How it learned that what customers really want is to Keep the Change
Innovation in services is rare. In financial services, the last big breakthrough was online banking, nearly a decade ago. In October, 2005, Bank of America (BAC ) brought out a radically different product that broke the paradigm. It's called Keep the Change.
The concept solves a critical banking problem -- how to get consumers to open new accounts. The product works like this: Every time you buy something with a BofA Visa debit card, the bank rounds up your purchase to the nearest dollar and transfers the difference from your checking into your savings account. It also matches 100% of transfers for the first three months, and 5% of the annual total, up to $250 a year. Since the launch, 2.5 million customers have signed up for Keep the Change. Over 700,000 have opened new checking accounts and 1 million have signed on for new savings accounts.
How did Bank of America create Keep the Change? In the spring of 2004, it hired an innovation and design research firm in Palo Alto, Calif., to help conceive of and conduct ethnographic research on boomer-age women with children. The goal was to discover how to get this consumer segment to open new checking and savings accounts.
For the next two months, a team of five BofA researchers and four researchers from a West Coast consulting firm visited Atlanta, Baltimore, and San Francisco. They observed a dozen families and interviewed people on the streets. They watched people at home as they paid and balanced their checkbooks. They tagged along with mothers as they shopped at Costco, dined at Johnny Rockets, and made deposits in drive-through tellers.
Ray Chinn, senior V.P. for new product introduction, along with Faith Tucker, another BofA senior V.P., saw two themes emerge from the research. In Atlanta, the team met a mother who always rounded up her checkbook entries to an even dollar... [continues]
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