Commerce Bank Case
Commerce bank has been a pioneer in the banking industry by reverting to customer service. This has driven customers to the bank, but in order to stay ahead on the curve they want to move away from the model that has worked for them. They should focus on the current model and enhance it, rather than change it. Background Commerce bank also known as Commerce Bancorp is a New Jersey based bank founded in 1973 by fast food restaurant franchiser Vernon Hill. Hill took his experience as a fast food business owner and used it to operate Commerce bank. The world”, he reasoned, “did not need another ’me-too’ bank” (Frei, 2006, p. 4. ) Hill created a retail franchise with branches openening earlier than the competitors and staying open later than the competitors, 7:30AM to 8:00PM during the week and modified hours on Saturday and even Sunday (Frei, 2006, p. 4). Drive through windows at some busier locations even stayed open till midnight to accommodate customers, however all branches operated un the notian that they were to open 10 minutes before and close ten minutes after the posted time, calling it the “ten-minute rule” (Frei, 2006, p. 4. ).
Commerce used this model to get customers in the door and made their primary focus customer service. This focus allowed them to increase customer deposits, by an average of 30% per year from 1996 to 2001, some years they even achieved growth rates in excess of 40%. This was not consistent with the market trend during this period. Other banks where opting for internet banking, literally pushing customers out the door. Hill felt that this was a model for failure, because “You can’t name one retailer in this country that has pushed people where they don’t want to go and succeeded” (Frei, 2006, p. . ). Currently Commerce is feeling the pressure from other banks, who wants to use their business model to draw new customers. Washington Mutual for instance launched “un-bank”, with roaming tellers, a children’s play area and no desk. ING a new entrant in the market opened a cafe style branch that served espresso to customers at seated tables (Frei, 2006, p. 11). To combat this Commerce launched a new customer experience called “Retailtainment”. Retailtainment is the incorporation of entertainment into the various branches.
Essentially each branch can come up with their own wacky ideas for entertaining customers every Friday (Frei, 2006, p. 11). This was to ensure that Commerce, who offer lower rates, stay ahead of the competition. Problem Statement Commerce bank is losing track of what the sole purpose of banking is and what the customers really want in a banking experience. Analysis “Many banks attribute their growth to their successful transformation to a sales culture” (http://www. bankrate. com/brm/news/bank/20051024a1. asp) . Commerce has used old school banking to carve out a niche in the banking industry.
When you look at other banks, you’ll notice that they are moving towards internet banking, focusing less on the person to person interaction. This could have catastrophic implications, “I am referring to the turn-off of poorly trained, new employees. What’s worse is seeing this person struggle and look in vain for help from someone else in the branch” (http://www. bankrate. com/brm/news/bank/20051024a1. asp) Commerce on the other hand have embraced this by training employees in the art of customer service. At the Commerce bank University, new employees undergo intense introduction to Commerce’s culture, and traditions.
The class is actually called “Traditions”, were employees are taught to smile, shake hands and greet customer (Frei, 2006, p. 9. ). This training leads to good service, and this framework is called “WOW”. WOW is a program that was developed in 1994 to teach employees service. To drive this program even more, employees are awarded when they “WOW” customers, by getting little red C’s for every instance. These C’s can then be turned in for merchandise. On Friday’s Commerce bank would have a “WOW” patrol visted branches to take pictures with employees and customers who were wearing red.
One author in the New York Times is quoted as saying “The locations also feature colorful change-counting machines and upbeat employees, who every Friday are decked out in red, often to hilarious effect” (http://www. nytimes. com/2006/02/26/business/yourmoney/26mgmt. html? _r=1&pagewanted=all) . This contributed to the customers overall experience, and was used to great effect to bring traffic in the door. The customer central model, was the springboard for what Commerce believed was the “value of the bank”, customer deposits (Frei, 2006, p. 5. Hill believed that by focusing on “non-rate” reason deposits, that he could build a deposit base. “Banks had given up on growing all together because theu thought you had to pay the highest deposit rate to get growth” (Frei, 2006, p. 5. ). Hills’s philosophy was just the opposite, the bank provided customers with an unforgettable experience in exchange for a deposit rate, half a point less than the competition. This lower rate enables Commerce to stay open later and have more additional benefits for its members. These benefits include no fee banking and even ATM fee refunds to high balance members.
To ensure this experience was the same for all the members of the bank, Commerce standardized it’s branches, down to the nuts and bolts, “We know every screw in the model“(Frei, 2006, p. 7. ), this Cunningham the chief marketing officer, felt would make life easier for customers. At these branches are all greeted at the front door by greeters and made to feel at home and offered treats while they wait to be served. This is unique from other banks who sometimes charges fees for customers if they visit the branches or talked to a real person. “Customers enrolled in Bank of America’s e-banking account pay $8. 5 a month for the privilege of accessing branches and talking to tellers when you need to make a transaction or deposit”( http://money. cnn. com/galleries/2011/pf/1106/gallery. annoying_fees/4. html) Commerce bank was certainly the winner on the ground, but they felt threaten by some competitors who copied there models in the New York area, namely ING and Washington Mutual. In fear of losing it’s hold on the ground, Commerce implemented a decentralized program called “Retailtainment”. This program would allow branches to come up with their own ideas, even wacky ideas, to entertain members on Fridays.
For starters this is a break from the model that has worked so far and that is standardization. Commerce had built the brand name using this philosophy, and moving away from this will hand the control over to the branch. With the bank industry ratings on the decline this strategy may back fire severely and hurt the brand down the road. “In October 2010, the number of Americans expressing a “great deal” or “quite a lot” of confidence in banks fell to an all-time low of 18% — lower than its level at the height of the global financial collapse.
Gallup analysts find this to be a continuation of a free fall that began in 2006” (http://businessjournal. gallup. com/content/148049/rebuilding-trust-banks. aspx) This strategy may or may not work, but it is not the real issue at hand. Consumer enter the bank, much as they do a fast food restaurant, Hills background, with speed of service in mind. Commerce bank have all the greeters and all the friendly smiles, but customers have been complaining about the lack of tellers and feels that the bank should have less greeters and more tellers. (Frei, 2006, p. 1) Recommendations and Conclusions “Retailtainment”, may sound like a good idea, but it has plenty of issues associated with it. Commerce bank uses a standardized process and this will steer them away from that model. They will decentralize a process and they will rely on the managers to make their own decisions. By relying solely on the managers and their staff, Commerce runs the risk of harming their image. There are other ways that they can look into to increase business. They need to look no further than the greeters within the branches.
Commerce has focused so much on the first impression that they lost sight of what people are there for. People are there to deposit their money, and undue delays in the process within the branch may lead to less than satisfactory service. Commerce can take some of the greeters and make them “junior” or “overflow” tellers. They can create a middle level of greeters/tellers that makes less than tellers, but more than greeters. This group can be seen as back-up to jump into action when there is heavy flow of traffic in the bank. They can also use these junior tellers to accept check deposits at the front, so customers don’t have to stand in line. . Conclusion Customers don’t care about a free hotdog in a bank, they care about service and the speed in which they can receive the service. Commerce needs to focus on the model that works and refrain from venturing into untested waters, they may lead to problems.