South-Western - Management  
Rebels with a Cause, and a Business Plan
Topic Technology, Innovation and Change
Key Words Strategic advocacy, alternative business models
News Story

Companies that defy the industry standard and find new ways to do business are not entirely new. Southwest Airlines and HBO are two successful examples of companies who took a unique approach to their business model. However, a new generation of companies is not only challenging their business models, they are questioning the standard and creating entirely new businesses based on customer advocacy.

ING Direct USA opened in September of 2000 and has two million customers and nearly $30 billion in assets. In the first half of 2004, the bank had pretax profits of $112 million. Arkadi Kuhlman, CEO of ING Direct, says that the company's goal was to create something radically different than what the typical bank had to offer consumers. The concept is an Internet-based savings bank with no branches or A.T.M.'s. The bank keeps things simple, offering a limited number of products including savings accounts, certificates of deposits, and a few select mutual funds with no fees and no minimum deposits. Because the bank keeps costs low, they can offer high interest rates on deposits, four times the national average on passbook accounts. However, the key message of the bank is to try to get customers to save more. The bank doesn't offer credit cards, auto loans, or checking accounts-all vehicles for spending. The company even "fires" customers that it feels are not in line with its message.

Another company that has radically changed the typical business model through the use of consumer advocacy is Craigslist, the online bulletin board founded by Jim Buckmaster. The bare-bones site allows customers to sell goods and services and search for jobs or apartments while charging no fees and accepting no advertising. The company doesn't advertise or compete. Yet, the company has generated healthy profits on revenue approaching $10 million a year.

Questions
1.

Define consumer advocacy.

2.

In today's competitive business market, why is it that these companies that don't compete in the usual way and take such an unusual approach to business are so successful?

3.

How is technology making it possible for these companies to be successful?

Source "Rebels with a Cause, and a Business Plan," The New York Times, Jan.2, 2005, pp.NA, p59.
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