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CONTENTS
2.1 INTRODUCTION 3
3.1 FINANCE 4
4.1 MARKETING 7
7.1 CONCLUSION 12
8.1 REFERENCE 13
8.2 APPENDIX 15
The report is based on the research on ING Direct. It covers three functional units of
the business which are Finance, Marketing and Operations. We discuss the current situations
of these functional units and their implications to the future. The report concludes with
recommendations to capitalise on the market and to achieve its long-term goals.
2.1) INTRODUCTION
ING Direct established in 1997 by Arkadi Kuhlmann, is one of the six business lines
of ING Group. The bank was built on the foundation of being unconventional. ING Direct
declared itself a rebel with a cause in an era when elaborate business models were more the
fashion, when entrepreneurs spent more time with venture capitalists than they did with
customers, and when being clever got more attention than being authentic (Kuhlmann and
Philp, 2009).
Ever since its establishment there has been a sharp growth in the company
performance. Starting at a loss of Euro 70 million it reported a profit of EURO 691 million in
2006. Definitely those records were the results of a revolutionary approach in the banking
sector and aggressive marketing strategy. Unlike other banks ING Direct is keen on
encouraging its customers to save. Presently, ING Direct is the world’s leading direct savings
bank, active in 9 countries with 22.2million customers worldwide. It sells a limited number of
banking products with a simple slogan: “Great rates, no fees, no minimums”. ING Direct has
a unique approach in marketing and follows tightly controlled operational methods.
Increase in sales revenue and thereby profit through larger customer base
Simplicity in operation
3.1) FINANACE
Finance is concerned with the ways in which funds for a business are raised and
invested. This lies at the very heart of what business is about(Atrill and McLaney,2006). ING
Direct has a very strong financial background which was initially supported by the parent
company, ING Group. ING Direct is the world’s leading direct savings bank. ING Direct
offer great value for their products along with making it as straight forward as possible.
Further they aim to keep their rates consistently competitive. This is done by minimising cost,
branchless operations and no hidden catches.
with industry trends; can point towards the necessary improvements and possible dangers;
and can also reveal profit and growth potential.
Profitability ratio provides an insight to the degree of success in creating wealth for
the owners. They express the profits made in relation to other key figures in the financial
statement. Net profit margin ratio relates the profit for the period to the sales revenue.
Net Profit Margin= Net profit before interest & tax X 100%
Sales revenue
NPM(2006) = 31.21
NPM(2007) = 24.13
The decrease in NPM shows the rise in competition and the economic imbalances
which the company had to face during the period 2006-07.
Capital employed
The sales to capital employed ratio increased in 2007 as compared to that of 2006 and
it implies the effective utilization of capital employed in generating sales revenue. Return on
Capital employed is a fundamental measure of business performance which is concerned with
returns achieved from all long term capital invested.
Capital employed
ROCE(2006) =20
ROCE(2007) =19
The current ratio compares the liquid assets with the current liabilities and is a
measure of short-term solvency. The higher the ratio, the more liquid the business is
considered to be (Brockington,1993). Appendix 4 shows the assets and liabilities of ING
Direct. From that the current ratio can be calculated as follows:
Current liabilities
The recent downturn implicates that in future ING Direct has to be more careful as the
credit market is very weak at the moment and the liquidity in the market is at its lowest. The
year 2007 witnessed the beginning of the credit crunch which in turn reflected in the annual
result. Even though ING insisted its declining profits were a result of loss of shares and not
related to US sub-prime mortgages, it has clearly been hit by the general loss of confidence.
That is why they applied for aid from Netherlands government and received a capital
injection of EUR 10billion (The Guardian). Increase in operating expenses and the
repositioning of UK market also accounted for the decrease in profit. Fluctuating exchange
rates is another reason. Yield curves remained flat or inverted in all currency zones, while
competition for deposits intensified as many banks faced tighter liquidity and increased
funding costs on the wholesale markets. Competition with regard to other banking giants like
HSBC, MetLife etc, focused on online banking making it tough for ING Direct in 2007.
Moreover, non-banks have begun to integrate financial functions into their online offerings,
and the competition has intensified because of increased reach and transparency of online
offerings. (Dewan and Seidmann,2001). ING Direct also incurred a start up cost of 22million
in Japan which also added to the expenditure.
4.1) MARKETING
‘Marketing is the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to create, exchange and satisfy individual and
organizational objectives’ (AMA, 1985).
