REV: OCTOBER 3, 2006
FRANCES X. FREI
The hardest thing about becoming a big bank is not becoming a big bank. — Douglas Pauls, chief financial officer
Deborah Jacovelli looked up from her desk as a big pumpkin, a Dalmatian, and a masked crusader ran by her office. It was business as usual at Commerce University, Commerce Bank’s Cherry Hill, New Jersey training center, but it was also Halloween on a rainy day in 2002 and the employees were getting into it with their usual enthusiasm. As dean of Commerce University, Jacovelli had witnessed the development of many innovative methods for energizing the company’s employees. Halloween costumes and people decorating their cubicles, hardly typical bank behavior, were not at all strange at Commerce. Jacovelli noticed that someone had adorned the giant “C” character outside her office with a cape. It took a special kind of person to deliver the high-quality customer service Commerce Bank promised. Happy customers were the bank’s top priority. An internal system of incentives and cultural training implemented by Jacovelli and her coworkers to reinforce a deep commitment to “WOW!ing” customers included awards, commendations, and compensation, as well as intense training and education. “We want to exceed customers’ expectations every time they visit our bank,” insisted Commerce Chairman and CEO Vernon W. Hill II. Commerce referred to its branches as “stores” and looked for operational comparisons to retailers such as Starbucks and Home Depot rather than the bank next door. “How does Starbucks get you to pay $6 for a cup of coffee?” mused Hill. “It’s the retail experience. That’s what we care about and it’s paying off. Some critics say our stock price is high for the banking sector, but if you look at other power retailers and compare our multiples, we are undervalued.” Since 1990, Commerce’s stock price had increased twenty-fold (Exhibits 1 and 2 present company financials.) Because Commerce encouraged customers to visit its branches, or stores, it wanted the experience to be positive even when the branch was busy. A handful of competitors were beginning to copy some of Commerce’s extra service features, such as weekend and evening hours, prompting the bank to be mindful of staying one step ahead. With coffee and newspapers already available to waiting customers, the bank considered adding entertainment to the lobbies of its stores. “Retailtainment,” proposed in 2002, was Commerce’s latest idea for “WOW!ing” customers. Among the ideas piloted ____________________________________________________________
Professor Frances X. Frei and Research Associate Corey Hajim prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
as part of this “atmosphere enhancement” concept were free hot dogs, a guitar player and juggler, and an employee on roller blades dressed as a big “C” character. While not completely off the map for a bank that encouraged its employees to dress up in costume, this latest program concerned Jacovelli. She wondered whether customers really wanted to be entertained when they visited a bank branch. Even with a program limited to Fridays, if execution at different branches varied, would the consistency of great service be put at risk? Had the bank, Jacovelli worried, finally taken the retail experience a step too far?
The Banking Industry
Retail banks offered deposit and loan products, which were widely considered to be commodity products. Deposit products were a way for customers to store their money with the institution in exchange for access to the payment system (through electronic transfers and checks), interest on their money, and contact with the bank service...