Commerce Bank was founded in 1973 by Vernon Hill II who took his experience in operating fast-food restaurants and applied it to banking. He decided to call his branches "stores" and developed a business model focused on maximizing customer convenience and delivering consistently great customer experiences. Commerce Bank invested heavily in store facilities and personnel to make the customer experience great and did not focus on having the best rates. To increase convenience, stores were kept open seven days a week and hours were extended in the mornings and evenings. Also, customers were able to get instant ATM cards, and funds from their deposits would be credited either the same day or the next day. For fun, the bank offered free coin counting machines and gave customers free merchandise such as pens and even dog biscuits. Employees were carefully recruited and trained and competed for WOW! appreciation awards. Through all of these efforts, the bank has been able to reduce the costs of acquiring and retaining customers and deposits as well as its staffing costs. In a highly competitive industry, Commerce Bank created a value proposition with mass customer appeal and a business model based on some of the best practices of speed, convenience, and friendly service from the fast-food industry. Background
Commerce Bank was founded in 1973 by Vernon W. Hill II with nine staff and $1.5 million. From the onset, Mr. Hill decided that Commerce Bank was not in the banking business but in the retail business, and created a business model that revolved around becoming a power retailer. Drawing heavily from his retail experience in fast food franchising, he leveraged important lessons from retailers that had transformed their own industry such as Starbucks and Home Depot. Best practices from these non-financial services companies offered unique insights to help Commerce Bank set itself apart in the financial services world. Taking a different approach is exactly what made Commerce Bank such a success. When big banks consolidated and closed branches, Commerce Bank opened hundreds of offices in the competition’s backyard through which to conduct business with customers. While most banks believed the value of its bank was in the loan base, Commerce Bank went after the deposit base. And, while most banks focused on cutting costs, Commerce Bank focused on customer needs, by adding paradigm busting conventions to the industry – the bank has open early/late hours and offers seven days a week branches. Happy and satisfied customers were Commerce Bank’s primary focus (Frei, 2006 p.1). Unlike other banks that encouraged customers to move their transactions from full-service channels to self-service channels, Mr. Hill’s business strategy was to provide customers the best of every transaction channel knowing that each one would be used by the customer. Commerce Bank must be mindful to stay one step ahead of the competition as a handful of competitors were beginning to copy some of its service features, such as weekend and evening hours. The competitors were beginning to emphasize the human element of service with advertising and marketing campaigns. Washington Mutual introduced its own retail experience which included roaming tellers, a children’s play area and no desks. ING opened a café-style location offering espresso and savings accounts to customers seated at tables provided with free internet terminals. And Bank of America installed televisions to entertain the waiting customers (Frei, 2006, p.11). Commerce Bank’s continued success is dependent upon delivering a better service than the competition. In this regard, the bank proposed to implement a form of atmosphere enhancement called “retailtainment” in order to differentiate itself. This decentralized program called “retailtainment” allowed branches to come up with their own ideas, even wacky ideas, to entertain branch customers on Friday afternoons....
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