Cost leadership, differentiation, and focus are the three generic strategies that any
business should pursue to attain competitive advantage (Porter and Millar, 1985). ING Direct
achieved competitive edge and competitive advantage by differentiating themselves from
their rivals in the overall marketing strategies they used and focused on the customers that
they can handle easily. Some of the marketing tactics that they used are:
b) Branding:
Branding is a way to distinguish the goods of one producer from those of another. It is
a name, logo, symbol, package design, or other attribute that identifies a product and
distinguishes it from others (Keller, 1998). ING Direct invested one third of its budget in
marketing programs to build the ING Direct brand. Many customers were attracted by the
combination of rates and its cool image. They had a simple branding strategy with clear
message and feature the bright colour orange (orange colour indicates cheap and reliable
products according to the vision experts), capturing customer’s attention by communicating
in a humorous, anti-establishment tone. Furthermore, they had a strong support from their
parent company in establishing the ING Direct brand.
c) Cafes:
Another unique feature of the marketing strategy is ING Direct’s cafes. The cafes are
the medium which introduced the customers to the brand. The cafes offer the customers a
place to speak and receive some financial advice with an ING cafe member who in turn is a
trained banker.
d) Guerrilla:
“People are sleeping. You have to shock people a little bit to get them to think
differently about how they manage their money. So we wake them up with one of our
marketing campaigns. They switch their money and go back to sleep”
Arkadi Kuhlmann introduced this unique and successful marketing tactics to make
people think differently about how to manage their money and to make them save. Appendix
6 shows some of the guerrilla marketing campaigns of ING Direct.
e) Greenfields:
They used green fields like Canada to grow their business because there was small
number of competitors and it was the ultimate place for them to grow.
competitor’s strategies, attitude to change and risk, market structure and opportunities
(Appendix 7). ING Direct had strong objectives that has been already mentioned and had
strong resources to support their marketing strategy from the ING group. They have intensely
analysed their competitor’s strategy that was to make people spend more, here, they used a
different strategy to make people save more. They reengineered the banking industry by
replacing branches with cafes which made more customers attracted towards them and finally
their marketing strategy improved their opportunities to grow.
ING Direct’s brand has been strongly established in the past and is a well recognized
brand in the banking industry. It has already done a huge investment in marketing in the
recent years so in this present financial condition they should concentrate more on cutting
down cost in each and every functional area. Most of the banks have been stuck by these
economic conditions and ING Direct is not an exception, so in future less investments should
be made in marketing and key concentration should be given to retain their existing
customers .Another main problem is the queuing method of customers when they frequently
contact the call centre, but in this scenario it is not fair to do so, as there are many options for
the customers to switch.
Arkadi kuhlmann introduced a unique system called ‘Orange code’ which indicates
that all the employees have the same goal and removing all the titles and offices. They
recruits people who are willing to do things differently, people with right attitude, and those
who can be easily trained and introduced to a competitive selling culture, but above all they
choose people whose personal values fit with the values of ING Direct. According to Kelly
(2009), human capital is a source of sustainable competitive advantage as it is rare and
difficult to imitate. Most of the employees consider ING Direct as an attractive employer for
the strength of its business model, and its non banking culture.
Heskett et al.
This model establishes a strong relationship between profitability, customer loyalty,
and productivity in ING Direct. Profit and growth of the firm are boosted by customer
loyalty, which has a direct impact on customer satisfaction, that is influenced by the value of
services to the customers and value is created by satisfied, loyal and productive employees in
ING Direct. Employee satisfaction eventually results in high quality support services and
policies that enable employees to deliver results to customers. ING Direct establishes a good
and strong relationship with both these forces which in turn helps in smooth running of the
firm. The most exciting fact is that more than 90 percent of the customers of the company
believe that they are getting a much better service than the competitors and 99 percent of the
employees are proud about their employer.
In order to satisfy their execution strategy in future i.e. to reduce cost of operation,
deliver better value to the customer, enable closed loop tracking and selling, efficiency
improvement, increase revenues , generate superior return, and higher cross selling rates, they
have to improve their operational performance (Refer Appendix 9). Business Process
Management (BPM) model is used to improve the company’s operational strategy which in
turn may help to achieve their business objectives. BPM is an approach dependent upon
strategic and operational elements, use of modern tools and techniques, people involvement
and on a horizontal focus to best suit and deliver customer requirements in an optimum and
satisfactory way (Kelly, 2009). As ING Direct is a flat organisation depending heavily on its
technology for delivering high quality to its customers, we suggest BPM for further
improvement in ING Direct’s operational strategy.
