Focus : Banking & Finance Bank sows service, reaps customers By JOHN GOLDEN

Focus : Banking & Finance
Bank sows service, reaps customers
By JOHN GOLDEN

Commerce Bank, a fast-growing banking presence in Westchester County and southern Connecticut, ranked highest in customer satisfaction in both the mid-Atlantic region and the nation in a recently released independent study of retail banking satisfaction.

The study by J.D. Power and Associates, a global marketing information services firm and business unit of The McGraw-Hill Cos., was based on responses from 20,898 households regarding their experiences with their primary banking providers. It examined six factors: transactions, account initiation-product offerings, account statements, convenience, fees and problem resolution.

Commerce Bancorp Inc. scored 828 of a possible 1,000 points. It led the national survey for the second consecutive year.

Community Bank ranked second in the mid-Atlantic region with 808 points. The regional study profiled 17 banking institutions and evaluated 4,887 households in Delaware, Maryland, New Jersey, New York and Pennsylvania.

Commerce Bank also led the nationwide survey in highly committed customers, at 42 percent.

For all banks included in the study, 31 percent of customers were highly committed to their products and services this year, up 3 percent from 2006.

For every 1 million customers a bank has, a 5 percent increase in the number of customers shifting from moderately to highly committed can lead to an additional $1 billion in deposits, according to the study.

“Positive experiences are a key contributor to advocacy and loyalty, and highly committed customers make more recommendations, use more products and services, and are more likely to positively impact the bottom line for their bank,” said Jeff Taylor, senior director of the banking practice at J.D. Power and Associates.

Overall satisfaction with the retail banking experience has increased considerably since 2006: up by 22 index points on a 1,000-point scale to 763 in 2007. Specifically, customers report higher satisfaction levels with fees, convenience and transaction methods.

In-person transactions have the greatest impact on customers’ transaction satisfaction, the study found, followed closely by ATM and online transactions. In-person remains the most common transaction method, with 40 percent of customers saying it is their primary method and 83 percent having visited a bank branch in the last three months.

“With nearly 85 percent of customers still doing some of their banking at a branch, regional leaders have done particularly well in offering more convenient hours of operation and branch locations,” said Taylor. “While larger banks are certainly making strides in enhancing the retail banking experience, community banks and credit unions are still strong players, as they generally provide shorter in-person transaction times, fewer out-of-service ATMs and shorter wait and transaction times when customers speak to a live telephone operator. However, community banks and credit unions tend to struggle with convenience, so increasing satisfaction within this area is surely one way for larger banks to remain competitive in the market.”

“Customers provided three primary reasons for selecting a bank: good reputation, free services and convenient location,” said Taylor. “Reputation, which is supported by recommendations and positive word of mouth, was thereason cited most often for choosing a bank. While many banks have focused on convenience and price, those that provide an outstanding customer experience can enhance their business at a lower cost and will likely achieve long-term sustainable advantages over the competition.”

The CEO of Commerce Bancorp Inc., Vernon W. Hill II, was 27 when he opened his first Commerce Bank in Marlton, N.J. in 1973.

“One office, nine people,” he said recently from bank headquarters in Cherry Hill, N.J., recalling his company’s start. “Today, we have 440 offices and 15,000 employees.”

“McDonald’s was my first client,” he said. “There’s a little of that McDonald’s flavor in our retail business. This is a retailer. McDonalds taught us the following things: every customer has value. Two, the brand is the most important asset that you have” and should be emphasized “in everything you do.”

“If you have the right brand, you can replicate it in market after market,” said Hill.

Since its founding 34 years ago, he has done that with his Commerce Bank brand in the metropolitan markets of New York, Philadelphia, Washington, D.C., and southeast Florida. In the New York area, “We’re a major player” with 259 stores, Hill said.

In Westchester County, Commerce Bank has 10 branches and will double that number by the end of 2008, he said. A Commerce Bank branch will open in downtown Larchmont in late June and another is under construction in downtown Pelham.

Commerce Bank has eight branches in Connecticut, including six in Fairfield County, and expects to operate 19 in the state by the end of 2008. One is under construction in Greenwich, Conn., and another in Shelton, Conn., the CEO said.

In the lower Hudson Valley, the banking retailer also has four stores in Rockland County.
“Our model is a retailing business, not a banking model. We sell bank products, but we’re a retailer,” Hill said.

In the banking industry, “There’s a lot more talk about service” of the kind that has Commerce Bank leading the nation in retail customer satisfaction, Hill said. “We don’t believe you can convert a traditional bank to this model, that you have to build a model to deliver that. You have to build a culture and a model. This is a company built from the ground up to deliver that expressly.”

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