support Minsheng’s long term competitiveness and profitability
Banking industry in China are facing the challenge of quick development of investment and protection product from other financial institutions (., mutual funds)
Importance: High
Rational :
Leading edge product innovation will be a key success factor, as experienced by leading players (., Citibank, CMB)
Minsheng’s innovation in retail product has been very active yet easily copied by competitors
Importance: Low
Rational: At the early stage of retail banking business development, market share /scale should take priority to ensure long term competitiveness and profitability, which will be eventually driven by economy of scale
Value to Minsheng
Sustainable First Mover Advantage
(1) Tower Group primary market research, June 2002
… in particular a breakthrough product in China such as OpenPlan that can quickly enhance its business scale and ensure sustainable first mover advantage
OpenPlan’s Characteristic . Selection Criteria
Business Scale Enhancement
1
Immediate Profit Contribution
3
2
Importance: High
OpenPlan: Breakthrough value proposition is effective in enhancing business scale through:
Customer acquisition and retention
Share of wallet enhancement
Importance: High
OpenPlan:
First mover in China on personal assets and liability product integration
Substantial product development lead time ensure sustainable first mover advantage
Importance: Low
OpenPlan:
Upfront product development/marketing investment required
Features such as auto-sweeping and offset may decrease profitability in short term, even profit contribution per customer will be enhanced in longer term due to cross-selling potential of the product
Value to Minsheng
Sustainable First Mover Advantage
Recently launched by CMB, the first integrated asset management product brings urgency for Minsheng on development of a strategic integrated product
Source: China Merchant Bank website
Product
Channel
Requirement
Key Features
Assets/Investment product integration
Deposit Sweeping function for better cash management and return
Single account view on consolidated balance, P&L and transaction statement
Internet-based without bank card
Consolidate bank relationships by setting up “relevant cards/accounts” for CMB accounts and also other banks’ accounts
Service channels include internet banking, RM and call center
RMB 50K Total Balance: free of charge
Investment research service available for VIP customers (>RMB 300K balance)
Meanwhile, with OpenPlan concept, Minsheng has opportunity become market leader through offering One-Stop Shop for ALL personal financial needs, while CMB is for only HALF personal financial needs
Asset Management
Deposit Auto-Sweep
Credit Facility
Asset/Loan Offset
4
(Cash & Investments)
5
(Cash, Funds and Insurance)
3
(minimum balance fixed; fewer account available)
5
(customized minimum balance; 12 saving pots available)
0
0
5
(Overdraft & Mortgage Reserve)
5
(Mortgage Offset)
High
Integrate loan product into account
offer tangible result through:
convenient and potential lower interest rate offering through credit facility
offset function (short to medium regulation constrains unclear)
Minimum: Gap existed mainly due to regulation constraints
Medium: Minsheng could offer more flexible auto sweeping function
Opportunity for Minsheng
Source: China Merchant Bank website; Openplan website
Minsheng has the strong mortgage base as a key advantage to develop integrated product
Organization: established “Mortgage Center” in major cities to provide “One-stop shopping”
Channel: established mobile sales force
Product: Provided new packaged mortgage product (.,)民生家园1＋3, supported by aggressive marketing program
Initiatives Since 2002
Mortgage % in Total Loan Portfolio (2003)
Mortgage
Other Retail Loans
Note: (1) Total retail loan 11%; breakdown estimated base on press release
Source: Bank annual reports; bank websites; . Kearney analysis
(1)
Minsheng has the technological foundation to build the innovative product after significant investment on IT infrastructure and systems in recent years
Illustrative
IT readiness suggest less IT investment required compared to WoolWich in 1999
Proper planning of product feature and channel roll-out can further lower IT investment required
Bank-wide centralized transaction processing enabled by data consolidation (数据大集中） completed in 2002
Single customer view enabled by CIM Phase I in 2003
Bank-wide standard origination and servicing enabled by retail credit system (个贷系统）completed in 2003
Significant improvement in alternative channel (., ATM, Internet Banking, call center) provide better channel foundation compare to WoolWich in 1999 when it developed OpenPlan
Management Accounting system will enable cross functional cost/profit allocation among relevant department of the Integrated Product (., Retail Banking, Credit Card, Call Center and Treasury Department ) once KPI been set up
Minsheng’s IT Readiness
IT investment will be within RMB 6 million and 6 months time frame
DW Data Wave ??
