What is Negative Target Market
by Leica Ison
Negative Target Market
A significant design obligation from the Design and Distribution Obligations requires product issuers to make a target market determination (TDM) in relation to each of their products. The product designer essentially needs to make a judgment about product suitability for the intended retail customers.
ASIC has since indicated that is useful to identify a "negative target market" as part of the TMD. This would set out details of those consumers for whom the product is unsuitable and not likely to meet their needs. Good product governance sets and monitors the TDM and channel approach at the key product lifecycle stages including planning, development, introduction, lifecycle of new and existing and divestment of products or features.
In Europe, the European Banking Authority (EBA) on the Application of the Guidelines on Product Oversight and Governance (POG) arrangements provides some good practice insights for making a target market determination.
1. Importance of product reviews to ensure sales not made to non-target market
Creating a product review template that requires the product owner/product developer and business unit to clearly outline what measures are in place to ensure that sales are not made to non-target market customers. The product review template could be designed in a way that necessitates internal mandatory approvals. Another good practice identified involves analysing whether customers for a particular target market need such a product or service. The manufacturers/Issuers/distributors can rely on customer feedback via surveys before the development of the product and after the product launch.
2. Incorporating customer feedback into product monitoring
Another good practice identified involves analysing whether customers for a particular target market need such a product or service. The manufacturers/Issuers/distributors can rely on customer feedback via surveys before the development of the product and after the product launch.
3. Attention emerging Digital channels
Taking into account that digital channels have been identified as a factor that facilitates access to credit by consumers, giving further attention to the risks that consumers might face due to the increasing use of digital channels by FIs (e.g. exposing consumers to market practices that exacerbate behavioural biases) when improving their POG processes.
How to set a target market determination
As explained by ASIC, industry must design fit-for-purpose products that meet consumer needs. They will also need to take steps to ensure their products are reaching the right consumers.
Quality framing of your segmentation and target market not only improves your product marketing to differentiate your product but it now also serves to meet your overall regulatory obligations in your design and distribution.
When you set your target market, it is also vital to continue assessing and refining your product and target market determination to stay in sync with changing market trends, competitive landscape and customer needs, on a continuous basis. Is the product delivering what you promised in your unique value proposition, are the outcomes measurable and have you conducted customer UX/UI interviews to generate distinctive insights? This step helps uncover new ways to engage your customer and deliver value - innovate your features, service model and commercial model.
Product managers are very familiar with the importance of assessing their target market and understanding what problem or customer pain point you are solving for. In ASICs DDO you are required to set a target market for your product strategy – ideally at the planning stage and put it in writing. The financial product must be consistent with the likely objectives, financial situation and needs of the people in the target market.
A Target Market Determination describes who a product is appropriate for (target market) and any conditions around how the product can be distributed to customers (such as a condition that a customer must have received personal advice about a product before they acquire it.
Skyjed has created a check-list to help you get started on your target market determination so you can institute a review process that doesn't slow you down.