Commerce Bank Case Study

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banking industry has become highly competitive prompting smaller banks to fold under acquisitions and mergers for survival. Most common is the industry's obsession with ability to generate increased revenue by pushing products to the customers and through bank transactions and functionalities. In turn, most banks have lost focus on the customer and concentrated on price rather than quality customer care. In this case analysis, Commerce bank saw an opportunity in the industry trends and developed a successful system. The bank developed an exemplary customer service mechanism that concentrated on customer needs. The bank developed SMART principles that were aimed at delivering quality service, this framework measured the impact of services offered to both external and internal customers. The bank also took measures in streamlining products that were neglected by the competitors such as deposits. As a result, it had reduced deposit rates to half percent lower than competitors had. It had also generated more than half of these deposits from consumer business as compared to most banks that lacked substantial consumer business base.

Commerce bank is a good case study in analyzing the banking industry. It is an indicator that customer service and employee motivation are key factors in success of organizations. One way of ensuring this is by selecting, hiring and training employees that are customer service oriented and by creating a conducive working environment for them. It is recommended that for the banking industry to succeed in generating income, the focus has to shift to the customer and not price. A successful organization always value both employees and customers alike and know how to help the customer best.

Background

The banking industry is experiencing numerous changes. Mergers and acquisitions have become common as a means of survival in the highly competitive market. Characteristic of the industry, retail banks offer services that either push to increase the "cross sell" of products, which is the number of products each customer use or generate revenue from fees customers pay for transactions and functionalities such as Automated Teller Machine (ATM) transactions, loan products and deposits. ATMs are increasingly viewed as profit centers leading to creation of large networks where customers can access their accounts for a fee. Most banks have different types of checking accounts categorized by characteristics such as fees based on minimum balance, overdraft protection and number of check written.

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Between 1998 and 2001, banks had raised non-interest income by 27% and interest revenue by 11%. Nonetheless, issuance of loans particularly has been an indicator of poor forecasting and execution. In 2001, most banks loaned almost 90% of their consolidated deposit base.

In addition, most banks used ineffective demographics such as age, income, and geographic location in differentiating customers instead of focusing on customer satisfaction. This resulted in attrition, which is the greatest contributor to customer dissatisfaction. By 2002, most banks had adapted internet banking that provided customers an option of viewing their account balances, transfer funds and pay bills at a fee. The electronic offered lower marginal costs and most banks encouraged their customers to transact this way while imposing monetary penalties for full service channels. Banks have increasingly shown little interest in training staff other than the common bank specific policies and procedures, this also has led to lack of motivation, which in turn lead to customer dissatisfaction.

Problem Statement

Banks are quickly transforming the industry's landscape. This has led to a rising wave of bank mergers and fire sales. Banks are result oriented thereby pushing to increase the "cross sell" of products and growing revenues from fees customers pay for transactions and functionality. This has caused many banks to lose focus of the importance of high quality customer service.

Analysis

Customer Care

One way that proved beneficial for Commerce bank is the exemplary customer service. It is imperative that organizations look into the needs of their customers as a priority, establish customer satisfaction, loyalty and retention to stay ahead in business (Singh, 2006). Commerce bank developed SMART principles that aimed at maintaining high quality customer service. This framework measured the impact of a particular service on both external and internal customers. Employees who attained the desired goal under this framework were entitled to stickers that could be redeemed for merchandize such as T- shirts, mugs and radios.….....

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