BofA Audit
Description
Bank of America – Online Bill Pay Marketing Audit Online Bill Pay – Marketing Audit MBA – 8642 Fall 2003 Kristen Rankin Ken Hysong Page 1Steve Padgett Wayne Salter Scott Murray Bank of America – Online Bill Pay Marketing Audit INTRODUCTION ........................................................................................................................................ 3 MACROENVIRONMENT AUDIT............................................................................................................ 4 DEMOGRAPHIC & CULTURAL...................................................................................................................... 4 ECONOMIC .................................................................................................................................................. 4 TECHNOLOGICAL.......... 4 RECOMMENDATIONS.... 6 TASK ENVIRONMENT AUDIT....... 7 MARKETS..................... 7 CUSTOMERS................. 8 COMPETITORS.............. 9 DISTRIBUTION AND DEALERS.................................................................................................................... 10 SUPPLIERS.................. 10 FACILITATORS AND MARKETING FIRMS.................................................................................................... 11 RECOMMENDATIONS.. 11 MARKETING STRATEGY AUDIT.......................................................................................... ...
Informations
| Publié par | Intae |
| Nombre de lectures | 31 |
| Langue | English |
Extrait
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 1
Online Bill Pay – Marketing Audit
MBA – 8642
Fall 2003
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 2
INTRODUCTION........................................................................................................................................ 3
MACROENVIRONMENT AUDIT............................................................................................................ 4
D
EMOGRAPHIC
& C
ULTURAL
...................................................................................................................... 4
E
CONOMIC
.................................................................................................................................................. 4
T
ECHNOLOGICAL
......................................................................................................................................... 4
R
ECOMMENDATIONS
................................................................................................................................... 6
TASK ENVIRONMENT AUDIT................................................................................................................ 7
M
ARKETS
.................................................................................................................................................... 7
C
USTOMERS
................................................................................................................................................ 8
C
OMPETITORS
............................................................................................................................................. 9
D
ISTRIBUTION AND
D
EALERS
.................................................................................................................... 10
S
UPPLIERS
................................................................................................................................................. 10
F
ACILITATORS AND
M
ARKETING
F
IRMS
.................................................................................................... 11
R
ECOMMENDATIONS
................................................................................................................................. 11
MARKETING STRATEGY AUDIT.......................................................................................................
.
1
2
B
USINESS
M
ISSION
.................................................................................................................................... 12
M
ARKETING
O
BJECTIVE AND
G
OALS
........................................................................................................ 12
S
TRATEGY
................................................................................................................................................. 13
R
ECOMMENDATIONS
................................................................................................................................. 14
MARKETING ORGANIZATIONAL STRUCTURE AUDIT............................................................... 15
C
ORPORATE
M
ARKETING AND
C
OMMUNICATIONS
D
IVISION
.................................................................... 16
C
ONSUMER AND
S
MALL
B
USINESS E
-C
OMMERCE
..................................................................................... 20
R
ECOMMENDATIONS
................................................................................................................................. 21
MARKETING SYSTEMS AUDIT........................................................................................................... 22
M
ARKETING
I
NFORMATION
S
YSTEM
......................................................................................................... 22
M
ARKETING
P
LANNING
S
YSTEMS
............................................................................................................. 22
M
ARKETING
C
ONTROL AND NEW
P
RODUCT
D
EVELOPMENT
S
YSTEMS
...................................................... 22
R
ECOMMENDATIONS
................................................................................................................................. 22
MARKETING PRODUCTIVITY AUDIT............................................................................................... 24
P
ROFITABILITY
A
NALYSIS
......................................................................................................................... 24
C
OST
E
FFECTIVENESS
A
NALYSIS
.............................................................................................................. 24
R
ECOMMENDATIONS
................................................................................................................................. 25
MARKETING FUNCTION AUDIT......................................................................................................... 26
P
RODUCTS
................................................................................................................................................. 26
P
RICE
........................................................................................................................................................ 26
D
ISTRIBUTION
........................................................................................................................................... 27
A
DVERTISING
, S
ALES
P
ROMOTION
, P
UBLICITY
,
AND
D
IRECT
M
ARKETING
............................................... 27
S
ALES
F
ORCE
............................................................................................................................................ 27
R
ECOMMENDATIONS
................................................................................................................................. 27
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 3
I
NTRODUCTION
Bank of America offers banking and financial services in 21 states as well as the District of Columbia.
