Who: Commerce Bank
Home Base: Cherry Hill, New Jersey
Year Founded: 1973
Sunday morning in Gloucester Township, New Jersey, a suburb of Philadelphia, is like Sunday morning in most places. Blackwood-Clementon Road, which churns during the week with harried commuters, feels eerily quiet. The strip mall there looks deserted. Even Laurel Hill Bible Church, across the street, is calm, since the congregation has already filed in.
The only sign of life is at the corner bank, where seven people are huddled in the ATM alcove between the door and the lobby. Curiously enough, they're not using the ATM. They look as though they expect the lobby to open at any minute. Which is to say, they look ridiculous. Don't they know it's Sunday? Don't they realize they're at a bank?
But at 9:50 AM, something amazing happens: The bank's doors open, and branch manager Regina McGee ushers the group inside. Darryl Pettus, a 33-year-old grocery-store clerk, deposits money into his ailing sister's account so that she can pay her health insurance. Before long, there are unshaven men in Philadelphia Eagles sweatshirts emptying sandwich bags filled with change into the coin-counting machine and children dressed for Sunday school comparing tongues stained red by the bank's cherry-flavored lollipops.
Extraordinary? Actually, no. This is an average Sunday at Commerce Bank, which prides itself on being the most convenient bank around. It may also be the most unconventional. For starters, it doesn't observe traditional banking hours. No Monday-through-Friday, 9-to-5 (or 9-to-3) limited availability. Commerce is open seven days a week. Typically, the branch offices are open from 7:30 AM to 8 PM during the week and for most of the day on weekends. Gloucester Township is the exception: Because Fridays are so busy, the drive-through window serves customers until midnight -- make that 10 minutes after midnight. Thanks to the companywide 10-minute rule, the branches open 10 minutes early and stay open 10 minutes late, an added convenience for early birds and procrastinators. "This," says McGee, "is the way banking should work."
Why such unbankerlike behavior? Because Commerce, based in Cherry Hill, New Jersey, with branches throughout the state as well as in Delaware, New York, and Pennsylvania, doesn't model itself on the giants of its industry. Its models are the giants of retailing, including the Home Depot, McDonald's, Starbucks, and Wal-Mart. President and CEO Vernon Hill believes fundamentally -- and tells anyone who will listen -- that Commerce isn't in the banking business. Rather, it's in the retail business, and its business model revolves around becoming a power retailer. "The problem with most banks is that they abuse their customers every day. We want to wow ours," Hill says. Banking is practically a dirty word around Commerce. As chief retail officer Dennis DiFlorio puts it, "The greatest insult you can give someone here is to say, 'You're thinking like a banker.' "
The key to Commerce's business strategy is its branches, which Hill often refers to as "stores." Other banks try to steer customers away from their branch offices by offering incentives to use ATMs or by limiting the number of teller visits allowed per month. Commerce does just the opposite. While it still gives customers the option of banking through its ATMs and its award-winning Web site (used by 29% of Commerce customers), Hill and his staff are trying to lure more customers into the store. Commerce distinguishes itself with its commitment to friendly and attentive service, he says. That's where customer relationships are built -- relationships that start with checking accounts and eventually lead to mortgages. The extended hours, gifts for opening new accounts, floor-to-ceiling glass windows, and historic murals on display are intended to attract visitors. At some branches, tellers take turns greeting customers inside the front door, just as Wal-Mart greeters do. "People will always choose to bank in person," says Hill. "But banks keep pushing them to use ATMs and online banking, because those are lower-cost transactions. Everyone else has given up on branches."
In the past three years, Commerce has nearly doubled its number of branches, from 96 to 185. This growth has fueled the increase of an even more important element: deposits, the bank's equivalent of store sales. As an industry, commercial and savings banks saw deposits increase about 8% last year. Commerce's deposits grew 38%, to more than $10 billion. "For the past 40 years, banks have said, 'Let's focus on growing loans,' " says Hill. "But what we've learned to do is grow low-cost deposits." Commerce offers free checking accounts in exchange for little or no interest, a trade-off that customers seem to accept.
