Spirit Airlines charges a fee for everything and continues to grow profitably, while Bank of America cannot make a $5 debit fee stick. It’s all about the relationship your brand has with your customers that matters most.
In November, Bank of America announced plans to impose a $5.00 per month debit card fee. Consumer advocates howled, and even President Obama criticized the fee. Organized consumer protests developed. Within a short time, BoA 
scrubbed the plan. Said David Darnell, co-chief operating officer. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.” Whether BofA was hearing the voices of customers or politicians, you have to wonder why the bank was so surprised at the fallout. Banks have become an easy target, but much of it is a mess of their own making as they have forfeited their customer relationship on behalf of the industry forces driving the acquire and go big strategy.
Spirit Airlines recently became the first airline to charge a fee for carry-on bags- from $30 to $45 a pop. Yet it is still flying at 90% capacity and in 2011 earned a whopping $2.1 million per plane! U.S. Airways earned a paltry $.21 per plane. Spirit also charges $5 to print a boarding pass at the airport and $3 for a bottle of water and $4 for peanuts. Says Spirit Chief Executive Ben Baldanza, “If you’re going to bring a lot of bags, fly Southwest.” When you add up all the fees, sometimes other airlines offer a cheaper total cost. The secret in Spirit’s sauce is that their fee-based pricing structure takes out cost as travelers require fewer desk agents, take fewer bags, and lighten the weight of the plane to save on fuel. Seating is crowded because they squeeze more rows in with less leg space. Flights are often late because their schedule is based on 30 minute turnarounds. But for those whose money is more valuable than their time, and might not be able to travel at all if prices are higher, Spirit offers a unique, clear and valued proposition.
It’s not whether you charge a fee or not, but rather the context in which your customers view your actions.
- Know whom you serve. Ben Baldanza and Spirit Airlines know exactly who their target is: the super budget non-business traveler like hair stylist Kristin Flood, whose only baggage was stuffed beneath the seat on a recent flight. As she said in a recent WSJ article, “We fly Spirit whenever we can. We just pack as little as humanly possible.” Service fees are not inherently evil and need not be a lightning rod for consumer or political attack. When they work to inform behavior for the right target customer, in transparent fashion, they serve a valid market function. In Spirit’s case, it is to keep costs and prices as low as possible at the expense of comfort and convenience. Its travelers understand this.
- Earn their trust by serving them well over time. New research from The Relational Capital Group shows that customers relate to brands the same way they do to people. Brands, like people, earn trust by behaving in ways that show their intentions are worthy (warmth) and that they have the capability to act However, when intentions are perceived as unworthy, like those of the big banks, a level of mistrust and suspicion develops to the point where even a simple debit card fee triggers a negative response, inviting your competitors (and politicians) to fan the flames.
The branding and business lessons you should learn.
- Your brand’s persona and relationship with your customers is the great enabler or inhibitor.
- Be transparent and consistent about whom you are serving and why. Do not betray their trust.
- Stay focused on the customer target segment your brand serves. You can’t please everybody.
