Commerce Bank Argumentative Essay Example

started adopting some of Commerce Bank's service features like weekend and evening hours, the bank must strive to stay ahead by continuously improving its offerings. These competitors also began emphasizing the human aspect of service with advertisements, roaming tellers, children's play areas, and no desks. (Fret, 2006 p.L).INS has opened a cafe-style location where customers can enjoy espresso and open savings accounts while seated at tables equipped with free internet terminals. Additionally, Bank of America has installed televisions to entertain customers while they wait (Fret, 2006, p.1 1). The success of Commerce Bank relies on delivering superior service compared to its competitors. To accomplish this, the bank proposed implementing an atmosphere enhancement called "retaliating" to set itself apart. This program allows branches to come up with their own ideas, even unconventional ones, to entertain customers on Friday afternoons. The problem statement is that Commerce Bank needs to provide a new "retaliating" experience while also controlling operating costs to increase profitability. Through its "retaliating" approach, Commerce Bank prioritizes a customer-centric culture by enhancing core banking services with a retail experience that customers value (Fret, 2006, p.1 1).

To ensure customer satisfaction, Commerce Bank offered several services including fast daily branch operations, convenient teller transactions, coffee and newspaper while waiting in queue, elimination of fees for ATM and check cards, phone access at ATM machines to reach the call center, a 'check view' feature on the website, and a penny arcade at branches. A key advantage of these services was that customers were willing to spend more time at the bank without being overly concerned about waiting time.

Commerce Bank believed that providing a positive customer experience

would lead to various benefits, such as increased traffic, customer retention resulting in higher lifetime value, and reinforcing the perception that the bank prioritizes building customer relationships. These factors contribute to enhanced customer satisfaction through a "WOW" effect.

While competitors were pushing customers towards low-cost channels, Commerce Bank provided alternate options without forcing customers to use them. By thinking like retailers and encouraging frequent visits to the bank, more revenue could be generated per customer.

The income of the banking industry can be categorized into interest income and non-interest income. Interest income refers to the amount earned from the difference between deposit and lending rates, while non-interest income includes revenues from customer fees for specific transactions and services.

For Commerce Bank, there was a significant increase in non-interest income compared to interest income from 1998 to 2001 (see exhibit 1 a). When comparing the financial matrices of the industry and Commerce Bank during this period, it is evident that Commerce Bank experienced a 27% growth in non-interest income. These numbers clearly demonstrate that customers value the services provided by Commerce Bank and are willing to pay higher prices, supporting the notion of "retaliating."

Additionally, it is worth noting that the average number of employees per branch in the industry decreased from 26.3 in 1998 to 25.9 (see exhibit b) in 2001. However, for Commerce Bank, this number increased from 27.5 to 28.8 during the same period. This indicates that the operating costs for each branch of Commerce Bank are higher compared to the industry average, and the decrease in ratio for the banking industry could be attributed to the utilization of alternative banking channels.

Commerce Bank has made

significant efforts to meet customer expectations through "retaliating". However, the bank now needs to decide if it should continue with its existing model, as customer perception is changing. Any decrease in customer satisfaction will directly impact Commerce Bank's operations. This includes a decrease in referrals, which will increase the cost of acquiring new customers. It will also result in a loss of opportunities for cross-selling and up-selling, which were possible due to high customer involvement, thus increasing operational costs. There is also a risk of increased customer attrition rate due to dissatisfaction with expected service levels. The value of "retaliating" is not as significant as it once was. Some customers prioritize service efficiency over having a greeter present but not doing anything. Additionally, certain aspects of "retaliating" have disrupted the bank's core operations.

Recommendations and Conclusions:

Considering the design of its operations, Commerce Bank is expected to generate more revenue in the form of non-interest income (see exhibit la). Accordingly, Commerce Bank should consider introducing more fees for ATM and checking account transactions. Customers may be willing to pay for these services at the expense of the retail experience.

Despite experiencing a higher growth rate in interest revenue compared to the industry, Commerce Bank noticed a decline in interest revenue starting from 2000. To address this, Commerce Bank should focus on personalizing banking services and attracting non-customers selectively for its loan products. This strategy will help increase the bank's interest income.

However, it is important for Commerce Bank to be cautious about potential risks. The bank's deposits have grown faster than it can lend the money out, with most of the excess cash invested in mortgage-backed securities.

If interest rates increase, the value of Commerce's portfolio could decrease, impacting the bank's capital levels and expansion opportunities (Barrett, 2003). Additionally, Commerce Bank's loan-to-deposit ratio is significantly below the industry average.

Recognizing that some of its best loans are those it did not make, Commerce Bank should streamline or standardize less valued activities for customers. The bank should also evaluate the appropriate level of "entertainment" necessary to maintain operations and remain competitive against other banks (Fret, 2006 p.6).

There is no need for a mascot or a hot dog cart to entertain customers while waiting in line. Bank of America found a more cost-effective solution by providing an entertaining experience for customers waiting in line. However, customers complained and preferred to have an extra employee serving them behind the counter. Long-term capacity planning is important for the management of a bank. A lack of planning or a wrong plan can lead to failure or bad service, resulting in customer attrition (Domingo, 2006).

The recommendation for Commerce Bank is to focus on improving efficiency by effectively matching demand and capacity. It is crucial to separate standardized transactions, such as check encashment and withdrawals, from personalized ones like account opening, loan applications, and marketing new services. Commerce Bank can analyze data from standardized transactions to determine peak and low periods instead of relying on "gut-feel" decisions made by Mr. Hill.

According to Optimizations and Optimizations (2011), request variability arises from unique customer demands that result in uneven service times.

If Commerce Bank matches the demand and capacity of its transactions, it can alleviate congestion in its lobby or ATM booths, enhance customer satisfaction, and give its staff

more time and composure to handle personalized transactions. Capacity planning becomes simple and straightforward when service transactions are conducted by a single station or one-stop-shop with multitasking and multi-skilled tellers.