Barclays’ pricing lessons…
In 2021, Barclays Bank reported a full-year net profit of £6.38 billion. In September 2021 it reported year to date profit at an all-time high of £6.9 billion. Yet last month we received a letter from them notifying us that they’re implementing additional fees on accounts like ours.
Don’t get me wrong, I’m not complaining at the extra fees, as we won’t actually incur them, but they’re really interesting in terms of pricing!
Firstly, let’s look at what Barclays are implementing:
These are all additional charges for Barclay debit card services, and are effective from the 1st August 2022.
1 If you need a replacement card, you can have one free per year if your card is lost or damaged, or if you need to change your name or details ON the card, otherwise there will be a charge of £5 per card. (The replacement card remains free if its to replace one that’s stolen, expiring or that needs to be replaced because of fraud.)
2 Delivery cost for your replacement card will be £1.99 for FIRST CLASS, not special delivery etc. Otherwise, standard despatch will be via 2nd class post.
3 Personalise your card. You can add your own photo or colour to your card for £10. It will revert to a standard card at replacement following expiry unless you tell them again that you want to personalise AND PAY again.
4 A temporary debit card, for example if you need a card in a rush, you can get a temporary card, lasting 28 days, for £12.
5 Fees will be taken automatically, usually 3-5 working days from instigation.
As you can see, none of these are large amounts, but the way these have been announced and will be implemented gives small business owners some really helpful pointers.
1 The announcement has been made well in advance of the implementation date. As with tax rises, these extra charges are being announced with plenty of lead time, which makes them feel that they’re a long time away, and therefore unlikely to be high on our list to think about. Most customers will just make a mental note, shrug their shoulders and get back to thinking about more pressing matters. When the changes actually come in, there’s less resistance.
2 None of these are big amounts. Barclays has enough customers, with 48 million worldwide, that they will get a good return on these relatively small increases.
3 The postage charge of £1.99 for first class warns the customer how their replacement card will be sent. Second class is the standard tariff that will be used unless you pay the extra fee. The extra £1.99 purely needs to cover the administrative effort to pull those cards out to be sent by 1st class, and the rest is pure profit. The current cost of first class post is just 21 pence more than second class, at 85p instead of 66p.
4 The personalised card is a nice idea! There are always going to be customers who want to spend more for a personalised service or product. Many people wouldn’t consider spending £10 every year to have a debit card with their childrens’ photo on it, or their dog, or maybe their football club emblem, but some will jump at the chance. The cost to produce the card is probably a very small part of this charge. Again, the rest is profit.
The surprise here is that this isn’t a recurring instruction, which would have been a recurring annual fee for Barclays unless the customer goes to the effort of cancelling. As we all know, once we’ve signed up for something, inertia kicks in and we tend to let the subscription run.
5 Having the chance to accelerate the process for an extra fee is a great one! How many of us are happy to pay for priority delivery (Amazon Prime?) or other enhancements? It’s simply another way to take notice of your customers who are happy to spend a little more, and allow them to access your product or service in a way that better suits them.
6 By making the collection of the fees automatically, Barclays are in control of the payment process. It’s the same as having a Direct Debit in place for your customers. There’s negligible administrative requirement, and unlikely to be any issue around chasing for payments. This is always a great thing for any business!
There’s a mix here of fees that customers can choose to incur, as well as some that they will just have to accept. This mix negates the impact of the enforced extra charges, as subconsciously we’re aware of the fact that we have a choice as we read through the list.
We talk a lot to our Outsourced FD clients about making sure they don’t leave money on the table, and are maximising their revenue.
- Some may decide to charge for ‘extras’ they’ve previously missed. The small costs they’ve previously absorbed all mount up and charging a small amount towards them can make a big difference to the bottom line.
- Some business owners may just decide to make it clear to customers that they ARE including these items in their standard fees, while their competition may not. Being transparent about your fees builds trust, and allows your customers to educate themselves about their options. (Our ‘What we give you‘ sheet works well for us with this one.)
The point is that this is then a conscious decision around your pricing, rather than a continuation of previous behaviours. Given the general increase in costs that we’re all battling at the moment, every small amount makes a contribution.
Despite their profit figures from last year, Barclays are not being complacent, and are taking steps to ensure they’re reviewing even small amounts in fees and looking at places where small extra charges can be made.
Spending some time over the next week or so thinking about similar changes in pricing structure for services or products that you offer might help you find ways to increase your income in future, or to educate your customers to appreciate the ‘extras’ you provide that they may have taken for granted.
As ever, if you’d like to chat through any of the above and how you might be able to apply the ideas to your business, please get in touch!
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