By Eric Rabe, Senior Advisor
The long–anticipated Initial Public Offering for Facebook has Wall Street buzzing. ...
Social media has played a key role in socio-political protests all over the world. Now, we're seeing customers use social media to affect the decision-making process of big business.
By Eric Rabe, Senior Advisor
If it was the Arab Spring, maybe this is the Consumer Fall. Or maybe the Fall of Businesses that don’t pay attention.
Perhaps less dramatic than the Arab state revolutions, but brutally effective, is the revolution of U.S. consumers using social media to get their way. Even companies that should be among the most savvy sometimes don’t get it and find themselves surprised at the result.
Bank of America
Social media played a key role in the decision announced this morning (Nov. 1, 2011) by Bank of America to trash its planned $5.00 a month debit card fee.
Bank of America took a look at how customers were using debit cards. BoA noticed that they were swiping for transactions like a $2.00 cup of coffee, generating processing costs, but minimal revenue. Furthermore, government-set limits on swipe fees were about to kick in. So on September 30, 2011, the bank announced that customers using a debit card for purchases (rather than to withdraw money from an ATM) would pay $5.00 a month for the privilege. Other big banks were eying similar plans.
Consumers immediately turned to social media to fight back.
A California woman organized “Bank Transfer Day” on Facebook to encourage fans to close their bank accounts by Nov. 5. By this morning more than 33,000 had “liked” the page and their comments filled computer screens. Thousands posted to this or other Facebook pages and commented on Twitter.
The Twitter hash tag, #debitcardfee, was being used to pile scorn on the banks’ plans. Leveraging its Twitter handle, change.org, a platform for social campaigns, was busy collecting 307,000 supporters who demanded the banks back down. Many were quick to point out that BoA took bail out money during the 2008 financial crisis. Politicians including Sen. Dick Durbin (D-Ill) championed the cause and threatened legislation, and Durbin became a regular on Twitter.
Some banks did back off, but, until this morning, not Bank of America. Then BoA cancelled plans to implement the fee and announced “We have listened to our customers very closely...and recognize their concerns with our proposed debit usage fee.”
Netflix Box Office Bust
The now well-chronicled travails of Netflix are another case in point. Netflix was flying high in mid-summer with a stock price in the $300 a share range when the company began to make changes that trashed its brand and stock price in short order.
Consumers were used to buying Netflix in a package that allowed them to get movies via computer streaming along with DVDs in the familiar red envelopes by mail. In what customers were quick to see as a 60% price hike, Netflix decided to split the services and charge for each separately.
Social media sites lit up. Castigation was quick and vicious on Facebook and Twitter, and Twitter users had a field day when it turned out that the new Netflix DVD service, “Qwikster,” – had chosen a name already grabbed on Twitter as the home of a weed-smoking Elmo devoted to drugs and girls.
Eventually, on Oct. 10, Netflix killed off the Qwikster idea with this revelation from CEO Reed Hastings: “Consumers value the simplicity Netflix has always offer and we respect that.” However, the price hike stayed, as Netflix hoped to mollify customers by ditching Qwikster.
Not Qwik enough. When Netflix reported earnings after the close on Oct. 24, some customers were missing -- 810,000 of them. The stock market’s response was as brutal as customer comments had been shedding another $43 or 36% overnight. The overall tumble for Netflix has been dramatic, some argue far too dramatic, but amounting to three-quarters of the company’s value in just four months.
Unlike, BoA, Netflix has yet to retreat on its price increases. Yet, for consumers, there are easy alternatives for movies or TV shows online, and those consumers are more than willing to vote with their feet. What is different today is that they have a powerful online mechanism at their finger tips to speak their minds and encourage others to join their revolutions. They are using the new tools like seasoned experts.
Fels will soon be publishing a comprehensive guide detailing trends of social media in government and tips for effective use of this powerful tool. See details here.