Xenophon Strategies

Year of Corporate Cave-ins and Public Outrage

Josh Stewart

As anyone with the red and blue Bank of America (BoA) debit card knows, the fourth largest bank in the U.S. recently proposed a $5 fee for use its debit card.  Netflix, in efforts to modernize their business model, decided to not only rename the DVD portion of its business to Qwikster (???), but also to raise prices considerably.   

Both endeavors turned out to be an epic public relations failure. 

Bank of America’s move gave fuel and focus to an otherwise unwieldy and unorganized Occupy Wall Street movement.  This culminated in a huge day of action, Bank Transfer Day, when hundreds of thousands of people across the country moved their personal funds into credit unions.  The economic impact to big banks like BoA, is uncertain, but the public relations impact was undeniable.  Images on local news of people lined up outside their local credit union, waiting to transfer their funds.  With the current mood in our country, every day Americans did not need another reason to be furious at Wall Street.  And the $5 fee, though small, was clarion call for action. 

Bank of America eventually caved on this front, seeking revenue elsewhere.  Like any business the bottom line drives decisions for banks.  And when your brand is involved in virtually every city in the country, it is worth taking pause to examine how potential blow back will shape customer behavior. 

Like Bank of America, Netflix underestimated potential public outrage.  For years, consumers and critics alike raved about the quality and consistency of the Netflix service.  As an ambitious startup the company took risks going after Blockbuster and other brick and mortar video rental companies.  Netflix is now a household name, and like any other widely used product, a slight change (remember new Coke?) could spark a consumer revolt.  Netflix kept prices up but the company quickly caved on its Qwikster. 

The public can only deal with so much.  With the economy and political environment in constant turmoil, household brands provide consistency in our everyday lives.  This consistency is proven through years of trust in a product or service, and when executives start to push this trust too far, they pay the price.  And that will affect the bottom line more than any $5 fee.  

Over the next few days Xenophon staffers will be sharing their thoughts on some of the top stories of 2011.  Keep checking our blog, Facebook and Twitter for more.  

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« return to blog | Dec 23, 2011 | Bank of America | Netflix | public relations