Beleaguered consumers have taken a page from the boxing world in recent weeks by “letting their hands go” in their battle with predatory corporations like Netflix and Bank of America.
Boxing trainers use the phrase when they want a pugilist to stop being cautious and pound away at an antagonist with unbridled fury. The effect in the business world has been to turn the clock back on customer relations to a time when more businesses had a moral compass and worried about how they were viewed by those who purchase their products and services.
Consumers have used their wallets to rout both Netflix and Bank of America (BofA) in the past month in a collective show of force that suggests a new activism has replaced their former apathy, which long allowed business leaders to treat them with disdain. The result may be a sea change in the way business has been conducted in America the past 30 years.
Instead of purchasing political and media influence to facilitate the exploitation of their own customers, particularly in industries like banking and cable TV, corporations now must rediscover how to treat them fairly again. That’s no simple task for a corporate world that has turned the exploitation of its own customers into an art form with dirty tricks like hidden fees, long waits for customer service, missed appointments, faulty equipment, billing dates that maximize late charges, and the like.
Activist-consumers are the newest leg of a drive by patriotic Americans to retake their nation from greedy elites the past three months. They join young people who have taken to the streets via the Occupy Wall Street movement to express their frustration with corporate greed, soaring tuition and the corrupt political system. And displaced journalists who have started dozens of news sites geared to the middle class, like this one, to report painful truths spurned by the mainstream media.
“The Internet, and in particular the rise of social media, has made it easy to find and connect with like-minded souls who aren’t customers any longer, they are passionate activists who move on brands that treat them the wrong way,” said Scott Goodson (right), founder of the Strawberryfrog advertising agency. “That same technology makes it possible for a group, once formed, to organize, plan, and take action – fast and across great distances. Just a few people can take down a corporation.”
Wall Street and its greediest denizens are wilting before the collective condemnation of so many of their fellow Americans as people turn their backs on the fiction that “greed is good” and those who embrace such nonsense.
We’re looking at nothing less than a return to the days when the standard business adage was “the customer is always right.” That code of conduct was built at a time when the importance of reputation in the small communities served by businesses was the key to their success. Social media is recreating that kind of small-town accountability at the global level.
Netflix and BofA both sought to maximize short-term profits via new fees, which they publicly attributed to costs. The true goal was to maintain their status with investors as growth companies by sustaining annual profit growth of 8% or more, even as millions of their customers were being laid off and losing their homes.
Netflix CEO Reed Hastings – still living the dream after being named Fortune Magazine’s “Businessperson of the Year” for 2010 – tried to raise his movie rental rates by a startling 60%. Meanwhile, Bank of America, which embraced predatory lending in 2008 even after the practice had been thoroughly discredited, tried to charge consumers for spending their own money via a new debit card fee of $5 a month.
Both companies received a swift kick in their corporate rump from angry consumers, who are in no mood to be lied to and gouged amid the deepest economic slowdown since the The Great Depression. The subscriber revolt at Neflix led to the loss of 800,000 customers in the third quarter (July, August and September). By letting their hands go, consumers also appear likely to claim Hastings, who recently denied that he planned to resign.
At least 650,000 big bank consumers have joined credit unions since Sept. 29, when BofA said it would introduce a debit card fee in the coming months, according to a report released Nov. 3 by the Credit Union National Association. Other big banks followed its lead in the kind of legal collusion usually practiced by the airline industry.
A Harris Poll released Nov. 3 found that only 40% of BofA customers planned to keep it as their primary bank after the fee was announced. Harris also found that only a quarter of Bank of America’s customers were satisfied with the inaptly named bank.
The social media protest sparked by BofA culminated Nov. 5 with national “Bank Transfer Day,” when customers at big banks were encouraged to move their savings to nonprofit community credit unions.
“Customers express their loyalty through their actions,” Harris reported. “But the underlying motivation for these actions is rooted in the degree to which the bank connects with its customers on both a rational and emotional level.”
Apparently, sending the message to your customers they don’t count for diddly is no longer the ideal way for a chief executive to meet their fiduciary duty of maximizing shareholder value.
Netflix and BofA both have cancelled their planned fees in the past week, before they were even imposed. Neither of them look much like growth companies any more.
Netflix shares plummeted from $293.42 each on July 12 to $90.02 on Nov. 4 after the hike was announced – a
drop of 69 percent. BofA stock has dropped 37% during the same span to $6.45 a share from $10.21.
The twin corporate defeats imply that the longtime corporate practice of pretending half-lies and sins of omission are the same thing as the truth has reached its extinction point. They suggest that lying is out and honor is back, due to the new climate of corporate and government accountability fostered by social media.
“Social media allows movements to blossom very quickly,” said Doug Bachtel, a demographer at The University of Georgia.
The fuel for change is a sociology term called “relative deprivation,” according to Bachtel. It deals with the manner in which hardships are viewed by victims and has been cited by political scientists and sociologists as a key factor in crime, rioting, terrorism and civil wars.
The level of relative deprivation is low when suffering is perceived to be either fully shared or borne in isolation. It rises as individuals realize they are part of a larger group that’s being hurt by a set of circumstances benefitting others, like the Netflix and BofA fee increases. Social media makes it easier for people to make those determinations and conclude they are victims of a choreographed campaign, rather than isolated failures.
Apparently, the term “keeping up with the Jones” is just as important to people on the way down as it is on the way up.
“Social media allows people to find out if they’re the only one very quickly and to find one another” when they’re not, Bachtel said. It means that “one pe
rson who decides to pull their money out of BofA can start a whole movement.”
It remains to be seen how a Fortune 500 that has institutionalized poor customer service is going to adapt to this new reality. The experiences of Netflix and BofA illustrate the high cost of clinging to a past in which consumers were helpless to effect change.
Former Fed Chairman Alan Greenspan, who led the nation’s central bank from 1987 to 2006, helped create the “greed is good” corporate climate by turning a blind eye to predatory behavior. His thinking was that markets should be allowed to police themselves, rather than be regulated by governments. The premise was that once customers realized a business was victimizing them, they would turn their backs on it – nevermind the pile of victims that had to be amassed first in sectors like the housing market.
Well, the present climate of consumer and voter activism is what the business world looks like when customers finally start doing government’s work.
Consumers and voters are powerful when they act in concert, much like the water in a flash flood, and the advent of social media allows them to gather speed faster and more effectively. That’s what we’re seeing now.
Like hikers plodding along a dry creek bed who are suddenly beset with a wall of water, our business and elected leaders are finally beginning to grasp the true meaning of the signs all around them.
The new activism of the middle class suggests that class warfare by the few against the many truly is a formula for rapid change, albeit in the other direction.
“I don’t see things changing if we don’t change them, and we can,” said Tom Hagan, a 60-year-old military veteran from Queens, New York. “Take your money out of Bank of America. Take your money out of all the big banks and put it in the credit unions.”
In other words, you’re not alone. We’re all mad as hell. That means you can let your hands go the next time a corporation tries to bully you without fear. Others will be fighting back with their wallets, too.
The larger question is when people are going to wake up and extend this newfound sense of democratic participation to its logical extreme by demanding to vote directly on issues now being determined in our names by millionaire senators and representatives. The short-sighted greed of the political class in Washington, D.C., suggests it won’t be long before they too are scoured from office by the flash flood of populist anger.
Markets are speaking and the piles of victims in them are saying business as usual is over.