When Bank of America announced on September 29th that it would start charging its customers for using their debit cards, the howls of outrage were heard around the U.S. BofA's website crashed and continued to have outages for days -- although it is not clear whether that was from hackers or overuse. Social media sites were overrun with angry postings. The bank's share price, already sorely buffeted by economic woes, plunged.
Almost immediately after BofA made the announcement the negative PR started. Fox Business anchor Gerri Willis cut her BofA card into little pieces on screen. Twitter comments were fast and furious, with plenty of unprintable feelings expressed about BofA by its customers. A quick search on Tweet Feel gauged negative sentiment toward BofA at over 70 percent. Ouch.
Anti-regulation pundits immediately blamed the Dodd-Frank Act; the Durbin Amendment to the Act limits the fees banks can charge merchants to use their credit cards. And presumably this was part of the reason for the debit card decision, as a large percentage of BofA's revenues come from credit card transactions. After all, a bank has to be responsive to new regulation in order to comply and to avoid losing business. But this is the wrong kind of responsive.
A responsive business is one that can anticipate events, either world-changing or company-specific, respond to the events and even profit from them. A responsive business should always consider its customers first and should not underestimate the negative impact that bad PR can have (think BP oil spill). Nor should it underestimate the ability of its competitors to attract away its customers.
A responsive bank, knowing that credit card fees are about to be chopped could, for example, find new and exciting ways to attract more users for its cards. I know of a large bank that was looking for ways to differentiate itself in an increasingly fierce competitive marketplace. It decided to increase its credit card user base and usage by offering personalized, location-based services. By engaging credit card customers in real-time, and offering them deals as they shop, the bank would not only differentiate itself but also increase usage.
Because a bank is somewhat of a utility, customers know it is there and use it unthinkingly -- like switching on a light. Banks can become complacent about their customers' loyalty because changing banks is seen as difficult and time-consuming. As a customer, if you have 50 bills entered into your bank's online bill payment system, you are not going to be happy about entering them all over again into another bank's system.
But that complacency can go amiss when a blunder like BofA's happens and customers vote with their feet; research shows that roughly two-thirds of people who say that they plan to switch banks do so. Gauging the Twitter comments, which continue to flow, BofA will lose a lot of customers.
There are responsive banks out there using technology and marketing know-how to keep up with 21st century customers. Responsive banks are changing their business models in order to attract and retain customers. Many consumers want a personalized relationship with their banks, while at the same time they are more internet and mobile banking savvy than ever.
The bank I mentioned earlier wanted to demonstrate to its customers that it was the most attentive bank out there, making its customers' needs paramount. The marketing department had a creative plan -- to offer its credit card customers personalized products at the right time and in the right place. This would appeal to a younger, mobile-savvy customer base. The bank knew that it should use mobility solutions to make them aware of its services.
With their customers' permission the bank can monitor their credit card usage and send relevant offers to them via their mobile phones. Customers can be classified in real-time by the size of their transaction, what store they are in, where the store is and the type of retailer it is. Then it combines this information with historical data about the customer's spending pattern and income bracket to tailor an offer.
For example, if a customer travelling from the airport into, say, Boston pays his taxi with the bank's credit card he would immediately get an SMS offer for a discount in a Boston hotel. Or he might get an emailed offer of discounted tickets for a concert or play in town that night. Useful, right time and right place offers in real-time.
Using its marketing smarts and real-time technology, this bank can drive new revenues from credit card usage, and attract new customers who want to receive similar offers. It does not need to institute fees on debit cards, because it is making more on credit cards. It saw the need to increase its customer base and card usage, and responded by implementing the personalized marketing campaign. Now it can tweak the offers and add new services and retailers to improve its offerings. This is the mark of a responsive business.
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