|By Hollis Tibbetts||
|October 4, 2011 10:00 AM EDT||
Banks and Bad Decisions
Let's face it, Bank of America hasn't exactly been the paradigm of good decisions lately - they purchased Countrywide Financial and Merrill Lynch, two boat anchors that almost sunk the B of A ship. Countrywide in particular turned out to be the posterchild of "toxic assets" and bad mortgages. But that's not what this article is about. And I'm not a banker, so I'm not in a position to authoritatively write on those particular topics.
But B of A recently did something that transcends categories like "banking". They "pulled a Netflix".
What Is a "Netflix"?
A "Netflix" is when companies:
- Make an incredibly stupid blunder, based on the belief that their customers won't go away.
- Get arrogant, and somehow or another actually believe that no other company could possibly offer a substitute for their goods and services.
- Believe they can disrespect their customers, treat them badly and put the screws to them, and like stupid sheep, the customers will just stand there and take it.
- Think that they take their own internal business problems and just dump them in the customers' laps.
Netflix jacked up their prices by 60% and (with a straight face, no less) told their customers that it was good for them because it meant "more choice". Then they made their service twice as hard to use, and told their customers (again with a straight face) that it was somehow an apology.
Netflix mumbled about how technologies and markets are changing, but in the end, customers don't care about Netflix's internal business problems. In fact, it should have been Netflix's mission to insulate it's customer base from changes in the market. That would have been a competitive advantage.
What Happens to Lazy Stupid Companies
Company's can't be lazy and stupid and just force unpalatable solutions on their customers simply because it's the most expedient and convenient way to resolve their own internal business problems.
That's not how you "add value" or "provide value" to your customers. Organizations that "add value" to their customers will attract more customers. Organizations that "subtract value" will drive customers away. Not that complicated.
Well, since Netflix started this nonsense, their stock has tanked by about 2/3 of it's value.
Bank of America is luckier (?) in that their stock is already trading in the toilet - pretty close to an all-time low - in January it was about $14, by July it was at about $11, now it's about $6.
What Has B of A Done?
B of A has decided to charge debit cardholders a $5 monthly fee for the privilege of using the card. It's an attempt to either (depending on your point of view):
- Recover some of the lost revenues due to a change in federal law which reduces the fee that banks can charge merchants from 44 cents to 24 cents per transaction).
- Use the Durbin Amendment to justify putting the screws to customers in an attempt to improve its top line revenue.
So regardless of whether $5 a month is a fair charge or not, the fact is that customers don't care if Bank of America's revenue stream from merchants has changed. Although a $5 fee is a convenient and easy (for B of A) way to recover that change, it's not going to sit well with consumers. It's a lazy and arrogant way of dealing with the problem.
B of A needs to grow a pair and figure out how to solve its business problems - and not just throw them over the fence to land in the laps of their customers.
Indispensable Products and Services? Hardly
Just off the top of my head - without looking at a web browser, I can think of two Bank of America branches within 4 miles of my house. I can also think of the other following banks:
- 3 Chase Bank branches
- 1 Compass Bank
- 2 Wells Fargo branches
- 1 Capital One bank
- 1 Frost bank
- Several credit unions
I'm sure there are a bunch more that I don't recall. I do know that I personally won't be doing any banking at any bank that charges me anything. Switching banks takes about 30 minutes to do. A lot of people will do so just out of "principle".
On another (non-marketing) note, one thing I find somewhat odious about the B of A move is that it will impact "lower-tiered" accounts. Students, minorities, fixed-income retirees, etc. In other words, the people who can least afford it. And in some cases, the people least likely to change banks - with fewer options available to them. So it's not just bad marketing, it's bad corporate citizenship too. Actually, bad corporate citizenship is also bad business.
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