How To...Get Tough with Bad Customers
By Elizabeth Esfahani

(Business 2.0) – ING Direct is the fast-food chain of financial services. With a handful of offerings including savings accounts, CDs, and home equity loans, the bank, based in Wilmington, Del., is about as no-frills as it gets. Yet its profits are downright gaudy, soaring 45 percent to $68.2 million last year. A unit of Dutch giant ING, the bank lures low-maintenance customers with high interest rates; its Orange savings account pays 2.2 percent, four times the industry average. To offset that generosity, the bank does 75 percent of its transactions online and avoids amenities like checking.

But here's another cost killer: The bank "fires" about 3,600 of its 2 million customers every year. Ditching clients who are too time-consuming saves the company at least $1 million annually. ING Direct has driven its cost per account to a third of the industry average, even as its total assets have climbed to $30 billion since it entered the U.S. market in 2000. CEO Arkadi Kuhlmann explains how ING Direct gets rid of overly demanding customers. — INTERVIEW BY ELIZABETH ESFAHANI

The difference between ING Direct and the rest of the financial industry is like the difference between take-out food and a sit-down restaurant. The business isn't based on relationships; it's based on a commodity product that's high-volume and low-margin. We need to keep expenses down, which doesn't work when customers want a lot of empathetic contact.

If the average customer phone call costs us $5.25 and the average account revenue is $12 per month, all it takes is 100,000 misbehaving customers for costs to go through the roof. So when a customer calls too many times or wants too many exceptions to the rule, our sales associate can basically say: Look, this doesn't fit you. You need to go back to your community bank and get the kind of contact you're comfortable with. Of course, we have to use judgment. In some cases, people have legitimate questions. But often it's customers with large balances who are used to special treatment. They like premiums, platinum cards, and special rates. But you don't get that kind of stuff at the take-out window.

There is no clear demographic that differentiates our customers; it's more a matter of behavior characteristics. Our customers tend to be early adopters—people who spend a lot of time online, on e-mail, and on cell phones. It's all about finding customers who are comfortable with a self-serve business; we try to get you in and out fast.

The conventional view in service is that if I trap you and hold you longer, the relationship is better. But I don't think that's the case. Even though our touch is light and short, it's all about how you feel in the end. The smile at a take-out window can be just as satisfying as good service at a sit-down restaurant. While this makes for some unhappy customers, you also get some who end up becoming a bit evangelical. Sometimes they apologize and promise they'll change. The trick is to explain why they can't call or e-mail all the time. People end up being more reasonable than you think, and the ones who aren't are the ones you want out the door anyway.

Source: ING Direct