Loans
Market Process
Laurence
Deposits
Marketing
Incentives?
Wealth Management
OCRM (Operational CRM)
?? provided by?? but not used
Currently called control management, possible rename to wealth management
Build or top of ?? is CRM management
Structured deposits managed here
Stub can be produced here, . set to control location or ?? partner for pricing and delivery
Mu calls it TCRM (?? CRM), but it is usually call ACRM (analyzed CRM)
Sends Leads to
I believe MU was referring to a process and not a ??
?? DW to generate leads
1. RMB 2 Million , 6 Month
2. RMB 2 Million
Statement 1 Million
4. Channel Integration
Internet million
ATM +IVR million
6 Months
Time frame
Product Feature
Channel
2 Months
To be double check with Boon Teck
Based on the OpenPlan experience, Minsheng’s ongoing retail banking reorganization effort will build important foundation for implementing such product in 2006
WoolWich Organization Post- OpenPlan
Customer-Centric – Policies & Protocols
Customer Strategy
Marketing
Customer Info
Product Management
Customer Segments
Production
Volume Processing
General Production
Channels
Call Center Operations
Branch Network
E-Channels
Sales Force
Shared Service & Systems
Customers
Customer-Centric Organization will be formed at the beginning of 2006 upon completion of Retail BU re-organization effort
Product Development: Better understanding of customer needs through more effective coordination between branches and headquarters
Product Launch: More effective support from headquarters (., resource allocation, marketing, training) and customer feedback communication from branches
Resource Utilization: Ability for better resource centralization and business unit based performance measurement suggest more effective leveraging of product development investment
Minsheng’s Organization in 2006
Benefit
Source: A. T. Kearney analysis; Housing Finance International
There are significant expected benefits from implementing the innovative bundled product, but also serious investment requirement
Significant Business Scale and Market Share Enhancement
Mid-Long Term Profitability Improvement
Benefits for Minsheng/Branches
Expected Benefits
Product Development Time
Achieve Market Leading Position in Overall Retail Banking Business
Cross-Functional Coordination
Additional Benefit for Branches
Lower Acquisition Cost
Product development/Marketing cost is generally centralized at HQs
Leverage of alternative channel (. call center) will lower the customer acquisition/service cost for branches
The product will require software development and may require additional IT system
To maximize benefit of first mover advantage, certain scale of marketing spending is necessary to draw market attention
Effective coordination among relevant departments is required before and after product launch
Sustainable First Mover Advantage
Marketing Expense
IT Investment
~10 months product development time assuming effective leveraging leading experience
Resource Required
Preliminary
To successfully implement this complex product, Minsheng need to have the appropriate knowledge, technological and organizational enablers
Challenges: Legacy systems, batch processing and siloed systems
Challenges: Short-term ROI focus, siloed org structures
Challenges: Lack of sophisticated customer knowledge and insufficient leveraging of customer knowledge
Product Feature: Effectively implementing practical integration-ware that interfaces with existing component-ware
Distribution Channel: Long term – implementing unified, real time, and cross channel systems
“Not perfect, but good enough” culture, supported by fact base feasibility study and long term focused organization commitment
Effective cross-functional coordination supported by dedicated PD team and meaningful performance measurement
Substantial effort in gathering and leveraging customer knowledge through “Learn-as-you-go” approach throughout product planning and launch phase
Simplified Retail Banking Value Chain
Major Challenges/Risks
OpenPlan Lesson Learned
Customer
Knowledge
Technology
Organization
Risks: Customer needs not been best satisfied
Risks: Unnecessary IT investment and/or delay in PD process due to ineffective leveraging of existing IT resource
Risks: Unrealistic product objective, ineffective cross-functional coordination
