Running head: COMMERCE BANK

Table of Contents
Executive Summary .......................................................................................................................3
Background ....................................................................................................................................3
Problem Statement.........................................................................................................................4
Analysis ...........................................................................................................................................5
Strengths ................................................................................................................................................... 5
Weaknesses ............................................................................................................................................... 5
Opportunities ............................................................................................................................................ 5
Threats ...................................................................................................................................................... 6

Recommendations and Conclusion ..............................................................................................6
References ......................................................................................................................................8
Appendix .........................................................................................................................................9



COMMERCE BANK 2
Commerce Bank
Executive Summary
Commerce Bank has built its success by focusing more on improving customer service
than increasing profits. From the beginning their methods have differed from their competition
but recently the competition has started to copy some of their unique service features. To
continue to stay ahead of the competition, Commerce has implemented something new which
they refer to as Retailtainment, (Frei, 2006).
This report evaluates the current operations of Commerce Bank with the use of a SWOT
Analysis. The findings indicate that Retailtainment may not be the best way for Commerce to
differentiate them from the competition. Management at Commerce Bank should take advantage
of this information and evaluate some other options.
Background
Commerce Bank was founded in 1973 by Vernon Hill. Vernon Hill began his career as a
fast food business owner and used that retail experience to create a different kind of bank. He
opened the 1
st
branch in New Jersey with only $1.5 million and has since expanded into 3 other
neighboring states without any acquisitions or mergers. Hill believed that, Its easier to build a
bank than to fix one, (Frei, 2006). He wanted to differentiate Commerce Bank from the
competition but wanted all of his branches to be consistent, not just with their appearance but
also with well trained employees and customer service. In order to develop well trained
employees he implemented Commerce University which not only gave new employees WOW!
Training but it also allowed current employees to learn even more by taking other courses
offered by the University. The University was also open to non-employees which helped with
future recruitment.
Commodity products such as loans and deposits are offered throughout the US banking
industry. From 1998 to 2001 both loans and deposits grew on average 20% in the industry, some
more than 20% but primarily due to mergers and acquisitions. Commerce, however, managed to
grow their deposits by 30% per year since 1996 and in 2001 managed to grow their deposits by
nearly 40%, which was 35% higher than the cumulative US deposit growth (Frei, 2006). The
founder of Commerce Bank, Hill, attributes this to the fact that they allow their customers to
bank with them however they want, whereas, the competition is forcing their customers to use
the lowest cost method or pay a fee. Hill let his customers choose the method they wanted at no
COMMERCE BANK 3
additional cost because according to him, there is not one retailer who has succeeded by making
their client do something they do not want to (Frei, 2006). Another way that Commerce Bank
differs from the competition is that non-interest income in the industry grew 27% from 1998-
2001 due to increased fees and at the same time that Commerce was reimbursing their customers
up to $5 per month for ATM fees charged by other banks (Frei, 2006).
Commerce Bank is different from its competitors mainly because of their focus on
convenience and customer service. Their many locations are open seven days a weeks with
extended hours Monday through Friday, all with a 10 minute rule in which they open 10 minutes
early and stay open 10 minutes late each day, they offer their customers coffee and newspapers
while they wait, give out pens, lollipops and dog biscuits, and have Penny Arcades in the lobby.
This customer-centric approach has made Commerce Bank very successful compared to its
competitors. There was once a poll conducted where banking customers were asked why they
pick a particular bank and according to that poll, 3% did so for a higher interest rate and 62% did
so for convenience and better customer service. Hill was of course ahead of the game because he
was going against the grain by focusing on the 62% of customers who wanted convenience and
better service. Throughout the years Commerce Bank continued to make service improvements
such as putting phones at all of their ATMs, keeping the drive thru teller open until 12:10 a.m. in
busy locations, and most recently adding Retailtainment, (Frei, 2006).
Retailtainment was a new concept created by Commerce Bank so they could stay ahead
of the competition. Commerce was beginning to feel pressure from the competition because they
were starting to implement some of their ideas in order to regain the market share.
Competitors such as Washington Mutual started un-bank with play areas for the children, desk
free branches and roaming tellers, ING opened a caf in one of their branches, and B of A
installed TVs in their waiting areas. The purpose of Retailtainment is to enhance the customer
experience by entertaining the customers. Retailtainment currently is only offered on Fridays
and varies by branch because the employees are allowed to come up with their own ideas for
entertaining the customers. This, however, strays from Hills original concept of consistency
(Frei, 2006).
Problem Statement
Commerce Bank may be focusing too much on entertaining their customers and losing
tack of what originally made them a success which was convenience and customer service.
COMMERCE BANK 4
Analysis
According to Fretty (2012), Organizations focused solely on generating financial returns
without delivering value often end up losing business and alienating customers, ( 4). This has
proven to be true for most of Commerce Banks competitors but they are being to realize their
weakness and are taking action to improve customer service. To remain successful, Commerce
Bank decided they needed to analyze operations by conducting a SWOT analysis (see Appendix
A) and make changes based on that data (Reed, 2013).
Strengths
According to McBride (2005), many banks attribute growth to the culture of the
organization. This is exactly what Hill believed. He was very selective about his employees
because he wanted more than anything for his employees to fit into the organizational culture of
Commerce Bank. Once hired, Hill reinforced the organizational culture with new employee
training at Commerce University which gave the employees the knowledge to do their job but
focused primarily on customer service. Commerce also reinvests their savings into the company
so that the customers benefit by extending operating ours, reducing/eliminating fees, and
allowing customers to always have access to a live person whether it be by phone or in person.
Another strength is that the branches are all standardized, which brings piece of mind to their
customers. They know exactly what to expect no matter which branch they visit, with the
exception of Retailtainment Fridays (Frei, 2006).
Weaknesses
Commerce Bank offers loans at an interest rate that is half a point less than the
competition. This is a weakness because this allows competitors to have an advantage but Hill
does at least reinvest these savings to compensate for this weakness. Also, due to the recent
implementation of Retailtainment customers have been dissatisfied with the current level of
service that Commerce is providing. They have limited Retailtainment to Fridays but it still
seems to have a negative impact on their customer service (Frei, 2006).
Opportunities
Commerce Bank requires their customers to come into a branch to sign their loan
paperwork. This allows the bank to show the customer the great customer service that they have
to offer and allows them to build relationships and increase business. Commerce University is
also a great asset, not only for training and growing their current staff, but also for the
COMMERCE BANK 5
recruitment of future staff due to their relationship with local high schools. Commerce also has
an opportunity to use their non-interest income revenue as a competitive advantage for growth
instead of increasing their bottom line. Also, by focusing on organic growth, they can continue
to maintain their consistent customer-centric organizational culture (Frei, 2006).
Threats
In order to minimize potential problems, Commerce Bank must consider the threats to
their operations. Competitors are always a threat but if Commerce is aware of these threats, they
can stay ahead of their competition. They are currently more successful than the industry average
but with their competitors implementing more customer-centric services at the same time that
they are impeding their customer service with Retailtainment, they could lose customers.
Recent feedback in regards to Retailtainment has not been positive. Many customers feel that
this strategy is a waste of money and manpower. They are complaining that there should be less
people greeting and entertaining them and more people assisting them with their bank
transactions. Retailtainment is very different than their original strategy (Frei, 2006). This new
strategy is decentralized and has gaps according to the Service Quality Gap Model
(Fitzsimmons, Fitzsimmons, & Bordoloi, 2011). In the next section, recommendations are made
to address Commerce Banks current weaknesses and threats.
Recommendations and Conclusions
Commerce Bank has built its operation based on Hills idea that he could build a better
bank by incorporating the retail experience. He was right and because of it Commerce Bank has
been more successful than the industry average but the analysis shows that Retailtainment may
be taking the retail experience a bit too far. Commerce Bank seems to have lost sight of their
original idea of convenience. It is one thing to entertain customers while they wait but another to
make customers wait because they are being entertained. Commerce Bank wants to be different
than their competitors but Bank of America had a much better and more cost effective way of
entertaining their customers with just a television (Frei, 2006). The reason this is better than
Retailtainment is because it did not take away from customer service. With the amount of
money it is costing Commerce Bank to have greeters and to entertain customers on Fridays, they
could enhance customer service by adding additional tellers during high traffic hours of
operation. This will help develop and improve communication between the organization and the
COMMERCE BANK 6
customer as well as the service delivery between contact personnel and the customer
(Fitzsimmons et al, 2011).
Commerce Bank can also invest in implementing the use of Data Envelopment Analysis
which, according to Fitzsimmons et al (2011), is a linear programming technique that can
measure the efficiency of each branch and identify which branches are in need of improvement.
This will allow Commerce to truly identify and address their weaknesses in an efficient manner
while at the same time give them an advantage over the competition.
Commerce has recently been so focused on the retail experience that they have forgotten
what the customer really wants which is convenience and good customer service. Yes,
entertainment can be good customer service but not if it impacts other more important needs. Not
to forget the fact that Retailtainment is not a sunk cost, its an ongoing expense as long as the
program is in effect. Commerce Bank needs to focus services that are more cost effective and
value adding. In addition, a SWOT analysis should be conducted yearly so that Commerce Bank
can continue to improve their services and expand their customer base (The SWOT analysis,
2010).

