How did Bank of America's image sink so low?
Even before the financial meltdown, Bank of America tarnished its image by making a series of missteps. For starters, the Bank aggressively made bad loans to people that could not afford to pay them back. Then, it made costly acquisitions of risky companies, such as Countrywide (acquiring even more bad loans). After the meltdown, B of A bought Merrill-Lynch and paid huge bonuses to poor performing executives. To drag down its image further, many companies and the attorneys general of at least two states are suing the Bank for fraud.
Treating customers poorly is never good for your image.
In the aftermath of the financial turmoil, Bank of America has treated too many customers very poorly. To add salt to customer wounds, they have devised hidden fees that David Lazarus of the Los Angeles Times says run as much as 1700% higher than previous fees. Henry Blodgett of Business Insider highlighted the process by which Bank of America and other banks abused the system to take care of themselves before servicing their customers. I have summarized the key points from Mr. Blodgett's post and added a couple of others below.
- Taxpayers bailed them out with TARP funds to prevent them from failing (they were deemed too big to fail).
- The Government loaned them money at near zero interest rates so they would loan money to creditworthy businesses and consumers to revive the economy.
- They are lending the money back to the US Government at 3 to 4% interest rates making a lot of money on the spread.
- They are making even more money by leveraging their assets - borrowing $10 for every $1 of equity capital they have.
- Worst of all, they are not lending money to credit-worthy businesses and consumers, which was the reason they were bailed out and given the money at near-zero interest in the first place.
- They are using the money not to jump-start the economy but to continue to pay their executives huge bonuses.
How can a company whose image has sunk so low recover?
Being voted the worst or second worst company in America two years in a row is about as low as your corporate image can sink. Unlike BP that has plugged the oil leak and taken other measures to improve its image, Bank of America has no easy image fix. No matter how bad things are, good Marketers have image repair tools in their marketing tool kits. The steps Bank of America needs to take include...
- Identify and recognize its good customers (those with a low-risk track record).
- Treat good customers well, and loan them the money at market rates rather than make them pay for Bank mistakes and loans to unqualified borrowers.
- End the Bank's aggressive lending practices that helped cause the financial meltdown in the first place.
- Offer benefits to good customers (rather than punish them), such as fee-waivers and other perks, that they more than deserve for helping the Bank to survive.
- Curtail blaming others for its mistakes and problems.
- End the practice of paying executives obscenely high bonuses and salaries based on profits from Government giveaways.
- Stop deceiving customers with hidden fees and other behaviors that cause them to not trust the Bank.
- Put any profits in a pool to pay back good customers that have been mistreated (rather than pay bonuses to executives that did not earn them). The Bank could brand recipients of this pool as the Power of Opportunity club (using the branding of one of their ad campaigns).
- Follow the fact procedure by admitting mistakes, apologizing for them, limiting the scope (perhaps positioning actions as common bank industry practices), and proposing a cure so they will not reoccur.
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image courtesy of flickr user, MoneyBlogNewz