Through effective leveraging of best practice, external assistance is key to ensure effectiveness of this complex product innovation effort, in a much shorter timeframe compared to OpenPlan
C. Our Perspective On What OpenPlan Would Look Like for Minsheng
Phased out approach could be applied on both product feature and channel mix, with priority on product feature roll-out
The Barclays (Woolwich) Open Plan Development Cycle
Source: TowerGroup
2001
1998
1999
2000
Open Plan Launched
Call Center Agent Workstations Rolled Out
Internet Banking Released
Wireless Channel Rolled Out
Open Plan Offset Launched
2002
Web TV Channels Rolled Out
Early Conceptual Planning
Customers are generally more interested in new product features
Multi-channel integration require much bigger investment and have longer repay cycle
Faster time-to-market to benefit from first mover advantage
Implications to Minsheng – Product Feature Goes Before Multi-Channel Roll-Out
Product
Channel
Preliminary
On product feature, Offset is a key function that has potential regulation constrain, yet should be targeted to be launched in early phase
Interest Rate Flexibility
Cross-Sector
Products/ Services
Constraints/Evolution
Increase of RMB deposit interest rate is not allowed, while decrease of RMB deposit rate started to be allowed（Oct 2004)
Increase of RMB loan interest rate is allowed (1), while decrease of RMB loan rate is still restricted to of standard rate (Oct 2004)
Potential Product Feature Constrains
Relevant Feature & Potential Approach
Banks can issue mutual funds (Feb, 2005)
Prohibition on certain cross-financial sector products/services (., insurance product; brokerage product)
Key Areas
Feature: Offset
Approach: key product feature which should be launch ASAP
Preferred option: launch in 2006, assuming interest rate fully deregulated, or regulator can be successfully lobbied with effective price design
Backup Option: launch later once regulation allow
Feature: Insurance Product
Approach: Insignificant product feature, could be launched once regulation allow
(1): credit union is an exception, with increase of interest rate restricted to of standard rate
Preliminary
Table of Content
Our Perspective on OpenPlan and Recommendation to Minsheng
Proposed Project Approach
Team Structure and Work Plan
Why A. T. Kearney
Appendix
Project Approach
Generation
1. Preparation
5. Pilot
7. Performance
tracking
Source: . Kearney
2. Business
Planning
4. Technical Design
6. Product Implementation
Week 1~3
Week 7~11
Go/No-Go Decision
Phase I
Phase II
Phase III
ATK Lead
ATK Support
Phase 0
ATK Lead - Optional
Option 1: A. T. Kearney work on Stage 1 and 2, ., Preparation and Business Planning Option 2: A. T. Kearney work on Stage 1, 2 and 3, ., Preparation, Business Planning and PMO
We Are
Here
Week 9~32
3. PMO and Pilot/Launch
Preparation
Week 9~32
Phase I. Objective of phase I is to develop a foundation for business planning
Conduct focus group study to understand unmet customer needs
Conduct global best practice study and draw lesson learned for Minsheng (potential field work required)
Activities
Deliverables
Qualitative focus group report (customer needs)
Best practice lesson learned
Identify product feature /channel priorities base on focus group findings and lesson learned
Develop high level product feature/channel options
Initialize survey to support detail product feature design
Objective
Develop product feature concept to support cost/benefit analysis
Develop high level marketing mix to support cost analysis and volume and profit projection
Build basis for product feature development and benefit analysis
High level Product feature definition
High level channel definition
High level pricing strategy
Customer survey questionnaire
. High Level
Product Feature/Marketing Mix Development
. Market Analysis
1. Preparation
Phase I. Flight plan: We will develop high level product feature and marketing mix base on customer interview and best practice; These initial definition will be further tested in quantitative customer survey
Understand Customer Characteristics
and Basic Needs
Use Focus Group to Build Knowledge
Illustrative
4
Total
1
SH
3
BJ
The interviews must meet the following requirements:
Current Minsheng WM Customer
None Current Minsheng WM customer
Annual income RMB 200,000 ~ 500,000
50% for male, and 50% for female
Descriptions of Interviewees
Focus Group Number
City
存款产品,自动的条件转账功能(Sweep)
借款产品, 适用按揭利率
