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The bank wanted to be up front with consumers about its short-lived debit card fee, senior executive Laurie Readhead said. She acknowledged a lack of initial planning, saying B of A has "a lot to learn."
November 3 -
Bank of America's decision to drop its controversial debit-card fee may have come too late to retain some accounts, as many big-bank customers have begun defecting to smaller banks in protest over various fees, according to FIS.
November 1
The hotel industry successfully introduced "resort fees." The airlines gradually added baggage-handling fees. Cell phone and cable TV marketers steadily increase fees for expanding services.
But when banks tried to introduce a $5 monthly debit fee, consumers revolted, likely because banks failed to rely on the science of "pricing psychology" to sell them.
"Customers will go along with price increases if they think they are getting a fair value for the service, but Bank of America failed to provide that part of the equation," says Jens Baumgarten, a partner and price-psychology consultant with the marketing-strategy firm Simon-Kucher & Partners in New York.
When introducing new prices in diverse industries, including banking, telecommunications, publishing, hospitality and entertainment, marketers should begin with a clear understanding of "the logic of what you are offering and what people are willing to pay for it," Baumgarten says. Then through strategic communications and marketing, they should build a case consumers will understand for why certain services cost more, he says.
Hotels conveyed that resort fees included extras, such as Internet and fitness center access, he says. Airlines provided customers with options to avoid baggage-handling fees.
But banks have not taken such a strategic approach in introducing debit fees, Baumgarten says.
JPMorgan Chase & Co. and Wells Fargo & Co. were among banks that earlier this year quietly began testing a $3 monthly debit fees in certain states.
But problems began when it was
By Nov. 1 B of A and other large banks that had introduced or tested debit fees had dropped the fees amid reports that consumers were planning to bolt from issuers adding debit fees.
"We learned from the experience and we'll continue to work to build the
The episode generated "a lot of negative impressions" with customers, Baumgarten says.
"The banking industry's mistake has been taking a product-centric approach when it should be looking at services as a whole and communicating the value of each service so consumers understand exactly they're paying for and what it's worth," he says.
Banks looking to find the right approach to profitably marketing services "need to be customer-centric, focusing on lifestyles, life stages and specific customer needs," and then price products accordingly, Baumgarten says.
The emergence of mobile banking, mobile payments and other new technologies could provide an opportunity for banks to repackage their services more profitably, he suggests.
"If banks take their habitual product-centric approach to setting prices for mobile services, they will meet with resistance," Baumgarten says. Instead "banks need to begin with looking at debit and mobile payments from the approach of who wants it, and why, and then enriching the products so they are appealing and consumers understand why it might be worth paying for them."
