ING Direct Gets It Right With Great Business Model Innovation! [CASE STUDY]
- Megan Dougherty
Banks aren’t winning any kind of business popularity contests.
Between their high rates and fees, to the terrible service, to a general perceived lack of trustworthiness, banking has become the industry that we all love to hate, and for good reason; when a company charged with stewarding your money starts demanding fees and issuing service charges of all kinds just to access your money, there’s a problem.
(And this is all in addition to the enormous income they already earn from interest and investments!)
Actually, this isn’t specific to banking – customers usually don’t like any fees they consider unfair or excessive, no matter what the industry.
They often don’t understand what’s involved with running a business, and a “service charge” often seems like nothing more than a “cash grab”.
But no industry is so far gone that they can’t do better, and when an example of excellence appears, it’s worth paying attention to, and learning from!
Yes, that’s right, we’re talking about ING Direct, the little online bank that changed it all through business model innovation…
Stick ‘Em Up and Hand over the Cash (Charges to Access your Own Money?!)
Banks, like many businesses, have high overhead costs to cover just to stay in business.
These costs can include huge office buildings, hundreds of small branches, office equipment for all of them, expensive professionals, and huge marketing budgets.
That money has to come from somewhere, and of course the first place that the banks look to is their clients’ pockets.
Now, yes, we may have an axe to grind with big banking, but the truth is that most businesses operate this way. Your costs ultimately have to be covered by the revenues you get from your customers, right?
But you can’t just say “I’m going to charge you $10 for my product, and $5 for my rent” – no customer would agree to that. So you charge the full $15 for the product. It’s the cost of doing business.
The trouble is that sometimes, businesses get greedy, and they realize that with a captive audience (it’s not like you’re going to keep your money in your mattress), they can use these excuses to add fees upon fees upon fees.
Hence, the service charge!
Somewhere along the way it became “normal” for banks to charge customers for the right to access their own money, even though, traditionally, banks have made their profits elsewhere.
The New Golden Boy: ING Plays With Business Model Innovation
As banks go, ING is pretty new on the scene.
It was founded in 1991, and has wanted to be different from the very beginning.
The internet was a new phenomenon, and people were still getting used to it, but ING nonetheless decided that cyberspace would be their vault.
Websites would be their offices, and their tellers would be available by phone or online. That’s it.
This may seem like a no-brainer today (does anyone still bank at their branch?), but back then it was pretty risky.
It was also brilliant, though, because it meant that ING had MUCH lower operating costs than their competitors, which meant that they could pass those savings on to their deliriously happy customers, and still turn a sizeable profit!
Mortgages, investments, savings accounts, checking accounts… ING does them all, and without having to resort to charging their customers for trivialities like accessing their own money.
And the customers loved it.
Love it enough, in fact, to abandon brick and mortar institutions, do their banking online…
Customers Flocked to the Bank that “Get’s Them”
It worked. Oh boy, did it ever work!
That joy at a bank actually doing something nice translated into hordes of new customers signing up for accounts and services.
By cutting expenses and foregoing the traditional brick and mortar style of banking, ING was able to create a massive, loyal following and reap tremendous profits from interest and investments.
More people sign up for ING every day because they make it easier, and their costs are so much lower that they can go so far as to give you a cash bonus for opening a new account!
Let me say that again: The bank gives you money when you sign up!
ING is growing like wildfire, and making money hand over fist.
So… what’s the lesson for you, our reader?
Don’t Be Afraid to Be Different… Especially When Everyone Else Sucks!
Are you maintaining overhead or spending money just because “that’s how it’s done” in your industry?
Do you feel that it’s just expected of you to have an office and an assistant? A nice car? Expensive suits?
Are those things really making the sales and bringing in new clients and business? Or are they extras that don’t do much for you?
Don’t get me wrong… not all overhead is bad. In fact, a lot of overhead is good.
(Note from Danny: Megan has been some of the most valuable overhead at Mirasee since 2010!)
Just don’t assume that because you’ve had it, you must need it.
Maybe you don’t.
Maybe you can dump it, and save a pretty penny in the process. Maybe it’s just getting in the way of the experience your customers are looking for. And maybe you can pass those savings on to your customers, or reinvest that cash to make their lives even better…
You’ll Be Surprised What You Can Live Without
Here’s an exercise for you to do as soon as you have a free hour.
Sit down with a pen and paper (or word processor if you prefer), and make a list of all your overhead expenses. This can include, but certainly isn’t limited to:
- Office Rent
- Phone and Internet Service
- Office Equipment
- Company Car
- Retail Space
- Website and Maintenance
- Other Stuff (come on, think about it!)
Now, is there anything on that list that you don’t necessarily need? Or maybe something that you do need, but that you could get for a better price?
Pay attention to your customers, and the way that they interact with you. Are you offering options that most of them don’t seem to be interested in? Then maybe you should just eliminate those options, and make better use of the resources that were paying for them! Don’t be afraid of a little business model innovation.