储蓄帐户
活期帐户
房屋资产担保的信用工具
交付渠道
渠道整合层
车贷
ABM
无线 - WAP
网络电视
分行
网上银行
IVR
个人贷款
透支产品
信用卡
共同基金
屋主保险
人寿保险
其它产品
ATK analysis
ATK analysis
Qualitative Focus Group Report
Best Practice Lesson Learned
Output
Input
Product
Feature
Definition
Channel
Definition
High Level Pricing Strategy
Customer Survey Questionnaire
ATK analysis
Out put
Out put
Conduct Focus Group Study to Understand Unmet Customer Needs
Conduct Best Practice Study and Draw Lesson Learned
Input
Input
Input
. The groups were selected to represent the customer segmentation and also to understand the banking relationship key factors and customers’ product and channel preferences
Illustrative
Sample Questionnaire
Understand Customer Characteristics
and Basic Needs
1
SH
2
BJ
4
Total
1
GZ
The interviews must meet the following requirements:
Current Minsheng WM Customer
None Current Minsheng WM customer
Annual income RMB 200,000 ~ 500,000
50% for male, and 50% for female
Descriptions of Interviewees
Focus Group Number
City
Use Focus Group to Build Knowledge
Illustrative
Sample Focus Group Plan
Sample Focus Group Report
Qualitative Focus Group Report
. Once identified the key options on critical aspects, a more tailored customer survey is important to screen out the critical/un-necessary features
RMB 500 for balance below
xxx
40% above standard rate
Potential Range
2
1
Early repayment fee
2
1
5
Regulation Implication
3
3
3
Importance to Customer
,,,,,,
One-time installation fee
Monthly service charge
Interest rate
Element
High Level Product Feature
High Level Channel Definition
Illustrative
Customer Survey Questionnaire
High Level Pricing Strategy
4
Purpose None-Specified (., SME )
4
Car loan
5
Deposit vs. Mortgage
5
Current& 1 Time Deposit
Personal Consumption Loan
Deposit vs. Car Loan
Current & Multiple Time Deposit
Functionality
Importance To Customer
Product Feature
4
Home Loan Backed Credit Line
3
Off-set
4
Auto Sweeping
Attribute
Channel
Sales Force
Branch
Direct Mail
Call Center
ATM
Internet
WAP
Activity
Focus
Relationship Management
Transaction, Service
Cost to
Serve
High
Low
Profitability
Revenue Generation
Cost Reduction
Investment
Medium
High
Low
Medium
High
Low
High
Phase II. 2. Business planning stage will specify product feature business requirement to guide technical design, and develop marketing strategy and performance metrics to support product launch
Source: . Kearney
Analysis customer needs
Determine pricing target
Determine demand
Estimate the costs
Analysis competitive price and offers
Selecting pricing method
Take pricing decision
Identify target audience and relationship to the product
Design messages to be communicated
Determine communication tool and high level budget
Analysis customer requirement
Define distribution target
Design alternatives channel for distribution
Design sales/service focus of each channel
. Detail Product
Feature Design
Synthesis customer survey findings
Specify product feature into detail component
Work with Minsheng team to draft business requirement for technical design
2. B. Marketing Strategy Development
Activities
Deliverables
Objective
Facilitate business requirement development to guide technical design
Specify appropriate pricing strategy to guide product launch
Specify communication strategy to enhance product awareness/image with meaningful investment required
Specify channel strategy to maximize efficiency of distribution channel
Product feature
Business requirement to initialize technical design
Pricing Strategy:
Decision on key price element
Potential Loyalty program
Strategy
Strategy
Strategy
Communication Strategy:
Product name and communication messages
Communication channel mix
Channel strategy
Channel mix and phase out plan
Sales/service focus of each channel
2. Business Planning
Business planning stage will specify product feature business requirement to guide technical design, and develop marketing strategy and Performance metrics to support product launch (con‘t)
Source: . Kearney
2. E. Develop
Implementation Plan
Identify best city for product pilot
Develop pilot plan and pilot tracking framework and mechanism
Identify potential risk and risk mitigation measure
Develop detail implementation plan for product launch
Identify key success factors
. Ensure
Organization Alignment
Identify organization readiness and change management required (., internal communication) for the new product launch
