Commerce Bank Essay

2782 Words Sep 2nd, 2013 12 Pages
Executive Summary
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
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All the above mentioned factors will lead to increased satisfaction among the customers because of “WOW” effect. While the competitors were in the process of shifting customer to low cost channels, Commerce Bank provided options for alternate channels but did not forced customers to use them. They thought like retailers; the more the customers visited the bank more revenue can be generated per customer.
Banking industries income can be classified into two major parts interest income which is simply the amount earned between the difference in the spread of deposit and lending rates, and non-interest income which is revenues from fees customers paid for certain transactions and functionality. For Commerce Bank non-interest income had increased much faster compared to interest income from the period of 1998 to 2001 (see exhibit 1a). By comparing the two financial matrices, one for the industry and other for Commerce Bank, it could be noted for the period 1998 to 2001, that Commerce Bank non-interest income had grown at 168% which is a much faster rate compared to the industry’s non-interest income growth at 27% . These figures clearly demonstrate people do value the services of Commerce Bank and are willing to pay additional price, strengthening the premise of “retailtainment.” At the same time it can also be noted that the industry average number of employees per branch had decreased from 26.3 in 1998 to 25.9 (see exhibit 2b) in

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