Strategic Advantage Reaction Paper

Pages: 6 (1762 words)  ·  Bibliography Sources: 6  ·  File: .docx  ·  Level: Master's  ·  Topic: Business

ING, Rebel in the Banking Industry

What is ING Direct's competitive strategy in the U.S.A. And how does this enable them to achieve superior financial performance?

ING Direct concentrates on creating relationships with its customers, leading to an eventual bond of trust being created that leads to greater investment and savings. The strategies that ING Direct relies on to create and maintain this trust emanates from every branding, marketing, selling, financial services and customer service strategy (Dunford, Palmer, Benveniste, 2010). The coordinated efforts of all these strategies together are highly effective, as they position the bank as egalitarian in nature, willing to work with anyone.Get full Download Microsoft Word File access
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Reaction Paper on Strategic Advantage Assignment

The obsession with measuring results, and using those insights gained to further increase process efficiency and performance also contributes significantly to their financial performance as well. This obsession with measuring results and slimming down processes has also led to ING Direct only concentrating on savings accounts, home mortgages, home equity lines of credit and mutual funds. As the case shows, ING has chosen to differentiate itself by making its product strategy simple, straightforward, and easily understood and used by consumers. The simplification of the services strategy translates into a cost of $400 per account for maintenance and administration, a fraction of what a typical bank must absorb to support more traditional services programs. This reduction in services to only the most basic services, with no ATMs, expensive branches with walk-up windows, or support for massive organizational structures that are typical of the banking industry, allows ING Direct to invest in streamlining processes and dropping operating costs while increasing savings rates and yields on their certificates of deposit. The case makes the point that their rates are often multiples above the industry median, which is an attractive incentive to consumers looking for competitive rates during challenging economic times. By reducing operating expenses and passing on cost savings from process efficiency gains to consumers, the bank also is providing further foundation for building a trusted advisor partnership with their customers. The center of innovation in any service business is the ability to set accurate expectations, consistently exceed them, and earn the long-term trust of customers as a result (Kantsperger, Kunz, 2010). ING Direct succeeds because it creates this contract of expectations and experiences delivered to its customers. The ability to create an keep commitments to a wide diversity of customers using a simplified service strategy fulfills the most basic contract for services between buyer and consumer, and that is the creation of trust and consistent performance (Cutcher, 2008).

Another aspect of the ING Direct's competitive strategy that leads to exceptional financial performance is the market position of being on the customers' side from the beginning. This bank is unlike many others because it actively tells potential prospects and customers why saving is important, and just how much they can earn on their savings with ING Direct. This approach to marketing is one of customer advocacy, a proven strategy for creating trust with consumers in services industries over time (Kantsperger, Kunz, 2010). Even the messaging that appears on the surface as non-conformist and even rebellious also contributes to the company's financial performance. This approach to marketing the banks' services strikes at the heart of the impersonal, often arrogant reputations traditional banks have. The defining of a unique position in a service industry requires integrating the commitment to quality and service with empathy and an appeal to consumers that anyone can participate in the service, not just a specific, often upper-income one (Loonam, O'loughlin, 2008). The non-conformist messaging creates a reputation for ING Direct as the underdog's bank, the bank for everyman, one that is egalitarian in its approach to serving customers. This resonates very well with the age groups that ING Direct is after in the U.S., specifically Millennial and Baby Boomers who want specialized service yet do not want the attitude that goes with it from a service provider. Studies of early adopters of e-banking indicate that the more egalitarian the messaging, the greater the early adoption rate throughout Millennial and Baby Boomer generations (Ozdemir, Trott, 2009). What then appears to be an appeal of non-conformity is actually a galvanizing message that unifies the specific audiences and segments ING Direct hopes to attract to invest with them.

All of these factors taken together serve to create a unified, highly coordinated strategy that pays off with ING Direct becoming the trusted advisor to millions of customers in the U.S. The strategy succeeds despite this bank being Internet-based alone due to the mix of messaging, streamlined services, and a passion internally to measure and continually improve customer-driven processes. All of these factors taken together are creating a unified platform on which ING Direct can confidently set expectations and exceed them, leading to new customers and reducing churn with existing ones. The messaging, services and branding are all synchronized to create a message that this is a bank for everyone, and that the goal is to help customers win first. The flat organizational structure, reliance in Information technologies (it) as a catalyst for process improvement and the cost reductions these improvements drive, passion for metrics, and the CEO's insistence they hire for cultural fit first all combine to create a highly effective business model, all delivered online.

What activities and actions support and shape this strategy?

The many activities, actions and strategies that shape the unified ING Direct strategy all revolve around creating trust with the prospect and earning it over time as they become customers. Instead of relying on a multitude of fees and a labyrinth of conditions, ING Direct concentrates on creating a unified, trusted experience for their customers to earn greater revenues. The focus on unifying all aspects of the marketing, financial services, and customer services strategy has a direct impact on overall e-banking effectiveness and customer satisfaction (Loonam, O'loughlin, 2008). What ING Direct has done is concentrate their efforts on creating a corporate culture that seeks out continual process improvements that yield higher customer satisfaction over time. The case study shows how their unique approach to defining their culture creates value for customers directly and immediately. Screening new hires through intensive training and seeking to find the best possible fit with their culture also assures less churn of employees or turnover, which also contributes to a consistently higher level of service quality delivered to customers. The 20 days spent training on five products is exceptional compared to banking industry standards according to the case. This commitment to training however is critical to ING Direct's success as it galvanizes the entire culture into a common direction.

What also makes ING Direct so effective is the aligning of all efforts to their brand of "Great deals, Responsive. Accessible, Simple and easy, and Passionate" or GRASP for short. This is the galvanizing value proposition of the company and also drives the user experience for prospects and customers alike.

For many banks or financial institutions, supporting this value proposition would be extremely difficult. Banks typically have very rigid processes in place that often cost the customer more in terms of time and expense than the bank, which is how they make their profits. This results in significant customer frustration and churn. One of the most powerful statistics in the case study is 18% of growth is attributable to cross-selling, a remarkable achievement in an industry known for rapid customer churn and high levels of customer dissatisfaction (Dunford, Palmer, Benveniste, 2010). That is the quantification of trust that can transform a business, which it has done for ING Direct. 18% of their growth being gained from cross-selling is also attributable to how consistent the user experience is and how much they are trusted by their customers to deliver reliable information. When a financial institution has achieved the role of trusted advisor, the open sharing of information and financial performance further strengthens the connection between expectations and positive experiences, creating a cycle of purchasing as a result (Berger, Messerschmidt, 2009).

What challenges does ING Direct face in the future and is its strategy sustainable?

For all the success that ING Direct has ad, its future will bring even greater challenges going forward. First, there is the continued churn of customers that cost them a significant amount of profits every year (Dunford, Palmer, Benveniste, 2010). ING Direct began tracking customer preferences using analytics years ago in an effort to understand what factors cause churn (Mattsson, Helmersson, 2005). Despite these efforts, there is still the challenge of retaining the most profitable customers over time.

Second, the firing of 3,500 unprofitable customers based on their cost of support sent a signal to their customer base to not expect support outside the boundaries of the process areas they had defined (Dunford, Palmer, Benveniste, 2010). This was highly risky as it could have been construed as hypocritical to their more egalitarian and non-conformist messaging. Luckily, it worked and the company is much more profitable as a result. Another significant challenge is overcoming the high-volume, low-margin commodity approach… [END OF PREVIEW] . . . READ MORE

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