Design post-launch relevant key position, roles and responsibilities, and key business processes
Design performance metrics to ensure cross-functional coordination
Activities
Deliverables
Objective
Ensure precondition in the organization for the launch of the new product
Identify pilot city and formalize pilot plan
Formalize product launch plan and risk mitigation mechanism
Roles and Responsibilities of Key Positions
Key business processes
Key Performance Metrics
Change management plan
Implementation Plan
Product Pilot Plan
Product Launch Plan
Risk Mitigation Mechanism
. Cost/Benefit Analysis
Conduct financial analysis on required investment (., PD, HR, marketing)
Develop financial model on product volume and customer base projection, and also product profitability and breakeven projection
Conduct high level risk analysis and mitigation plan
Identify the resource needs for implementation and also the cost/benefit estimation
Cost analysis
Business projection
Phase II. 2. Flight plan: Detail product feature and marketing strategy development will be base on quantitative findings from customer survey, as well as high level product feature/marketing mix base on best practice/ focus group sturdy
Led by . Kearney, Research firm will conduct quantitative market survey
200
200
200
200
400
GZ
South
100
100
100
100
200
SY
Northeast
800
800
800
800
1600
Total
100
100
100
100
200
CD
Southeast
200
200
200
200
400
SH
East
200
200
200
200
400
BJ
North
Female
Male
Non-Minsheng Customer
Minsheng Customer
Interview Number
City
Region
Business Requirement to Initialize Technical Design
Pricing Strategy
Decision on key pricing element
Loyalty Program
Communication Strategy
Product Name/Communication Message
Communication channel mix
Channel Strategy
Channel Mix and Phase out Plan
Sales/Service Focus of Each Channel
Product Feature
Product Feature Definition
Channel Definition
High Level Pricing Strategy
Customer Survey Questionnaire
ATK analysis
Out put
Output
Input
Input
Phase II. Fight plan: Cost/Benefit analysis was developed and also practical detailed business design for product launch implementation
ATK analysis
Out put
In put
Cost analysis
Business Projection
Risk Mitigation Plan
ATK analysis
Out put
Input
Business Requirement to Initialize Technical Design
Pricing Strategy
Decision on key pricing element
Loyalty Program
Communication Strategy
Product Name/Communication Message
Communication channel mix
Channel Strategy
Channel Mix and Phase out Plan
Sales/Service Focus of Each Channel
Product Feature
Implementation Plan
Change Management Plan
Key Performance Metrics
Key Business Processes
R&R for Key Positions
the identified product feature, business requirements for IT development can be deployed
Business Requirements
Product Features
Illustrative
xxx
Name of Saving pots can be defined
xxx
xxx
xxx
Priority of Saving pots can be customized
Pre-requisite: Minimum balance of current account > RMB 2000
XXXX
Minimum/Maximum balance of Current and Saving Pots can be customized
xxx
12 Saving Pots Available
xxx
Current Account Connected to fixed deposit
Specification
Key Variables
Auto Sweeping
Offset
Credit Line
Investment Product
Channel
General
xxxxxx
Roll Over for Fixed Deposit
Interest Rate & Processing
Processing
xxx
Passbook
Account Opening Document
xxxxxxx
Minimum Balance Must Be Maintained- Current Account
Product Characteristic
xxxxxxx
Forex Fixed Deposit
Forex Current Account
RMB Fixed Deposit
RMB Current Account
Product Type
Deposit
OpenPlan Specific
Loan
Inve
s
tment
Channe
l
decision needs to be made after understanding of demand, costs and competition and to select proper models on different pricing elements
%
%
%
Early repayment fee
…
RMB5000
RMB5
%
Option 1
…
RMB3000
RMB10
%
Option 2
…
RMB2000
RMB15
%
Option 3
,,,,,,
One-time installation fee
Monthly service charge
Interest rate
Element
Illustrative
Pricing Decision on Key Elements
Demand
Costs
Competition
Pricing Strategy
Loyalty Program
Pricing Models
Need to identify what is the current
standard mortgage loan
. Communication tools and messages can be defined based on target audience and the relationship to product offering
Communication Strategy
Product Name
Communication Messages
Channel Mix
Channel Mix & Communication Messages for Different Segment
mix will be determined by customer requirements and the sales/service focus of each channel will be deployed along value chain