Customers of Bank of America can handle their finances at one of over 4000 banking centers or 13,000
automated teller machines. However, this isn’t the only way that customers can reach the bank. Bank
of America offers a comprehensive suite of Internet based services, allowing families and individuals
to handle their financial needs from any access point across the globe. 6.63 million Bank of America
consumers currently manage their bank accounts as well as their retirement and investment accounts
via the bank’s acclaimed web site.
1
A primary feature of its site is Online Bill Pay and e-Bills. These services, offered by Bank of
America to all its customers since 2001, allow the consumer to move the traditionally check-based bill
payment process completely online. Bill Payment allows the consumer to specify the payee and the
amount of payment, click “Submit”, and Bank of America handles the rest. Bank of America’s e-Bills
service allows payees to present the payer with an electronic bill through the Bank of America web
site. With this paperless bill, consumers can use the bank’s site as a “one-stop-shop” for handling bills.
Bank of America offers these services to the consumer at no charge. Nevertheless they are important
offerings in the eyes of the bank. In this audit, we will discuss
•
the environment and methods in which Online Bill Pay is offered
•
the details of the service and how it is offered
•
the marketing research and strategy employed by Bank of America
•
and, the organization of Bank of America to support this product’s marketing and operation.
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 4
M
ACROENVIRONMENT
A
UDIT
Demographic & Cultural
Heavy Internet Usage
The major trend affecting Online Bill Pay and e-Bills is the growth of the Internet-using population.
Not only has Internet access become nearly ubiquitous among middle-class America, but market
researcher MetaFacts Inc. has observed that nearly 49% of households that are online in 2002 were
“Heavy Users” meaning they spent more than 11 hours online per week. That number is up from 45%
in 2001 – an indicator of healthy growth.
2
The growth of this segment represents an increase in the
potential customers for Bank of America’s Online Bill Pay service.
More Women Use Banking Services
Another interesting demographic trend is the increase in female bank traffic, both over the web and
traditional channels. Banks have historically targeted the male population with their marketing efforts
because they were the most likely to handle financial activities – both at work and at home. Today,
however, more women own their own businesses and hold higher positions within companies than they
ever have before. Women are also more likely to make the financial decisions in their home.
3
This
trend demands that banks start paying attention to women in their marketing efforts.
Internet Security Concerns
The banking industry is fighting an uphill battle with regards to convincing the public of Internet
security. Because of the inherent sensitivity in banking matters, consumers are especially reluctant to
conduct these activities over the Internet. Security has been listed as the largest barrier to adoption of
bill payment services by active Internet users.
4
Consumers fear that Internet “hackers” might gain
access to the bank’s financial data and either steal their money or compromise their security in some
way.
Economic
The economic recovery underway in 2003 has had a healthy affect on the banking industry. The most
recent economic data suggests that the economy grew 8.2% during the 3
rd
quarter of 2003, the fastest
growth in two decades. Corporate profit growth has been over 9% for two consecutive quarters, and
the unemployment rate actually shrank. Although experts agree that the economy’s growth will not
maintain this pace, they do feel that the economy has developed momentum, and that steady growth is
predicted well into 2004.
5
As average incomes continue to rise, the savings rate has been raising with it. However, it is important
to note that because of the price point of Online Bill Pay and the inelastic nature of basic bills – power,
water, telephone, etc – the Online Bill Pay product has some insulation against economic events.
Technological
Online Bill Pay is a high-tech service, and keeping abreast of recent developments in Internet
technologies is crucial to its success. Most of the technologies used in Online Bill Pay were developed
during the “.com boom” of the 1990s. Since that time most of the developments have been focused on
improving existing core technologies such as the usability of web sites and their security as well.
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 5
Other developments, such as the widespread availability of broadband access, have made accessing
online banking services easier than ever before.
Web Usability and Customer Experience
When dealing with customers through a web site, their ability to navigate the site effectively is a large
component of the customer service experience. If they are unable to perform their tasks or find the
information they require, they will eventually become frustrated with the service and abandon it, or
even switch banks. Web Usability is an ever evolving science that attempts to make the customer
experience better. Web Usability experts study customers’ habits and take into consideration the needs
of users with handicaps.
Bank of America is one of the leading banks in the usability arena, along with competitors Wells Fargo
and E*TRADE. Recently, Bank of America was awarded top honors by Vividence, a leader in
Customer Experience market research. This award commended Bank of America for its Online Bill
Pay section, and opportunities for customers to “test drive” their site.
