July 31, 2006

Keep it simple. Stay focused. Avoid cross-selling.

Bigger Isn't Always Better is the second book I’ve written that lauds the ING Group. Based in Amsterdam, it’s the largest bank in three of Europe’s smaller countries – Belgium, Luxembourg and the Netherlands.

When ING expanded operations to the US in 2000, it didn’t open a network of branches (or buy somebody elses). Instead it started ING Direct, a high-yield internet-only savings bank. In a June 3rd New York Times interview, Michel Tilmet, ING’s chairman, shared his formula for bloatless-growth:

“In every country where we are, we have competitors offering higher rates than we offer. But you've got to be very careful, because, you know, consumers are smart. We have a product offering that has no commissions, no minimum, no tricks. Does the competition offer any tricks, like ties to something else that you have to do to be there, or a minimum balance, or a minimum usage? We have to be better than the next most comparable alternative.”

“For us, cross-sell is not what we want to do, because we want to keep it simple. We know that out there, the largest pool of earnings in the retail banking world comes from savings and mortgage — those are the only two things that we want to do. If you try to cross-sell too many products, you confuse the clients about what you are and your costs escalate exponentially.”

The Times interviewer was surprised to hear a banker coming out against cross-selling:

“Well, it's unorthodox, yes, because when you talk about banking, you think about branch networks. And branch networks add a cost that can only be justified by cross-selling. But we have chosen another distribution alternative, which is much more cost-efficient but also requires that we focus on what we try to do.”

Keep it simple. Stay focused. Two good ways to avoid the bigger-is-better trap. Going after smart customers isn't a bad move, either.


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