Channel Mix
Primary
Secondary
Alternative
Illustrative
Channel Strategy
Phased Out Plan
Sales/Service Focus of Each Channel Type
. Resource requirement for product launch needs to be identified by each major elements…
H
Illustrative
IT Investment
Internal Staffing
External Program Development
System Hardware Costs
System Software Costs/Licenses
Channel Hardware Cost
Channel Software Cost
Total
Category
Total Cost (RMB Million)
Year 1
Year 2
Marketing Investment
Staffing Training/Incentive
Others
High Level Communication Plan
Technical Design WorkPlan
High Level Channel Strategy
High Level Pricing Strategy
Cost Analysis on Product Development & Launch
. …based on key assumptions derived from customer/market understanding, a financial projection can be developed
Non-interest Income
()
()
Operating Income (Loss)
7
5
4
3
2
Operating Cost
0
0
0
3
5
Non-recurring Cost
40
Interest Income
75
28
12
3
1
Product Volume
8
4
Customer Base
Year 5
Year 4
Year 3
Year 2
Year 1
Category
Break-even
Illustrative
Product volume/Customer Base Projection
Income Statement
Key Assumptions
Business Projection
alignment needs to have cross-function roles and resposiilities /processes defined, and also the performance measurement for relevant functions
Illustrative
Change Management Plan
Key Performance Metrics
…
…
……
Finance Team
Monthly
Profit & Loss
Retail Team
Daily
Asset size
Service team
Bi-weekly
Service Level
IT team
Bi-weekly
IT development schedule
Responsibility
Frequency
Product Development
Retail/Credit Card/Treasury
3 Month
Profit & Loss
Retail
Monthly
Total Deposit
xxx
xxx
xxx
Retail/Credit Card Center
Monthly
Credit Card Balance
Retail – Customer Team
Monthly
Total Loan
Retail - Customer Team
Monthly
Assets Size
Retail – Customer Team/Call Center
Monthly
No. of Registered Customers
Responsibility
Frequency
Product Performance
Cross Functional Position/R&R
Key Business Processes
. Implementation plan would include design of pilot plan and an overall product launch plan
Launch Plan
Pilot Plan
Illustrative
Implementation Plan
Risk Mitigation Mechanism
Phase . Our involvement in PMO and Pilot prepration process will ensure effective and efficient PD execution
. Pilot/Launch
Preparation
Assess product development and launch risk
Develop risk management strategy
Implement risk management initiatives
Identify communication initiatives
Facilitate communication initiatives (., workshop)
Coordinate meetings schedule and manage issue-driven agenda
Assist with meeting process and Follow-up on decisions made
.
PMO
Develop PD execution workplan and metrics
Track/report workplan and metrics
Propose initiatives to facilitate progresses if PD progress out of track
Activities
Deliverables
Objective
Ensure PD progresses quickly
Work plan/ tracking report
Metrics/tracking report
Initiatives to facilitate progress if needed
Risk assessment
Risk management strategy and initiatives
Internal cross functional communication sessions
Steering committee meetings and follow up
Work Plan Mgmt & Metrics Tracking
Risk Management
Communication and Steering Committee Coordination
a
b
c
a
b
c
Identify, raise and resolve PD risks
Ensure communication consistent with PD objectives
Ensure effective senior involvement
Prepare business tool/conduct training to support product pilot and launch
Product manual
training material/sales guide
RM training
Design and prepare internal product management manual (., key processes & policies)
Develop RM training material and sales guide
Conduct bank-wide RM training
3. PMO and Pilot/Launch Preparation
. Project Management Office is responsible to track and facilitate the product development process…
Case Example
Workplan/Tracking Report
Metrics/Tracking Report
. Identify and facilitate initiatives to mitigate risk factors, so as to ensure the success of overall processes
Legal block to product features/service channel
Unquantifiable cost impact
Major cost impact
Significant difficulty in work-around
Customer irritation
Minor cost impact
Identified and acceptable work-around
Localized impact
Red
Amber
Green
High
Impact
Low
Impact
Risk
Rating
Criteria
What are the risk drivers?
Launch timing
Technical requirements
Internal staff complaints
What are the risk hot spots? What areas of the business are subject to major risks?
What further actions are needed to address key risks?
