So you found a credit card that pays you for using it, offered by a hip bank, Tangerine, that wants to share its profits with its customers by providing 2% cashback on purchases in two categories of the customer’s choice, 1% back on all other purchase, a 1.5% foreign currency conversion fee for purchases abroad, and a balance transfer fee of 1%. Sounds great.
You sign up, use social media to spread the word about the deal, start spending on the card and all is well until roughly a year later the hip bank decides it is going to change the terms. The 1% cash back on all other purchases is cut in half, the foreign currency fee gets boosted to 2.5% and the balance transfer fee zooms north to 3% (and don’t forget there is interest to be paid on top of that 3% for balance transfers).
And what does the PR flak for the hip bank say when called on this about face? “The changes reflect what our clients value most and allow us to maintain a competitive product with industry-leading features.”
Tangerine bank’s customers aren’t buying it based on media reports and social media trends. Rather than the hip orange bank, Tangerine is now being branded as the “bait and switch” bank.
As one client speaking for many opined on social media: “Thank you Tangerine for bait and switching on us, your loyal customers. It’s now time to look elsewhere. Welcome to #backwardbanking”
And what is bait and switch? “The action of advertising goods that are an apparent bargain, with the intention of substituting inferior or more expensive goods.”
Tangerine has put itself in a situation where customers can credibly accuse it of business activities usually associated with shady operations.
What is the lesson for business owners?
First, customers are always right. Sending a flak out to spin a web of tales undermines the authenticity of the business’s brand. Tangerine could have addressed this better by grandfathering existing credit card holders for a year or two and admitting the card was unprofitable and apologising. Transparency helps preserve brand authenticity.
Secondly, do your due diligence before offering a product or service at cut-rate costs.
If you are beating competitors on cost or by offering deeper discounts, the first question to answer is what makes your business better able to offer a lower price? If you can’t credibly answer that, then you likely cannot sustain the product or service (and that was likely the case for Tangerine once they recognized the actual impact on the bottom line versus the projected impact).
And what is the result of such failings?
Look at the mess Tangerine is now in.
Its reputation as a fair dealer is in question. Its ability to undertake due diligence effectively is in doubt. Its customers have no doubt they feel wronged and the orange bank’s reputation has taken a hit, both for bungling the low-cost credit card offering and responding to critics by saying the changes are in the interests of consumers.
Who can trust Tangerine to keep its promise when it offers its next low-cost banking initiative?