Commerce Bank (1)

COMMERCE BANK

Group No. 8:Vijay Jain (60)

Yamini Kalra (65)Renu Pathak (68)

Shakti Tandon (70)

AGENDA

Overview of Banking Industry Commerce Story Key Leanings from the case

Product Differentiation Employee Training and Its Impact Brand Building Strategies Customer Satisfaction and Value

Individual Assignments

OVERVIEW - BANKING INDUSTRY Retail banks offered commodity Products

i.e. Deposit and Loan Products Two important trends in the industry :

1) Push to increase the “cross sell” of products 2) Growing Revenues from fees customers paid

for certain transactions and functionality Customer Satisfaction with banking

industry had been quite low Customers selected their bank for variety

of reasons such as proximity of a local branch, large ATM networks

OVERVIEW …contd.

Front line employees in retail banks were often selected for their ability to perform repeated tasks, interact with customers and their willingness to accept low wages

Compliance with Processes and Product attributes were paramount in the industry

Commerce Story

Commerce Bank was very different from other banks in the industry

They compare themselves with a retailer more than a traditional bank

Their service delivery system is based on guidelines and standards for their products, branches and employees, and focused on customer centric programs

Services were based on personal contact, with branches opening longer on working days and modified hours on the weekend

KEY LEARNINGS

Product differentiation in service industry

Importance of customer satisfaction and value

Employee training and its impact on service quality

Brand building strategies in service industry

Product Differentiation

Instead of several products they offered just a few and replaced high interest rates with extraordinary friendly service

They also had a big branch network and generated deposit growth rate on a store level

Employee Training and Its Impact Internal system of cultural training and

incentives WOW!ing customers included awards,

commendations and compensation, as well as intense training and education

Mystery shopping, the WOW shops, was a significant component of performance measurement

Leagues were organized whereby branches in different regions might compete against each other for the most impeccable service report

Brand Building Strategies

Building every branch itself and didn’t go through mergers and acquisitions because of cultural differences and brand weakening

High service quality standards Customers as fans Drive through window for faster service 10- minute role Spent a lot of money on big promotional

activities and giveaways Wow terminology to measure service

excellence

Customer Satisfaction and Value In 2001, cumulative deposit growth rate in the

united states was 5% while Commerce deposits alone grew by almost 40% and households grew by 20%

Commerce model was to give the best of every channel what customers used

The big-bank sees a customer as a cost, not a revenue generator

3% - wanted the highest rate while 62% picked a bank for service, convenience, etc.. Commerce targeted this 62% while others focused on 3%

What Sets Commerce Apart

ATM Phone

COIN Machine

Mr. CBuzz

Dr. Wow

Mystery

Shoppers

Can ≠ May

Kill the

Stupid

Rule

IVRS PersonEasy

Retired Part

timers

Hot Dog FireJuggler on

Fire How far we

go ?

INNOVATION-EXAMPLESFROM INDIA & ABROAD

Banking Innovations Abroad Netting Clearing Houses

Bundling of services one stop shop for all financial needs

ATMs

Direct Debit Pay Monthly Bills

Global Banks

Online Banking - anytime

Cash withdrawal at Retail Counters

Mobile Banking – Apps world – Anytime / Anywhere

Banking Innovations - India Adoption of Global Innovations

Drop Boxes

Utility Payments

Door Step Services – Cash, Drafts, New Accounts, Cheque Books

Welcome Kit - ICICI

High Interest on SB accounts – Kotak Mahindra / Yes bank

Gold Deposits

Any ATM Withdrawals

SMS Alerts

Futuristic Perspective What Business I am in?

Deposits? Loans? Payments? Risk Management? Financial Intermediaries?

Can someone else do this?

Retail outlets? 100% Virtual bank? Insurance?

Why customers deposit?

Interest? Safety? Convenience?

What customers want? EMI AMI (Adaptive % )? Spending Pattern

analysis and AI based Advice

Inflation Linked Rates

Technology Trends? Bit Coins ? Big data? Social Banking?

?

CO-CREATION: CURRENT EXAMPLES AND FUTURE POSSIBILITIES

Co-Creation – Current Examples Branch network optimization (number

and size of branches), reviewing network architecture (i.e. hub and spoke model)

Basic multichannel integration, alignment of channels and integrated governance processes for real-time banking

Proactive and reactive management interaction based on customer needs

Operational customer segmentation driven by a needs based offering structure

Sales force effectiveness powered by consistent sales behaviors and tools

Simple and clear communication with customers

Performance management (new customer-oriented metrics) and tailored compensation schemes

Future Possibilities

GLOBAL BANKING:STAKEHOLDER MAPPING AND

CURRENT CHALLENGES

Global Banking: Value Chain

Value Chain: Cyclic Transformation

Global Banking: Stakeholders

Global Banking: Coalitions

Coalitions Explained

Stake Holder Engagement?

External vs Internal How much power

Govt. vs Employee Supplier vs. Customer

Allies or Opponent +ve Collaboration or –ve advertising

Management Strategy Marketing Communications Media

Engaging with Stakeholders The long-term success of our bank depends on our ability to gain and

maintain the trust of our stakeholders. Banking business works on the basis of trust. One of the ways we inspire trust in our stakeholders is by knowing

what they expect from us and how their expectations are changing. We therefore regularly engage in a dialogue with clients, shareholders,

employees, regulators and NGOs, as well as other groups of stakeholders.

We gain an understanding of their needs and interests through discussions and by conducting surveys or participating in events, as well as through our involvement in initiatives, forums and associations. Individual groups of stakeholders have different – and sometimes conflicting – interests and consequently have their own specific expectations of us as a bank.

By exchanging our views with these stakeholders, we gain a more detailed understanding of our responsibilities in our core business of banking, as well as our responsibilities toward our employees, society and the environment. At the same time, this dialogue enables us to identify potential issues at an early stage, offer our perspective and help to develop solutions to current challenges wherever possible.

Strategic & Regulatory Challenges

Strategic challenges: Private banking industry professionals need to reinvent

themselves in order to reinforce themselves as a leading pole in private banking services.

Retail bankers also have to face a growing competition from abroad as well as from non-traditional institutions. Asset management and investor services institutions need to prepare themselves for significant changes in infrastructures, regulatory frameworks and their competitive landscape.

Industry regulatory challenges The constant evolution of local and international regulations is a

major driving force in the banking and securities industry. The likely introduction of Basel III standards, as an example, will

have a major impact on the way institutions run their business. There is likely to be an increased focus on capital efficiency. Implementing all these rules can be an issue, yet the real challenge is more about optimising your regulatory investments than merely complying.

Operational Efficiency Challenge

Industry operational efficiency challenges

To appropriately address strategic and regulatory challenges, impeccable execution is a must. Constantly improving operational efficiency has to be high on the agenda of bankers. Now more than ever, institutions have to optimise their processes, control their cost structure, and explore new operating models using all the tools now at their disposal.

Analysing the opportunity to mutualise operations or IT systems across entities or geographies, outsourcing non core activities, improving risk management frameworks and tools… these are some of the areas where financial institutions can find the levers to reach excellence.

TECHNOLOGY IMPACT ON BANKING SERVICES AND

FUTURE

http://www.youtube.com/watch?v=oYPtBhkn_HU

http://www.youtube.com/watch?v=LsEV5wdh3EE

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