Key Questions
Illustrative
Risk Registry Report
A tool for PMO to log and track the risk registry, responsibility, action taken, progress and closing
Risk Assessment
Risk Management Strategy & Initiatives
. Coordination is required by PMO effort on both cross-functional communication and steering committee communication, to ensure effective support from key stakeholder of product development
Illustrative
Internal Cross Functional Communication Session
Steering Committee Meetings & Follow Up
. Business Design aims to prepare practical tools to support the pilot, including process, training and external communication plan
Training Program Example
Product Manual Example
Illustrative Example
Product Manual
I. Executive Summary
II. Product Feature Introduction
III. Processses
1. Account Opening
2. Credit Line Application
3. Loan Drawdown
4. Repayment
5. ……
VI. Policies
1. Fee and charges
2. Credit Policies
3. Complaint Handling
4. ……
VII. Performance Tracking
IX. Help Desk
X. Appendix
Table of Content
Our Perspective on OpenPlan and Recommendation to Minsheng
Proposed Project Approach
Team Structure and Work Plan
Why A. T. Kearney
Appendix
提供领导与项目指导
解决问题以及困难
积极的参与
每月/定期更新信息
Retail Banking Subject Mater Expert
Bill Turner (Growth Strategy, New York)
Rajnish Bharadyaj (Product Development, New York)
Bruno Laskowsky (Wealth Management, Brazil)
Denise Grieffenhagen (Product Development, Germany)
William Yin (IT Implementation, HK)
Guido Rossi (Product Development, Italy)
Jaromír Babinec (Product Development, Prague)
Tomoya Hasebe (Product Development, Tokyo)
Project Leadership
Minsheng
TBD
Kim Ghatalia
Sherri He
管理并领导项目工作
配置资源
解决问题
沟通管理
跟踪并汇报进度
日常执行
负责分析、访谈以及完成报告
Steering Committee
Project Team
Minsheng
2-3 Team Members
ATK
3 Consultants (2)
Preliminary
Proposed Team Structure
The project team will be staffed with experienced consultants from China unit, supported by global senior experts
注: (1) 特约顾问，将有较多的时间与项目组共同工作；报价前将确定其项目分配时间
(2) 项目组特约专家，在本项目报价前将确定与项目组成员共同工作的时间
Minsheng
Mr. Gao Feng; TBD
ATK: Luke Yang
The Preparation and Business Planning Stage will take 11 weeks, including 8 weeks of ATK Project Work
Week
1
2
3
4
5
6
7
8
9
10
11
Task
Steering Committee Meeting
Phase I
. Market Analysis
. High Level Product Feature/Marketing Mix Development
High Level Hypothese Formation
Customer Survey
Phase II
. Detail Product Feature Design
. Marketing Strategy Development
Pricing Strategy
. Communication Strategy
. Channel Strategy
. Cost/Benefit Analysis
. Ensure Organization Aligenemtn
. Develop Implementation Plan
Research Firm Progress
Milestone
ATK Progress
The PMO and Pilot/Launch Preparation Phase will take 24 weeks
Research Firm Progress
Milestone
ATK Progress
Task
Week
13
14
15
16
17
18
19
8
9
10
11
12
13
20
21
22
23
24
25
26
27
28
29
30
31
32
Phase II
Work Plan Management Tracking
Performance Metrics Tracking
Risk Management
Cross Function Communication
Steering Committee Coordination
. Pilot/Launch Preparation
Product Manual Development
Training Material Development
RM Training
9
10
11
12
Table of Content
Our Perspective on OpenPlan and Recommendation to Minsheng
Proposed Project Approach
Team Structure and Work Plan
Why A. T. Kearney
Appendix
. Kearney has extensive experience in assisting global leading players …
Select Clients
New Product Design
Corporate banking
SME banking
Retail banking
Insurance
Product Development Capability
Process improvement
Organization design
Performance measurement
Change Management
Core Banking System/IT Strategy
Business Need Identification
Vendor Selection
Project Focus
Selected Clients and Project Focus
… on innovative product development and product development capability enhancement
Developed market entry strategy of reverse mortgage product for Italy market, with joint effort of legal service, government and investment banks
Assessed economics by customer segmentation study and scenario analysis
Europe
Leading Insurance Company
Used a four-part framework to reinvent the Product Development Process for the bank’s leading online cash management product
Defined process flows, roles, frameworks and tools throughout the Product Development Process
US
Leading Private Bank
Introduced life-cycle product concepts
Rationalized existing product portfolio and marketing strategy to maximize customer retention
Re-engineered development process and cross-function cooperation
Europe
Major Private Bank
Developed SMEs loan product and bundling service
Developed related channels and organizations for SME banking business to be launched successfully
Japan
Major Private Bank
Developed SME loan product
Helped the client to launch their SME banking business successfully as the first mover in Japanese banks
Japan
Leading Regional Bank
Project Description
Region
Client
Selected Product Development Related Experience
… on innovative product development and product development capability enhancement (Cont’d)
