This past week BofA announced that they were canceling their planned $5 monthly fee for having a debit card with their bank. This is welcome news to BofA customers, present and future. But as a business owner I can’t help wondering if this was the right decision.
Recently another company, NetFlix, tried to change their pricing structure to move their company forward and adapt not only to a new economy but to changing technology. NetFlix customers revolted. A few years back when one airline announced new fees for extra bags to help offset increased costs in their industry, other airlines jumped on board with the idea and implemented their own baggage fees. Not so in the banking world. Other banks didn’t want to go anywhere near this fee for fear of a NetFlix style customer revolt.
BofA tried to backpedal and soften this fee with options that would allow customers to avoid the fee like setting up direct deposit or keeping a minimum balance of $20,000 in their checking account. Everyone has $20,000 they can leave in their checking account, right? BofA customers let the bank know that there would be a customer revolt if the fee was implemented, so BofA cancelled their plan.
Banks have been scrambling to find new revenue streams for their operations. I’m not saying that the banks did not play a part in their own problems, especially when it comes to the whole mortgage debacle. But there have been challenges for banks from other areas such as government. New federal regulations, meant to protect consumers from out of control bank fees, have limited fees that banks can charge for things like overdraft protection and debit card transactions. So banks are looking for new ways to pay for services.
Like I said, I don’t like paying more for anything, nor am I a fan of BofA. Yet, as a business owner, I know that a business must make a profit to survive. When any business is faced with a shrinking revenue stream they can increase revenue or decrease services. If they don’t operate at a profit they won’t operate for long.
Trying to set pricing for intangibles like services is an ongoing process. One of the hardest things that clients ask is how to price their services. BofA will have to try to find a new revenue stream or adjust their pricing structure to accommodate their service level. The lesson here for small business owners is to keep your finger on the pulse of your company. You need to constantly watch your costs and revenues and stay flexible so that you can change your business model or your pricing structure when conditions require it.
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