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No-frills consumer insight applies across categories

August 20, 2004

Many brands are moving towards increased customization and niche specialization, adding new value beyond their core offering in an attempt to either keep up with or differentiate from competitors. At the same time, no-frills brands are stealing share in more and more categories, cutting out those same added values and transferring the operating savings right to the consumer.

While the no-frills trend is not new in categories like airlines and retail, might other categories be ripe for a no-frills entrant, or a no-frills brand extension of an existing player? Absolutely.

As an example, what would a no-frills savings bank model look like? What frills would it do away with? Answer: ING Direct. According their CEO, they’re a bank brand that is not at all interested in personalization or building relationships, but rather “intentional comoditization.” ING Direct has no branches and no ATMs, but does have a few cafes where potential customers can come in and talk about potential plans with specialists. But seeing as how there are only three of them, the cafes seem to be more of a differentiating conversation piece than a vital part of the marketing strategy.

Nearly one-third of ING Direct customers automatically transfer money from their paychecks or their other banks without ever speaking to a representative or even clicking a mouse. ING even “fires” customers that need too much hand-holding and customer service because that’s not part of the deal. “We basically tell them, ‘you’re not ready for this yet. You’re better off at a (traditional bank) branch,” says CEO Arkadi Kuhlmann. By doing away with all that overhead, ING Direct can afford to provide savings accounts with no minimum balance, no fees and very very competitive interest rates.
Article entitled, ‘(ING Direct) Going Another Way’

The core insight can be applied to other categories. Yes, many customers want more added value, features and conveniences. But there is another type of customer, or a part of each customer, that would switch brands on a dime if they found a simplified, commoditized alternative that passed along the saved value in the form of low prices. How many market leaders will be brought to their knees the way the big airlines have? Who is at risk? Marketing organizations that don’t understand that, in evolving, they must lose less relevant elements of their offering and structure, not just grow more and more new ones.

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