Conducted opportunity study and designed product offering and marketing plan
Studied and developed operational launch : commercial action plan, communication plan, sales force formation
PERP product offer launch in January 2004 and PERCO product offer launch in Q1 2004
France
Leading Financial Institutions
Developed product and bundles for different customer segments
Designed loyalty management initiatives
China
Major Telecom Operator
Developed a flexible product strategy with a robust product development and product management process, and a detailed implementation plan
Developed Ideas for new promotional products to spur customer acquisition as well as ideas for life-cycle products to enable retention in jeopardized segments and cross-selling across the entire customer base
German
Leading Savings Bank
Optimized product portfolio
Developed product portfolio management processes
China
Major Telecom Operator
Project Description
Region
Client
Selected Product Development Related Experience (Cont’d)
We have a team of experts in the product development areas covering various topics, which could be leveraged by Minsheng
Co-led a joint effort between . Kearney and the TowerGroup to develop perspectives on achieving top-line growth in retail banking via product innovation
Conducted a feasibility study for developing a community banking business for a leading Thai bank
Vice President, New York
Rajnish Bharadwaj
Over 30 years as a financial services consultant in the US, Europe, Korea and Greater China.
Led retail banking product and channel growth strategy projects for important banks in many countries
Vice President,
New York
Bill Turner
Close to 25 years of financial services consulting and industry experience
Experience with leading Asian banks include retail banking growth strategy, business unit redesign, core process improvement and developing cost reduction plans
Vice President, Shanghai
Luke Yang
Over 15 years of international consulting experience in Financial Service industry
Led the segmentation study for upscale customers for one leading Brazilian bank
Vice President, Sao Paolo
Bruno Laskowsky
Over 10 years of consulting experience, focused in Financial Industry
Expertise in retail banking growth strategy, product offering and operation enhancement, including a recent private banking operation improvement project for a leading European private bank in Asia
Principal, Hong Kong
Kim Ghatalia
Relevant Experiences
Position
Name
Selected Product Development Experts
We have a team of experts in the product development areas covering various topics, which could be leveraged by Minsheng (Cont’d)
Director Business Development Retail/SME Banking and bancassurance at the largest Czech/Belgian financial group and also developed and launched unique financial advisory service “Key plan”
Participated in product business planning for the leading Czech insurance company
Senior Manager, Prague
Jaromír Babinec
Helped Japanese Mega bank to develop a SME product offering, developed marketing strategy, and designed organization for marketing planning/execution
Rebuilt the product/channel strategy and realigned sales/marketing divisions for a Japanese Major bank
Manager, Shanghai
Tomoya Hasebe
Designed new product offering for a leading international insurance company, including customer needs analysis based on segmentation, legal feasibility, distribution strategy and operational processes
Developed and implemented lifetime (reverse) mortgage for a major Italian financial institution
Senior Manager, Rome
Guido Rossi
Design of product strategy and development blue print for active management in the retail and affluent segment for regional bank
Development of a market entry strategy and implementation for affluent segments of a global FI
Principal, Berlin
Denise Grieffenhagen
Relevant Experiences
Position
Name
Selected A. T. Kearney Product Development Experts (Cont’d)
Lastly, we offer unique insights from our research on product innovation
Selected White Paper and Book on Product Development
“Achieving Performance Breakthroughs in Retail Financial Services – Realizing Top Line Growth via Product Innovation”
In this report, A. T. Kearney explore the state of the art in product development in the US retail banking industry
The study was based on best practice product innovation analysis in European and Australia market, and how the US banks can leveraged experience from these international leading players
“The Steps to Be a Unique Marketing Innovator for Japanese Banks”
In this book, . Kearney identified that one of the most critical factors for the revitalization of Japanese banks is to differentiate themselves by the marketing excellence
Referring the product innovation cases of . and European banks, . Kearney defined the steps to develop outstanding innovative product which is executable in Japanese market
1
