2012 Trends Report Card, Part V

Here's Part V of our report card of how we did with our 2012 predictions. 

General Business Trends

1.     Companies will use fees to offset declining revenue in 2012. This didn’t generate the kind of coverage we expected but it still was an issue this year. Check out this Wall St. Journal article: "Big Bank Weighs Fee Revamp; Bank of America Considers a Revamp That Would Affect Millions of Customers."  BofA got embroiled in at least social media controversy over its fees.  Grade: B.

2.     Mobile payments will increase. We saw a number of articles validating this one, including the Wall St. Journal ("Retailers Join Payment Chase; Two Words: Digital Wallet—Wal-Mart and Target Join Project Aiming to Make Plastic"), New York Times ("Many Competing Paths on the Road to the Phone Wallet"), Fortune cover story: "The Death of Cash: Tech giants - and startups like Square - want you to use your phone to pay for everything from gum to train rides. Here's how they plan to achieve cash-free nirvana." We predicted that e-wallets would be mainstream in five years but we may move that up to four years, based on the kind of media coverage we've been seeing.  Grade: A.

3.     Videoconferencing will continue to hit its stride. We still believe we’re right but we expect videoconferencing to make further inroads.  Grade: B based on a lack of strong media coverage.

We'll issue more grades in Monday's post.

In the meantime, let us know if you have any questions or comments.

Bank of America Validates our Prediction about Using Fees to Offset Declining Revenue

Usually we tout when a media outlet validates our predictions, like the one we made that Companieswill use fees to offset declining revenue in 2012.

But BofA is validating that prediction on its own (via a WSJ article: "Big Bank Weighs Fee Revamp; Bank of America Considers a Revamp That Would Affect Millions of Customers."

Here's another case where we'd like to be wrong since we'd prefer not paying fees for services we've been getting for free. Can we get the same people behind the no net revenue increase pledge on taxes make a similar pledge about no-net-fee increase?

Birnbach Communications' Top Predictions for 2012, Part 5

Here's Part 5 of our predictions:

1.  Companies will use fees to offset declining revenue in 2012. With revenue still not approaching 2007-2008 levels and with costs continuing to increase, look for all types of companies to start adding fees for things that had once been included in the price. Airlines and hotels are charging for baggage, onboard food and other things, like Wi-Fi, that used to be included in the price of a ticket or a hotel room. Banks are charging consumers to use their debit cards or paying bills by phone (or backing off, when there’s too much public pressure).  Shipping companies charge surtaxes to offset spikes in the price of gas, which, by the way, has dropped from sky-high prices. And that illustrates another aspect of fees – they won’t go away.  What we saw in 2011 was that a number of big companies did a poor job of explaining why they felt they had to impose higher fees on their customers – which made the increase feel like a slap in the face to many customers. In 2012, some companies will have learned that lesson – but you can expect a number of companies who should have known better to make a mistake in how they communicate their fees to their customers. 
2. Mobile payments will increase. Spearheaded by Google Wallet, Visa's V.me, and Verizon, 2012 looks to be a big year for mobile commerce. Using your smartphone to make purchases will not attract most Americans this year, but a growing part of the population will love the convenience of not having to find an ATM or not paying fees to use another bank system’s ATM. You can delay the day our society becomes a cashless one, but eventually going cash free will be mainstream by the end of the decade.
3. Videoconferencing will continue to hit its stride. Consumers are able to use video to chat not only on Skype (now owned by Microsoft) but also on Facebook or Google+ as well as their iPhones and other smartphones. As consumers bring their own devices to work – rather than carry two smartphones (one for work and one for personal) – they will naturally try to use FaceTime, Skype or other free videoconferencing software. But what they’ll find is that while the service they get from free video chat services is fine to talk with a long-distance friend or family member, it’s not okay when talking with a customer. Expect more interest in cloud-based videoconferencing.

Let us know if you agree or disagree. And check back Monday for additional predictions.

Fee, Fie, Foe -- 3 Lessons learned when companies mishandle how they communicate their new fees

In the wake of Netflix's mishandling its new pricing structure and sub-brand (Qwikster, in case you misspelled it), Bank of America recently also blundered in announcing a new charge for debit card customers (check out the Time Magazine about it here and a Financial Times article here).

With a US economy that continues to fluctuate wildly, and continued bad global economic news, it's probably a safe bet that more companies are going to look to raise prices and implement new charges to boost their embattled bottom lines. It's also a safe bet that as they do so, other companies (besides Netflix and BofA) will mishandle their communications around the price hikes.

You can check out Nine Lessons from Netflix and the 'Half Apology." 

Here are some thoughts about lessons from BofA:

1. Some companies may feel that their customers are captive and don't have much of an alternative, but even if that's true -- and I think it's more difficult to change banks than to switch TV channels -- companies need to realize there is a price to pay for mishandling communications. Beyond a company's reputation, publicly held companies have seen their stock prices fall as a result of negative consumer backlash.
2.  Companies need to provide context for restructuring their prices and fees. Blaming new government regulations, as BofA has done, will likely appeal to some customers, but when so many people think the government bailed out the banks while holding consumers accountable for bad mortgages will not generate much sympathy overall or provide enough of an explanation as to why BofA will soon start charging $60 a year for the privilege of using debit cards instead of checks or credit cards.  Especially right now, when there's a lot of anger towards Wall St., with in-person and online protests like #OccupyWallStreet. So for BofA and other banks like Chase, SunTrust, Wells Fargo, Regions, establishing new fees will likely be seen as another example of banks putting their interests ahead of their customers. 
3. Communicating solely by Twitter can be partially effective to get what amounts to a headline, but is not effective in providing detail. Our advice to BofA: Consider steps to take to mitigate the consumer backlash, especially since some reports attribute the drop in its share price to the negative consumer response to the new fees. If the only place BofA has addressed this issue is on its Twitter feed, @BofA_News, the bank should start communicating beyond Twitter.  First, because its 140-character limitation, Twitter is not the right means to communicate a complicated message. Second, fewer than 9,000 people currently follow @BofA_News so the bank can't be sure it's actually and effectively reaching its customer base. 

For example, the bank should prepare a detailed FAQ inserts to accompany its monthly statements and post that information on its website, about the new fee. The FAQ should explain the economics of the fee, should include a statement that explains the reluctance with which BofA realized it had to initiate the fee, and include information about ways that customers can avoid being charged the $5 per month fee -- for example, apparently using a debit card at an ATM won't trigger the fee but using a debit card at a retailer will. Meanwhile, explaining that Platinum customers will be exempt from the debit card fee, will not placate the majority of customers who will soon be charged the fee.

Other companies considering price increases or the implementation of new fees should learn a lesson from Netflix, which did an arguably poor job in communicating the context for its increase of fees. Even if you're in a position where you must pass along higher fees, it helps to explain the reasons for the increase. Otherwise the increase will seem like a slap in the face to its customers.  Again, I have no doubt that we'll see more companies considering raising prices and charging new fees in the near future -- and that there will be negative response if the increases are not communicated effectively.  What's also clear is that companies that mishandle their price increases may also pay a price -- in their stock price, as BofA and Netflix have seen.  With the right planning, companies can announce price changes that don't have to lead to crisis communications.