6
However, the banking industry as a whole has been criticized for its lack of compliance with standards
for web accessibility for the visually impaired.
7
Accessible sites can adjust their font sizes to
accommodate those who have trouble reading monitors, and can even be read aloud by special
browsers for people who are blind. Whereas charts and slick graphics enhance a site’s look and
usability to the seeing consumer, they are often difficult to translate for those who are impaired.
Network Security
The consumer nervousness about online banking discussed previously is not unwarranted. In fact,
security testing corporation NTA Monitor has accused banks of having the worst security record of any
industry.
Simply put, network security is achieved by maintaining strict control of your network, and ensuring
that no one has access to computer systems and data without express permission, either from outside
the company or from within. This chore becomes exponentially more difficult when these systems
must also be connected to the Internet so that consumers can access and maintain their accounts.
Network security is not a topic that banks like to discuss, preferring to give “hackers” as little
information as possible for them to use in their attempts to penetrate a banking network. However,
NTA Monitor released a report disclosing that “a third of financial organizations (31%) tested were
found to have at least 10 flaws, opening themselves to a considerable risk of malicious attack.”
8
Bank of America attempts to ensure that their networks are secure by participating in network
perimeter tests, where companies like NTA Monitor attempt to gain access to the Bank of America’s
network with the intent of discovering security flaws that can be remedied.
Broadband Access
The International Telecommunications Union has reported that, in 2002, almost 7% of the U.S. had
broadband Internet access.
9
Broadband access is typically defined as an Internet connection capable of
speeds well above the 56 kilobit per second rate that can be achieved by a modem and a standard
phone line.
Broadband access is an enabler for bill payment and related services because of its effect on the overall
web experience. Consumers with broadband access are 50% more likely to be “Heavy Internet users”
which, as mentioned earlier, means more than 11 hours of Internet use per week.
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 6
Banks are able to react to this trend by allowing their web designers to create more dynamic and
graphic intensive sites. Consumers with slower connections can become frustrated with these intensive
sites, but can be offered a separate view of a site with less bandwidth requirements.
Recommendations
When reviewing the Macroeconomic environment, it becomes obvious that banks, including Bank of
America, have a problem with consumer security and privacy. Not only do consumers have concerns,
but in fact those concerns are not without basis.
Bank of America has reacted to this concern by attempting to advertise the trustworthiness of its
services in its marketing efforts. However, clearly not enough is being done. Bank of America can
suffer in this situation from the failings of its peers, as well as its own actions. A security breach at
one bank will reflect poorly on the entire banking industry. Therefore, Bank of America should:
•
Continue to increase its efforts to ensure network security
•
Increase the presence of its security message in advertising to assuage consumer worries
•
Examine creating a security alliance and standard with other financial organizations that
would not only increase security across the industry, but also provide a consumer confidence
building seal of approval that could be applied to advertising and the Online Bill Pay site
itself
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 7
T
ASK
E
NVIRONMENT
A
UDIT
Markets
Market Size
As of fall 2003, around 7 million U.S. consumers were actively paying bills using their online bank
accounts. This represents almost a quarter of the 30 million U.S. households that use online banking.
Additionally, 63 million American households have Internet access; approximately 43% of households
with Internet access currently bank online. As Institutional Investor Magazine points out, online bill
paying has become one of the fastest growing web services, right behind online auctions and online
dating.
10
However, the online bill payment marketplace is not just serviced by banks. Consumers pay large
numbers of bills directly at the biller’s websites, such as credit card companies, telephone companies,
and utility companies. Overall, more than 29 million U.S. consumers paid bills online this year,
meaning that only about a quarter of those consumers actually paid their bills online through a bank.
Bank of America currently has about 3 million Online Bill Pay customers, according to analysis
performed by Forrester Research.
11
This means that Bank of America has currently captured about
50% of the overall online bill payment marketplace. However, Bank of America only has 6.63 million
online banking customers, representing only 20% of the online banking market.
12
Growth
The research firm Gartner has predicted a 38% growth in online bill pay consumers this year, from 29
million consumers to 40 million.
13
Additionally, a study by Online Resources Corporation shows that
online banking adoption is currently experiencing the same growth and adoption curves as Automated
Teller Machines (ATMs) did in the 1980s.
14
This study shows that online banking is rapidly
approaching mainstream adoption in the marketplace. Even though the study did not track online bill
payment, because this service is highly correlated with online banking, it is likely that online bill
payment is also approaching mainstream consumer adoption.
