Commerce Bank: The Power of WOW

Tom Peters, the workplace guru on a mission “to drive Dilbertian cynicism out of the workplace”, added a commentary to his Web site ( ) after one of his colleagues visited Commerce Bank’s Centralized Customer Service Call Center in Mount Laurel, NJ. “My colleague Ilene Fischer hung out at a Commerce Bank call center last week…trust me, it ain’t your father’s call center!” wrote Peters. Commerce Bancorp (CBH) staffers are not trained in the get ’em on, get ’em off way of the usual banking customer service person. They are trained to spend whatever amount of time is necessary to satisfy a customer’s needs. Welcome to the machine? Not at Commerce. No voice messages sounding like Star Wars protocol droids; no need to be able to type 60 numbers per minute on your touch-tone phone, either. All service is performed by flesh-and-blood human beings. Yet, the average call-response time is a mere 16 seconds, only half that of the banking industry average. “All this lavish service, and they manage to grow almost 50 percent a year…organically,” concludes Peters. What is going on here? A bank that cares about people? This Call Center quality service thing has to be an anomaly, though, right? Some marketing sleight-of-hand to garner attention, like tellers giving out extra lollies would be. Right?

Wrong. This quality is ubiquitous throughout the revolutionary corporation that is Commerce, a fact that a close friend of mine who began working at the corporate center in June of 2004 suggested that I look into.

Let’s take as another example the Commerce Bank Visa Gift Card product. Competing retailers typically sell an average of seven to eight gift cards per day. Commerce sold 220,177 of its cards between November 23rd and December 31st of 2004, going beyond its original total projected sales of 80,000 to 100,000 cards. What breaks down to an average of 30 gift cards sold daily per store (in December) was more than four times the average among competing retailers. One Commerce store (yes, the bank’s branches are not branches, they are “stores”–more to come on that point of fact) sold 112 cards in a single day. “The overwhelming success of the Commerce Bank Visa Gift Card reaffirms our belief that success is achieved by focusing on convenience, service, and fulfilling customer needs,” said Chairman Vernon W. Hill. “I am also pleased to announce that we have eliminated all conversion, expiration, reissue, and other fees from the Commerce Bank Visa Gift Card, thereby liberating gift card users from unnecessary and inconvenient fees.” Liberation from unnecessary and inconvenient banking fees? BRILLIANT! (As that Guinness Stout scientist would say.)

Commerce does not have customers. It has “fans”. Commerce does not have bank branches. It has “stores.” “America’s Most Convenient Bank” prides itself on being “one of the nation’s most dynamic power retailers”. What gives? The reason that Commerce stores are stores is because fans can come on in and get everything they need from a bank in one stop. They can take care of real estate transactions, retail banking (personal loans and lines of credit, savings and checking accounts, money markets), insurance, and investments all in one place. If they hang out enough, they might even get more than one lollie.

I don’t mean to make Commerce sound perfect. Perfect’s not for real (unless you’re eating my personally conjured chicken almondine, but that’s another story). There is the fact that in 2004, two mid-level execs at a Commerce store were criminally charged with being part of a “special loans conspiracy” involving a former Philadelphia political official, who in turn was awarding lucrative bond underwriting deals to and pulling other strings for Commerce. In addition, a potential concern for potential investors is the company’s present forward P/E ratio of 13.48, which is perceived as very solid in any industry but, in reality, is noticeably down from Commerce’s average (historic) P/E ratio of 23 over the past six years.

Nevertheless�are you saying WOW yet? If not, you should be. Especially if you are an active investor looking for something to put into your aggressive growth or long(er) term growth portfolio.

To WOW its fans is the mission possible of Commerce, and it takes it to the limit. Examples of WOW include customer service reps going to see clients (I mean, fans) in hospitals for loan closings and notary services, and meeting fans at a store at six o’clock in the morning so they can retrieve items out of their safe deposit boxes. Customer service reps will also man the store doors with umbrellas on rainy days so that fans can be escorted inside without getting drenched. This can even go for employees. “I have been walked in many mornings under a big ol’ red umbrella,” says one Loan Application Specialist who works in the corporate headquarters. In fact every spring, Commerce holds what is called the WOW! Awards ceremony, where awards are given for outstanding works of customer service. This year, just as with the last two years, the WOW! Awards ceremony is being held at Radio City Music Hall. Commerce is the first private organization to ever have its name on that illustrious place’s marquee. The awards range from money to red Porsches (I myself would prefer a red Barchetta Ferrari, but that’s another story).

WOWing the fans not only gets a performer into Radio City Music Hall, it gets a performer big money, too.

In the late 1990s, Commerce had 97 stores. By the end of 2004, it had 319, and it plans to open another 55 (or more) of them throughout New York, New Jersey, Connecticut, Pennsylvania, Baltimore, and Metro D.C. in 2005 alone. WOW! Over the last five years, the corporation’s loan amounts are up 27%, its assets and its deposits each up 39%. More WOW! Over that same time period, total revenues are up 31%, net income is up 36%, and earnings per share up 27%. MAJOR WOW! In its 2004 fourth-quarter alone, earnings were reported at record levels, with the bank-cum-retailer now holding over $30 billion in assets and seeing an earnings per share growth of 26%, all while taking in a 34% deposit increase. Um…did I hear someone in the back say WOW?

Investors, the fundamentals are in place at Commerce. They show up in their bottom line reflective of how they show up under the big ol’ red umbrella ready to escort a fan out of the rain and into the store. Achieving success by focusing on convenience, service, and fulfilling customer needs? BRILLIANT (er, I mean, WOW)! This is what it takes to be a top 40 performer in our contemporary service-oriented economy.

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