Commerce Bank

Submitted By-
Mrigendra Yadav (PGP04054)
Rishabh Malhotra (PGP04055)
Rahul Rishi (PGP04069)
Suhas Jirgi (PGP04085)
Vineet Saini (PGP04094)
 Case Overview r

Banking Industry:
Product – Deposit and loan products.
Service - Interest and convenience.
 34 % - Dissatisfaction with steep fees, fees surprise, errors
 34% - Geographic change
 15% - Availability of more convenience.
Distribution – Local branches and ATM networks, VRU but moving towards self-service channels.
Preferred Employees –
(a) Ability to perform repeated tasks
(b) Accept low wages
(c) Training consisted bank specific policies and procedures(Became more important after merger & acquisition).
(d) Performance – Vol of calls handled and number of transactions processed.
 Commerce Bank r

• Founded by Vernon W. Hill II in 1973.

• Different from any another bank in terms of service.
• Timings 7:30 to 8:00. Modified during Saturday and Sunday and they have 10 minute rule ( open 10 min early and
stay open 10 min late)
• Giving gifts for opening account.
• While other bank were pushing customers towards online they were focusing on giving best of every channel and
that’ s why they were having the highest deposit rate growth and online usage also was around 34%.

A. Growth
• Since 1990 stock price increased twenty-fold.
• When entered New York they had spent $500,000 per branch on
promotion, five times more than usual but broke even in half the time than
usual.
Parameter 1998 2001
Net income ($ in thousands) 52,232 105,012
61,752 (Banking industry) 73,978 (Banking industry)
Employees 2424 5329
1626978 (Banking industry) 1701721 (Banking industry)
Branches 88 185
61957 (Banking industry) 65654 (Banking industry)
Interest bearing deposit ($ in 3578041 9221383
thousands) 2961347 (Banking industry) 3505277 (Banking industry)
Loan loss allowance ($ in thousands) 26409 66981
57261 (Banking industry) 72314 (Banking industry)
Non- current loans and leases 7749 17616
31253 (Banking industry) 54905 (Banking industry)

B. Debits and Credits

1. Deposit rate – 0.5 lower than those of competitors.
2. Consumer business vs wholesale business - More than half of their deposits but only 1/3 in case of competitors.
3. Longer hours => higher cost => High Expense ratio. (Disinvesting in their business)
4. New account - 3% (highest rate) but 62 %(service and convenience) on which commerce was competing.
• Improving Value proposition to customer
 Eliminated fees for ATM and check cards. No charge for using cards. No charge for transactions.
 Other bank ATM charging ($1.5) but giving back later.
C. Loans
 Ability of customer to repay.
 Best loans – which they were not making.
 Commercial real estate projects, home montages, consumer loans.
D. Not customers – fans
Branches – Replica of remarkable consistency with white- brick exterior capped with black metal roof, same black and
white marble, same no- frills checking and savings accounts.
Lollipops
Dog biscuits
Commerce umbrella (rainy day)
Pens (300,000 per month)
Phones attached to ATM.
Large coins accept.
 E. Wow (Good Service) r

• S- Say YES to customer. Avoid forbidden phrases No, Sorry.

• M- Make each customer feel special.(Be personable, pleasant and positive). SMILE
• A- Always keep customers promises.
• R- To err is human! To recover, divine!
• T- Think like the customer. Always exceed their expectations.
F. Staffing
• More importance to experienced people. No substitute for experience.

G. Retailtainment
• Proposed to improve service experience. Managers used to suggest ideas for entertaining branch customers.
 Problem Statement r

1. Other banks had started copying same type of service offerings.

Washington mutual (un-bank) – roaming tellers, children’s play area, no desks
ING- Opened a café style location, free internet terminals
Bank of America – Experimenting with televisions for waiting customers.
2. Complaints
Greeted well but prefer employee to help in speeding up the process.
Too many greeters, not speeding up the process
Hot dog – cart had caught fire. Spread over Local news.
Some believe with proper training and guidelines, retailtainment can be a success but other believe in
sticking to the existing model.
Blueprint
r
 SWOT Analysis r

Strengths Weaknesses Opportunities

• Consistent service delivery
• Retailer mindset
• Customer-centric program
• Excellent service
innovation
• Walk the talk attitude
• Passionate employees
• Financial growth
• Provided the lowest
deposit rate.
• Higher operating cost as
compared to competitions
• Less focused on
responsiveness, reliability,
and assurance.
• Enormous market
opportunities.
• Expanding the business to
related financial sector
such as insurance.
• Expanding overseas.

Threats
• Fierce competition: competitors were beginning to adopt some of its basic service offerings.
• Lack of creativity and innovation to keep ahead of the competition.
 Recommendations r

1. Discontinue Retailtainment program as it does not fit with Commerce’s

value.
2. Back to previous service business model, i.e. focusing on superior
customer experience delivery rather than providing entertainment to
customers.
3. Focus should be given to the effort of improving quality of service.
• Three main areas to be improved are responsiveness, reliability and assurance.
4. Improving brand positioning through consistent service delivery.
5. Maintaining and improving financial conditions (deposits growth, net
income).
 Action Plan
r

• Create more effective and efficient process.

• Provide several service zones, i.e. basic service area, quick service zone,
and complaint zone.
• 3 types of front-liners, i.e. product consultant, service consultant.
• Launch service guarantee program rather than continuing Retailtainment
Program.