Targeting Market Selection - In the question, it has been suggested that a high Customer Participation in a highly reduced service should have customer handling activities, which are of low-risk category. Example given is of the customers of Southwest Airlines, where customers are needed to take care of activities like food, baggage etc which are not something which can cause risk (unlike flying the plane itself). Normally, banking is considered a highly ordered service, where maintaining relationship with the customers is important. However, in this case, the customers are targeted in a manner such that most of the services being offered are standardised. This allows them two major benefits a) Offering lower costs by means of achieving operational efficiency. b) Targeting appropriate customers especially since they are offering higher interest rates for savings bank accounts. This helps them in getting customers who would need such services, even if there are less non-monetary benefits. Targeting is also done in the mode of conduct. Here most of the business is conducted online / over phone. Most of the HNI people would prefer to deal with an actual person, not trusting a transaction over the telephone (unless he/she knows the person at the other end of the line). Hence, the target essentially became the financially savvy, entrepreneurial crowd who were comfortable with the latest technology. As this segment grew, so did ING Directs business. Service Operating System Banking is generally a mass service, with huge needs of labour. However, with the reduction of the already commoditized portfolio that is on offer for the customers, the operations are more efficient. As such, the service provided here becomes more like a service factory where even a call-centre employee can provide efficient service. However, even then there is need for good service, because otherwise, bad publicity goes viral (WOM) quickly online. As such, they have internal parameters for internal service standards a) Quick delivery of service responding within 20 seconds to a customer call (achieved 80%), creating an account online in 5 minutes. b) Month-long training on the products being offered. It is not sure of that much training on these products is actually required (since retail banks do with 1-week training with many more products). It might be important rather to make the employees accustomed to the culture of the organisation, or train them for the job requirements. c) They decided that internally the business of ING Direct would be in markets where parent company is not there. Also, there are many small players so that it can differentiate on price by gaining volume and high efficiency. Service Delivery System The bank has developed a system which it calls Unbanking. It basically tries to show that it is different from traditional banking system. It started this at a time when other innovations in banking were becoming popular, eg ATMs, Credit Cards etc. All these had already set a tone where banking was getting more and more distanced from traditional banking where people felt the need to speak to bankers to decide on their investments. As such the service delivery system was designed in a way to offer a) No service charges cost was borne by the company (which got absorbed in companys savings). b) Transparency in service offering induced by online banking system c) If there was any risk from traditional banking, it was reduced by introduction of fast and hassle-free service especially in case of no need to move checking account to ING Direct. d) Similarly, setting up of Savings Bank account online helps in two ways 1. Provides customer a high degree of authority (as viewed by the customer). 2. Also, it reduces the time that a service operator has to spend with the customer, thus improving efficiency and requiring fewer operators. e) The new customers are lured by other means providing assurance that its banking services are secured (and FDIC insured), setting up cafes where servers double up as information agents etc. As such, we can say the following are the core competencies of ING Direct 1. Customer segmentation without efficient customer segmentation, it could not have built its strategies and business model. They also have segmented as per their customer needs (as mentioned by parent company products to different customers and different products to same customers). 2. Processes without the processes in place, it cannot provide the efficient service that it can provide now. It can, however, improve it further (especially the response metric of 80%) 3. Product Portfolio (part of service design) The bank has realised that the customers of today do not ask for too many products. As such, their curtailed banking portfolio is extremely profitable