According to Forrester Research, Bank of America experienced 20% quarterly growth in the first
quarter of 2003 for consumer and small business accounts. Compared to the same period one year ago,
Bank of America doubled the number of active Online Bill Pay customers that it services.
15
Geographical Distribution
Bank of America’s Online Bill Pay service is offered via the Internet to its customers. Although the
Internet allows for customers to be located anywhere in the world, Bank of America only has brick-
and-mortar locations within the U.S. The company operates 13,000 ATMs and 4,500 branches
nationwide.
16
Profits
In 2002, Bank of America was the first large U.S. bank to begin offering free online bill payment
services to its customers. Although Bank of America does not make any money directly from online
bill payment, studies have indicated that customers who use online bill payment are more profitable
than traditional customers.
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 8
According to the San Francisco Business Times, Bank of America makes 21% more money from
customers who use online bill payment compared with non-bill pay customers.
17
Barbara Desoer, the
chief of Bank of America Consumer Products Division, reported that the “average online customer’s
loan and deposit balances are 45% and 35% higher, respectively, than off-line users”.
18
Additionally, Internet clients tend to be more self-sufficient, meaning that it costs the bank less to
serve. Not only do they visit banks less often, but also call the customer service center about 30% less
than other customers.
19
Market Segmentation
According to the Online Bill Pay product manager for Bank of America, the company does not
segment the product based on demographic or geographic variables.
20
Bank of America conducted
research into segmentation but found that the market was too homogenous to segment using these
variables.
However, the company does target potential customers based on their use of Internet-based services
with Bank of America. For instance, the company differentiates between customers who are enrolled
in Online Banking but not Online Bill Pay, customers who enrolled in Online Bill Pay but have never
been active, customers who were once active in Online Bill Pay but are no longer active, and
customers that are actively using Online Banking and Online Bill Payment. The company designs
marketing campaigns targeting these various customer groups.
In 2004, Bank of America is planning on adding more Spanish-language functionality to its Online
Banking and Bill Payment services.
21
This follows closely on the heels of a Spanish-language
television, radio, print, and billboard blitz that the company recently completed to add nearly 200,000
new Hispanic accounts.
22
Although the company may not specifically segment the online bill payment
market, the Spanish-language efforts do work to demographically segment the consumers by language.
Customers
Customer Needs
Online Bill Pay gives the consumer the option to forego mailing a check to each payee, and instead
allow Bank of America to handle the payment process for them.
Customer Satisfaction
Bank of America recently revamped its Online Banking and Bill Pay websites in May 2003 to make it
easier for customers to navigate through the bill payment system, view bills from other billers (bill
presentment), and pay the bills online.
23
Since this website redesign, Bank of America has seen a drop
in the attrition rate of its customers, which it attributes to the customers’ increased satisfaction.
Buying Decision Process
Problem Recognition
The consumer must realize that there is a better alternative to pay bills rather than writing checks each
month. A significant amount of advertising is spent to promote online bill pay systems in an attempt to
convince consumers that paying bills online in one place is easier, faster, and ultimately cheaper than
writing paper checks.
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 9
Information Search
Once the consumer decides to look for an online bill payment system, that consumer must search out
the alternatives. The consumer would likely consider using an existing account or bank, or opening a
new account with a different bank.
Evaluation of Alternatives
The consumer must rate each of his or her alternatives based on criteria. For instance, studies have
shown that consumers consider the cost of using the service a major factor in selection.
24
Purchase
The consumer must then sign up for the online bill payment system. This step must be easy to
complete for the consumer to avoid the risk of the consumer getting frustrated and aborting the
process.
Post-Purchase Evaluation
The consumer then begins to evaluate the service based on the criteria that he or she developed
beforehand. With online banking and bill payment services, studies have shown that attrition rates are
much lower than standard services, indicating that the vast majority of consumers are highly satisfied
with their decision.
25
Competitors
Major Competitors
Bank of America’s largest direct competitors are as follows: (Bank of America has over 3 million
Online Bill Pay customers)
•
Wells Fargo – 1.4 million bill payment/presentment customers as of June 2003
26
•
Wachovia – 506 thousand bill payment/presentment customers as of January 2003
27
•
Washington Mutual – 205 thousand bill payment/presentment customers as of January 2003
28
Bank of America and these 3 competitors represent a combined total of 85% of the banking online bill
payment marketplace.
