Archive for October, 2009
Bank of America’s (NYSE:BAC) Latest Ad Campaign Targets Building Trust with Consumers
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Bank of America (NYSE:BAC) has decided in their latest $40 million marketing campaign to get back to simplicity with their message, and it seems to be working so far, as consumers seem to understand the trouble the economy is in, and now are looking for answers on how to receive help in getting through the times, not more data and confusion reinforcing that it exists.
With many consumers having a very negative view of all banks, especially the large banks receiving bailouts, executives at Bank of America said they’re attempting to rebuild trust with their customers and build their relationship with them up again to a healthy place.
Consequently, they decided to get rid of the language normally used in the industry which consumers don’t understand, and us ad spots which include messages that are “simple, clear and direct,” to that end. The campaign launched on Monday of this week.
Understanding people are looking for help, the campaign is presenting the various products Bank of America offers and explains in easy to understand terms how they can help their customers. Simple things like showing customers how they can save while getting gas, use their debit card and also get mobile alerts as to when their checking balances are getting low are examples of the ad spots used.
Research revealed that consumers want banks to be clear and transparent when doing business with them, and to show them how banks can help them get through the harsh economic times being experienced. They are also looking for help on how they can still keep living in their homes.
Other research data show that 75 percent of Bank of America’s constomers feel they must cut back on spending, and when spending, to figure out ways to save. Approximately 40 percent of Americans say they are saving more now than they did three months ago.
Basically, Bank of America ad spots include more of a general educational type of focus which helps their customers use their products than attempt to sell them on them.
With many consumers saying they weren’t explained about the risks associated with ARMs, the bank has been also eliminating hard-to-understand language and working on making it easy for consumers to know what they’re getting. That seems to have resonated well so far with their customers and generate a more positive image of the BofA brand.
Last year the company spend $319 for marketing in the U.S., while through June they were at a much smaller rate of $125 million, according to Nielsen.
Although there has been a lot of talk lately of breaking up big banks so the idea that they’re “too big to fail” doesn’t have an effect on the banks going to the governments to be bailed out every time they get in trouble, HSBC Holdings (NYSE: HBC) sees it differently, believing we’re going to enter into even more consolidation, as retail banking margins will continue to put downward pressure on profits, forcing continued cost-cutting measures in order survive and be profitable.
What HSBC is contending is scale will have to be attained or the banks may struggle to even survive in the regulatory environment they’re now facing.
Besides regulation, HSBC also said things like funding, liquidity, low interest rates, trust, among other elements, will continue to pressure retail banking for some time.
Others in the industry concur, saying the extreme pressure on cutting costs because of the above-mentioned reasons will be difficult without the banks getting larger.
Bankers in the EU say that no matter what they do concerning breaking up banks, eventually market forces will inevitably bring consolidation to the industry.
The problem with that assessment is it in fact not market forces putting pressure to bring about more consolidation, but knee-jerk reactions by governments around the world trying to gain favor with their constituents which is generating that pressure. The market has long been out of the equation, and if market forces were truly part of it all, there would never have been banking bailouts in the first place and the poorly run banks would have folded, while the well-run banks thrived and picked up the pieces. That’s how the market works, not responses to government interference in the market.
Could more consolidation become a reality in this economic climate? It could once people get back on their feet and move their attention away from the banks and governments and on to their daily lives, which is what the banking industry and governments around the world are hoping for.
But if we haven’t learned yet that “too big to fail” and moral hazard aren’t something that should be allowed to affect decisions in and about the banking industry, we’re going to face this again, and next time (assuming we get through this now) it’s doubtful the economic system could survive that type of hit if banks are even bigger than they are today.
With credit card companies such as Citibank (NYSE: C), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and others raising interest rates on their credit cards, cutting limits and in some cases closing down cards without any advanced warning, it’s more important than ever to have access to multiple credit cards.
This need was highlighted recently when many travelers tried to use their Citibank co-branded credit cards on the road only to find that their charges were denied. It turns out that Citibank closed their accounts without any advanced warning. Imagine how much of a pain it would be if that were your only available form of payment on a trip.
Citibank might have been the only company to close credit cards unannounced, but just about every major bank is limiting who they provide credit and how much credit they provide them. It’s not just sub-prime borrowers that are getting effected either. The Fair Isaac Corporation (FICO) recently released a report that showed that 70% of credit card users that had their cards shut down had good credit.
If having access to credit shut off isn’t bad enough, the San Francisco Chronicle recently reported that having a single credit card closed can result in a short-term drop of more than 50 points from one’s credit score. That drop could be the difference between getting approved or denied for a mortgage, car loan or other note.
Consumers can protect themselves and their credit scores to have multiple lines of credit from different issuers. If possible, get at least one credit card from a credit union and make sure to have at least 3 credit cards (if not 4 or 5) available to you in the event that one or two issuers decide to limit or eliminate your access to credit.