NICKEL DIMED AND FIGHTING BACK

Posted in Anticipating A Crisis, Bank of America, Banking Industry, Business Crises of our own making, Business Crisis Management, Crisis Management Consulting, Crisis Management Response, DECISIONS IN A VACUUM, Excessive consumer fees, negative publicity on November 6th, 2011 by mnayor

The first time I noticed the flagrant imposition of an additional fee for a business service was when ordering Broadway tickets on line. It was a six dollar “service fee” per ticket. I paid the fee but was puzzled. I was paying the company for a service which they were in business to provide. Strange. Do architects charge an extra fee for putting their plans on paper?

Since then of course things have gotten much worse for American consumers. Airlines seem to charge for everything except the air you breathe, and probably don’t, in order to avoid a debate on how inferior that air is. Everywhere you turn there are extra fees for services and “things” that were once free. Understandably businesses and industries are trying to maintain their financial positions. Many want to bring back the good times when they were flush. Because of the weak economy, and the higher cost of resources, they must extract more from the customers who keep them in business in the first place. Obviously, much analysis has gone into the “cost” (interpreted to mean loss of customers and bad press) of implementing new fees. It is clear that most businesses are willing to sacrifice a certain percentage of customers who will bolt in anger, if the economics work.

But it appears as if we are entering into a new phase of business/customer relations. Customers are fighting back, asserting essentially that business has to have skin in the game too. In bad times business cannot expect to maintain the same level of profits or to ride on the backs of consumers in order to do so. Case in point: Bank of America’s announcement in September that it was going to impose a $5.00/month fee for debit card use. A debit card fee is a charge for you to access your own money for commercial or other financial transactions. It is the same money you have deposited with a bank and the same money it needs to conduct its lending business.

Some analysis definitely went into the Bank’s decision. New regulations have reduced the payments merchants pay the Bank for processing debit card payments and BofA didn’t want to just absorb the loss of income. Fair to say that many other banks also entertained the idea of customer debit fees. Some have implemented them. But, after witnessing the backlash from BofA customers, many backed off. BofA itself announced at the end of October that it would allow customers to avoid the fee if they maintain a minimum balance, or arrange for direct deposit of paychecks or use BofA issued credit cards. But just a couple of days later, it fully capitulated to the pressure and scraped the plan in its entirety.

Unlike Netflix which lost 800,000 customers after announcing a 60% price increase a couple of months ago, BofA will likely weather the storm without a major loss. Why? First, it announced its new fee well in advance and wasn’t the only bank contemplating debit fees, so it didn’t look like the only bad guy. Secondly, many of its customers are locked in to BofA with automatic bill paying, multiple accounts and complicated relationships. Unraveling a bank relationship can be complicated. Finally, BofA certainly calculated the loss of customers it would have to endure if it implemented the plan and decided it was worth it. Now that it has jettisoned the fee, many fewer people will transfer their banking relationship. But unquestionably, some damage has been done. There is a strong movement currently underway in the country to pursuade the public to withdraw from national banks and transfer business to community and regional banks and local credit unions.

People are no longer rolling over. They are fighting back, and businesses should realize that weathering an economic storm (or a regulatory reversal) is something to which all segments of society are subject. One segment is not entitled to be made whole at the expense of another. Profits made in good times cannot always be sustained – especially if they can only be sustained on the backs of others who are suffering just as much. Businesses and industries should be rewarded for innovation and creativity, for new and better goods and services, not for figuring ways of squeezing the hand that feeds them. The moral of the story is quite simple: a business can create its own crisis by being too greedy. Before making a dramatic decision that could adversely effect one or more of your stakeholders analyze both the short-term and the long-term costs. Many of your investors may also be your customers. Aiming for profit maximization may not necessarilly please everyone, especially if bonus maximization is the underlyiong motivation and result.

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SOME COMPANIES GET IT

Posted in Crisis Communication Success Stories, Crisis Management Success Stories on March 25th, 2010 by admin
I just received a new credit card in the mail. This is not unusual in itself but it is from my current credit card company – Bank of America, not one of my favorite institutions if truth be told. What is remarkable is that it is a card to replace my existing one that is not nearing expiration.
A very nice letter accompanied the card explaining that since BofA suspected that my card’s security had been compromised, they were cancelling it and substituting this new card. All terms and conditions remained the same.
Here is a company that determined a potential problem and did something about it. Proactive. It had to have cost them to do it. A cynic may say, yes, but it could have cost them more if they hadn’t done anything. True, but oftentimes it is difficult for an organization to bite the bullet, rather than wait it out. Taking no action can be kind of comfortable. So regardless of whether BofA took action that was for its own benefit, kudos for stepping up. But wait, there’s more.
Responsible action must be contagious within BofA. They just announced publicly that they would be forgiving the mortgage debt of some distressed borrowers. Could this actually be? Only time will tell but again BofA has gone on the offensive and is looking good. It would be a mistake if this is nothing more than a hollow PR gambit but time will tell. If it is, the bank takes a huge risk that they will look untruthful undermining its precarious public perception even more.
There have been a couple of other crisis management initiatives that have come to my attention that I think warrant applause. My own hometown was hit by a severe Nor’easter a couple of weeks ago. Trees were down everywhere. Many main and secondary roads were impassable (including mine – I couldn’t drive out of my street due to a fallen tree across the road). And over one-half of all homes in town were without electricity.
I’ve lived in the same house in the same town for over twenty years. Electric power delivery has always been dicey. Early on I lost electricity several times and finally, fed up, I wrote to the local newspaper complaining that I had moved from a third world country that had better electric power delivery than I was now receiving. Over the years some of the transformers and other gizmos have been updated and service has been acceptable, if not perfect. When the storm hit I shuddered to think what we were in for. But Connecticut Light & Power went to work. Crews were imported from other states. Every household was given updated Code Red alerts via the town’s emergency network, CL&P kept information flowing regularly and even went out on a limb and stated that 99% of the power would be restored by a certain date and hour. At the time, this forecast seemed far-fetched given the amount of damage and clean-up necessary just to get access to the wires. Yet, they did it! The company made an extraordinary effort, kept the public informed and, in my eyes at least, achieved a reputation as a first class public utility. I have only one suggestion. It would have been helpful for citizens to know what areas of town were scheduled for work on what days, and times, so homeowners could plan ahead, remove stuff from their freezers, get a hotel room etc. Barring that, nice job CL&P.
I received a rather personal letter from my cable company. Strange. I always get solicitations for the Triple Play – Internet, TV and telephone, but no, this was a kind of apology. The company thanked me for being a customer! They said they were sorry for inconveniencing me while they argued over programming fees with certain networks. They said they were sorry that there were interruptions in providing the Food Network, HGTV, and ABC (for the first 45 minutes of the Oscar presentations). Of course, they blamed everything on the greedy networks for trying to gauge the cable company instead of attempting to reduce costs, but hey, everyone has a different perspective. The thing is that the cable company tried to explain its side and did a credible job of it.
So congratulations to BofA, CL&P, and Cablevision for recognizing a crisis, handling it competently, and communicating to their respective stakeholders in a manner that has been straight-forward and not particularly self-serving, although self-serving communication, when deserved, is just fine.
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