7.1) CONCLUSION
As credit crunch prevails in the current economy, ING need to capitalise on its
‘simple’, ‘safe’ and ‘savings’ bank image. The financial, marketing and operational aspects of
ING Direct was analysed in the report and few recommendations are suggested. As all these
aspects are strongly inter-related, a change in strategy of any of these aspects will reflect on
other. In ING Direct, marketing and finance acts as supportive functions to operations
management. In order to maintain its image in the current business scenario, ING Direct need
to be extremely careful in its future plans. The level of success achieved by ING Direct holds
some important lessons and offers, some much-needed inspiration to a business world; that
could use a little of both right now.
8.1) REFERENCE
1. AMA (1985),’AMA Board Approves New Marketing Definition’, Marketing News,
1 March 1985, pp-1.
2. Atrill, P. (2006), ‘Financial Management for Decision Making’ (4th edition), Prentice
Hall, United Kingdom.
3. Atrill, P. and McLaney, E. (2006), ‘Accounting and Finance for Non-Specialists’ (5th
edition), Prentice Hall, United Kingdom.
9. Heskett, J., Jones, T.O., Loveman, G.W., Sasser Jr., W.E. and Schlesinger, L. A.
(1994), ‘Putting the Service-Profit Chain to Work’, Harvard Business Review, 72(2),
pp 164-170.
11. Kotler, P. and Armstrong, G. (2001), ‘Principles Of Marketing’, Prentice Hall, USA.
12. Kuhlmann, A. and Philp, B. (2009), ‘The Orange Code’, John Wiley and Sons, Inc,
United States of America
13. Levitt, T. (1960), ‘Marketing Myopia’, Harvard Business Review, July/Aug 1960,
pp.45-56.
16. Porter, M.E. and Miller, V.E. (1985), ‘How Information Gives You Competitive
Advantage’, Harvard Business review, July/Aug 1985, pp.149-160
17. Schroeder R.G. (1993), ‘Operations Management: Decision Making in the Operations
Function’ (Fourth Edition), McGraw-Hill, Singapore.
18. Slack, N., Chambers, S., Harland, C., Harrison, A. and Johnston, R. (1995),
‘Operations Management’, Pitman publishing, United Kingdom
20. Valentin, E.K. (2001), ‘SWOT Analysis from a Resource-based view’, Journal of
Marketing Theory and Practise, 9(2), pp 54-69
21. http://www.ing.com/group/index.jsp
22. http://annualreports.ing.com/2008/report/ing_direct/index.html
23. http://www.ing.com/xpedio/annualreport2007/report/ing_direct/index.html
24. http://www.bloomberg.com/apps/quote?ticker=ING%20direct
8.2) APPENDIX
Appendix 1
Strength Weakness
• Strong brand image and customer • Declining revenues
focus • Narrow product range
• Support from parent company • Less face-to-face interaction with
• Efficient use of technology customers
Opportunity Threat
• Cross-selling • Intensified competition
• Explore new markets • Economic breakdown
• Weak competitors • Security threats
• Rising asset management market
Appendix 2
Appendix 3
Appendix 4
Appendix 5
Price
• High rates
Product Place
INTENDED
Physical Evidence POSITIONIN
G Promotion
• Cafes for customer
interaction • Advertisements
People Process
Appendix 6
Appendix 7
ATTITUDE TO
ORGANISATIONAL
CHANGE
OBJECTIVES
Branchless Operation
Make people save more
Reenergised banking
Provide high rates
industry
MARKETIN
G
STRATEGY
COMPETITOR
MARKET
STRATEGIES
OPPORTUNITIES
Traditional banking style
Weak competitors due to
to make people spend
economic crisis
more
START
VISIT CAFE
START NO
AN
ACCOU END
NT
YES
DELAY
IN
RESPO
NSE
NO
APPROV
ED END
YES
COLLECT MEMBERSHIP
DETAILS
CHOO NO
SE
END
PLAN
YES
1
Liverpool Business School
24 | P a g e
ING DIRECT CASE STUDY
ANY
NO END
INTERNET
BASED BANK
ACCOUNT
YES
LINK THIS
ACCOUNT WITH
ING SAVINGS
ACCOUNT
NO
INVEST
END
MONEY
YES
END
APPENDIX 9
-Convenience
Tracking &
-Pricing
selling
Operations Consistent
acquisition costs
Execution
by using database
Marketing
Improved
Technology Generate
Higher
Platforms Superior
cross-sell rates through Integrated
Returns database
Call centre
marketing
Marketing
operations