Why Bank of America Needs To Do More Checking On Its Products

by drjim on June 24, 2013

Bank of America had better stop nickel-and-diming their customers

Bank of America had better stop nickel-and-diming their customersImage Credit

As product managers, one of our main goals is to always be searching for ways to apply the product development definition in order to leverage our products and boost the company’s bottom line. At the same time, we need to stay aware of our product’s impact on the company’s reputation. Over at the U.S. bank, Bank of America, their product managers seem to have forgotten this very important set of rules…

What Bank of America’s Product Managers Did That Was So Wrong

Over at the Bank of America, the product managers know that they have a problem on their hands. Ever since the global financial crisis that hit in 2008, a wide range of fees that banks used to be able to charge their customers have been removed by the government agencies that regulate banks. This means that despite the product manager’s best efforts, the bank’s bottom line is getting smaller and smaller. Clearly this is not going to do anything good for anyone’s product manager resume.

To make this problem an even bigger deal, the bank currently has roughly 10 million customers (about 20% of its total customers) that actually cost the bank a couple of hundred dollars a year to service. These customers generally have a household income of less than US$50,000 and don’t use other bank products such as credit cards or mortgages.

What the Bank of America product managers wanted to do was to create additional fees that these costly customers would have to pay unless they started to use more bank products. The fees could be avoided by keeping more money in a checking account, using bank credit cards or taking out a loan. The problem is that the outside world saw Bank of America picking on the very customers who could least afford to buy more bank products.

What Bank of America’s Product Managers Should Have Done

Bank of America’s product managers should have known that this was a bad idea from the start. Three months ago they had tried to do the same thing. The Bank of America product managers had proposed tacking a $5 monthly fee on to the usage of the bank’s debt cards. However, their customers revolted, Congress got involved, and the bank was forced to back down and do away with the proposed fee.

What seems to be causing the problem here? It’s actually pretty simple, the Bank of America product managers are trying to solve a problem in one fell swoop. Instead, what they really need to do is to break this problem up into two separate parts.

The first part of the solution would have to do with just exactly who the bank is going to get to pay them more money. The answer to this question has to be “everybody”. When the bank picks on one subset of its customers in order to make up for lost revenues, then the outside world believes that it is treating them unfairly.

The second part of the solution is that what the bank really needs to do is to create new products and services that everyone wants to buy. This could be a new type of checking account that allows you to use your cell phone to make payments, etc. Instead of trying to fine their way back to profitability, the Bank of America product managers should use product innovation to make their customers happy to fund the bank’s recovery.

What All Of This Means For You

The product managers at Bank of America tried to fix a problem that the bank was facing and they failed. The bank is facing the loss of a number of different revenue streams that have historically boosted the bank’s bottom line. The solution that the product managers put together just made things worse and doing that has never been on anyone’s product manager job description.

What the product managers tried to do was to boost the fees that the bank charged its lowest income customers for various services. This did not go over well with customers or bank regulators and Bank of America was forced to drop their plans. A better approach would have been to impact all customers with smaller, incremental rate hikes.

The product managers at Bank of America have hopefully learned an important lesson from this misstep. When they are considering ways to make their products more profitable, they also need to take into consideration how these changes are going to impact the company’s reputation. It turns out that this being a product manager can be a tricky thing to do correctly!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: When Bank of America started to get pushback on their rate hikes, what is the first thing that you think that the product managers should have done?

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What We’ll Be Talking About Next Time

What kind of marketing do you do: outbound or inbound? For that matter, do you even know the difference? In today’s overloaded, hyper connected society, getting the attention of our potential customers has become harder than ever. Darn. As product managers we need to find ways to overcome this hurdle and right now, it’s looking like inbound marketing just might be the way to go…

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