COMMERCE BANK 7
References
Fitzsimmons, J.A., Fitzsimmons, M.J., & Bordoloi, S. K. (2011). Service management
operations, strategy, information technology (7th ed.). New York, NY: Irwin/McGraw
Hill.
Frei, F. 2006. Commerce Bank. Harvard Business Review. Harvard Business School
Publishing, Boston, MA.
Fretty, P. (2012). Most valuable players. PM Network, 58-61.
McBride, G. 2005. Banks need to sell customer service. Retrieved February 19, 2014 from
http://www.bankrate.com/brm/news/bank/20051024a1.asp
Reed, D. (2013). SWOT your way to the future. Industrial Management. 55(2), 23-26.
The SWOT analysis. (2010). CA Magazine, 143(8), 31.
COMMERCE BANK 8
Appendix A

SWOT Matrix
Strengths Weaknesses
Focused on customer service Rates are lower than the industry
Longer operating hours
Retailtainment has reduced
convenience by increasing wait times
Consistency amongst their branches (until
retailtainment)
Only offer 4 checking options
SMART principles/Managing for
WOW!

More selective when giving out loans
which reduces their risk

Opportunities Threats
No fees for customers to use the tellers in
the branches
Competitors offer higher interest rates
Continued growth without mergers and
acquisitions
Competitors are implementing some of
their customer service ideas
Using their competitive advantage to get
stronger (Frei, 2006)
Competitors have higher profit margins
and lower costs
Commerce University great recruitment
tool

Live agents over the phone instead of a
Voice Response Unit to talk to customers