On September 29th, Bank of America announced that they were going to start charging debit card users $5 a month for the privilege of using their debit cards. It was a move intended to offset the impact of new limits on swipe fees. Swipe fees are the charges BofA charged merchants for debit card processing. Unable to collect from merchants, BofA intended to replace that revenue directly from their customers.
It was a great plan, from BofA’s point of view. BofA’s customers had another opinion on the matter. One of the tenets of Brand Modeling is that you must always be aware of and responsive to your best customer’s needs. We tell clients continually that this is not difficult. Today’s customers are empowered. Social media has become the platform of choice to share reaction and responses to corporate action.
Molly Katchpole used that power to share her anger and frustration with BofA’s new debit card fee on Change.org. Part of her commentary read:
“The American people bailed out Bank of America during a financial crisis the banks helped create. You paid zero dollars in federal income tax last year. And now your bank is profiting, raking in $2 billion in profits last quarter alone. How can you justify squeezing another $60 a year from your debit card customers? This is despicable.”
300,000 people agreed with her. The viral campaign, coupled with a Credit Union National Association report that credit unions had gained 650,000 customers since the September 29th announcement, was enough to change BofA’s mind. They announced on November 7th that the new fee wasn’t going to happen.
Did BofA blink—or have their eyes been opened to some fundamental business realities?
Brand Modeling: The Value in Knowing Your Customers
This is hardly the first time that BofA has raised fees. The charge for basic checking has gone up, and there is now a fee for replacing a lost or stolen debit card. It’s $20 if you need the replacement card overnighted to you. Until September, card replacement and shipping had been free services. Yet there was no outrage over these changes. How was Bank of America to know that a little $5 fee would provoke such widespread consumer outrage?
They might have tried paying attention. Brand Modeling tells us that the route to true business dominance is putting your customers first. Identifying your most profitable customers and understanding what motivates their purchasing behavior is easier said than done. You can’t just look at demographic data or even previous patterns of customer behavior to predict, with any degree of accuracy, how consumers are going to react to an operations change.
Instead, you need to know, with pinpoint accuracy, where your customer’s heads and hearts are on any given day. You can’t rely on general data. You need specific actionable intelligence. What pressures and tensions are your customers facing? What challenges are making their life tougher? How is your brand making their lives better—or worse?
BofA’s customers, the legions of small account holders who rely on debit cards as a way to control both cash flow and interest expenses, are feeling pretty strapped. Economic pressures are hitting hard. To be an effective brand manager, you have to understand what tensions your customers are under, and how they’re handling those challenges. You have to know how many straws are on the proverbial camel’s back—preferably before you add another to the load.
BofA didn’t know. Or if they knew, it sure looks like they didn’t care. Piling another fee on customers already stressed to the max was just dumb, no matter how you slice it. Customers are paying more attention to fees and charges than ever before. They are watching every penny, and are fearful about their financial security. Had BofA been following the tenets of Brand Modeling, they would have been aware of the levels of customer tension and bail-out related resentment that made a new fee untenable at this time. Instead, they had to do it the hard way, imperiling their relationships with their existing customer base and deterring would-be customers from giving them a chance.
Will this wake up call change the way BofA does business? Only time will tell, but one thing is certain. BofA’s customer base is not willing to tolerate many more mistakes. We don’t think BofA blinked. We think their eyes were forced wide open. How about you? What’s your take on the BofA fee reversal?