Strengths & Weaknesses
Bank of America’s large total customer base provides a significant advantage over regional banks
when trying to bring new customers onto its bill payment system. Also, the strength of the brand has a
positive impact on the Online Bill Payment product line. Finally, Bank of America has very low
attrition with its Online Bill Pay product – customers close accounts at one-fifth the industry rate.
29
However, some competitors do have certain advantages over Bank of America. Wells Fargo offers
“Live Chat” services from its online banking and bill payment websites, allowing a customer to talk
directly with a customer service representative.
30
Gomez ranked Bank of America’s online baking site
4
th
in the U.S.; “It’s well designed and has some key functionality, but it’s still fairly limited.”
31
This
shows that Bank of America has some opportunities for improvement which its competitors are able to
exploit.
Product Substitutes
There are other ways that consumers can pay their bills:
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 10
•
Consumer pays the biller directly through the postal service (or equivalent) by mailing in a
check
•
Consumer pays the biller automatically through an automated bank draft
•
Consumer uses the Internet to pay the biller manually through the biller’s website. This is
also known as biller-direct billing.
•
Consumer uses non-bank bill-consolidation website to pay the biller
Distribution and Dealers
Trade Channels
Bank of America’s Online Bill Pay service deals directly with the consumers and is not provided
through a middleman or dealer. The service is directly provided through the Internet and is available
to anyone with a computer and an Internet connection.
Bank of America provides access to Online Bill Pay through the Internet, e-mail notification, Pay-by-
Phone (in California only), and Quicken®. Additionally, Bank of America is also examining ATM-
based bill payment options.
Suppliers
Outlook for Resources
Bank of America outsources its Online Bill Pay operations to CheckFree Corporation. CheckFree is
the largest supplier for online bill payment services, currently servicing over 11 million consumers and
delivering 5 million bills per month through the banks it supports.
32
CheckFree is able to process
payments to any payee via paper check or electronic transaction if supported by the payee.
Bank of America purchased a 16% stake in CheckFree in April of 2000 and signed a ten year contract
with the company for it to be the supplier for online billing for Bank of America customers
nationwide.
33
Also, per the agreement, Bank of America committed to having ten million customers
using Online Bill Pay by the year 2010.
Because Bank of America uses a single supplier for Online Bill Pay, it could pose a problem for the
company if this supplier began experiencing difficulties meeting its commitments. In such a scenario,
Online Bill Pay service levels would plummet, likely meaning the attrition of a significant portion of
the customer base.
Supplier Trends
CheckFree has only made a profit one year out of the last 9 years – a profit of $10 million in 1999.
The company has lost a sum of $1.18 billion dollars since 1996. If the company is unable to produce a
profit it has a risk of bankruptcy which could negatively impact Bank of America.
34
Another potential supplier and current competitor, Yodlee, also offers services similar to CheckFree.
In August 2003, Bank of America launched a service called BillDirect which allows banks to present
bills from billers to its consumers.
35
This service directly competes with CheckFree in the bill
presentment market space.
Bank of America – Online Bill Pay
Marketing Audit
Kristen Rankin
Steve Padgett
Scott Murray
Ken Hysong
Wayne Salter
Page 11
Facilitators and Marketing Firms
Outlook for Financial Resources
Bank of America is extremely well positioned financially. The company’s recorded profit for the prior
12 month period (July 2002 through July 2003) exceeded $10 billion dollars. The company does not
break out its online banking data, although the company does report that it is currently earning a profit
on this product. As of October 2003, the company currently has an “A+” rating from S&P on its bonds
and a $113 billion dollar market cap.
Effectiveness of Advertising Agencies & Market Research Firms
Advertising campaigns used by Bank of America include:
•
A $70 million advertising campaign, run from May of 2002 through August of 2002. This
campaign targeted the bank’s consumer products, including its Online Bill Pay service. The
campaign used television advertisements as well as radio, print, Internet, and movie theaters
to convey the message
36
•
A $45 million advertising campaign, the first phase run from April 2000 to May 2000 and a
second phase run during September 2000. This campaign directly targeted consumer interest
and awareness in Bank of America’s Online Bill Pay service. The campaign used a mix of
radio, print, and outdoor advertising to convey the message
37
Recommendations
The major issue that has arisen while examining the task environment is Bank of America’s reliance on
CheckFree Corporation for its online bill payment solution. To mitigate this risk, Bank of America
should diligently strive to make its 10 million customer goal as soon as possible. By reaching this
customer level, CheckFree should theoretically have the volume of transactions it needs to become
profitable and stay solvent.
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