By using those cheap deposits for loans and investments, Commerce turns a nice profit. Last year, revenue increased 34%, and earnings rose 29%. That performance has made Commerce Bancorp, the bank's holding company, a Wall Street favorite. From 1990 to 2000, total return on Commerce stock was an eye-popping 2,048%. The stock split last December and still ended at a record high.
Commerce is one of the country's fastest-growing banks. It's also the silliest and most over-the-top bank imaginable. How many banks have not one but two costumed mascots and a third character who is heard from but never seen? One of the mascots, Mr. C, is a jolly, oversized red letter with white gloves. He's a walking logo, Commerce's version of the Golden Arches. Buzz is an overjoyed, human-sized bee who ensures that the staff is creating -- you guessed it -- buzz within the branches. The bank takes its playfulness seriously, because it inspires the company's obsession with service -- or, in Commerce lingo, its focus on "wowing" customers. Hence, the name of its third character, the ultramysterious Dr. Wow (more on him or her later).
Last year, Commerce opened 35 new branches, including its first 4 New York branches. This year, the plan is to open 40 more, the majority of them in Manhattan and on Long Island. Hill isn't worried about going up against market leaders Chase and Citibank. Following a series of mergers that resulted in branch closings throughout the city, convenient banking is in short supply, he says. His chief concern then? "Culture, culture, culture." Because without superior service -- without the "wow" -- Commerce could easily become just another bank.
How to Wow the Customer
"We're asking you to forget the way you delivered your skills at other banks." Vernon Hill is talking to new managers at Commerce University, the training department that was inspired, in part, by Hamburger University at McDonald's. "In many ways," he says, "you have joined a service cult." Nordstrom has its Nordies. Commerce has its Wow Team. ("We can't call ours Commies," says DiFlorio.) Branches try to "out-wow" one another. Employees are praised for being "wowy." And every March, Hill recognizes top performers at the companywide Wow Awards. " 'Wow' is more than a word around here," says John Manning, vice president of -- that's right -- the Wow Department. "It's a feeling that you give and get."
That type of obsessive service culture starts with hiring the right people. "This is not the job for someone who's interested in being cool or indifferent," Manning says. And instead of the usual humdrum orientation class, every new employee attends a one-day course at Commerce University called Traditions. It's part game show, part training session, part common sense. Banks do all sorts of stupid things to customers, Manning tells new hires. That's why the company has a "Kill a Stupid Rule" program. "If you identify a rule that prevents you from wowing customers," Manning says, "we'll pay you fifty bucks."
While Commerce employees are trying to wow customers, the company is trying to wow its staff. The business of banking is grueling, especially for tellers, who make less than other employees and have the most contact with customers. Weekly events like Red Fridays keep the bank playful. That's when the Wow Patrol, along with Mr. C, visits branches and takes photographs of staffers wearing so much red that the bank looks like a Christmas party. Some customers even get in on the act. "It sounds juvenile," says Manning, "but people like getting their picture taken with Mr. C."
The ultimate keeper of the bank's culture, Manning tells employees, is Dr. Wow. Such a character really does exist (although he or she declined to sit down for an interview). Dr. Wow receives hundreds of letters and emails from customers and employees about the bank's service, which Dr. Wow forwards to the appropriate staffer, along with a congratulatory note. But ask employees about the identity of Dr. Wow, and they all say the same thing: "I don't know." And they don't, insists Manning.
Some letters from customers deserve truly special recognition. When members of a family in New York wrote to the bank about the "great service" that employees Theodocia Edwards and Dean Mitchell provided, Manhattan senior retail officer Daniel DelRoccilli decided to do something special. He visited the branch and presented them with a bouquet of red balloons that said "Wow!" and led the branch staff in a cheer that amused the customers looking on: "We are from the Wow Patrol/And we are here to say/Dean deserves a big wow cheer/for wowing every day!"
Initially, the family members opened an account with Edwards for $10,000. "They weren't happy with Chase and wanted to test us out," says Mitchell, who began looking after them as if he were their personal banker. He remembered the names of all nine siblings and even brought them a souvenir from his vacation to Argentina. They started bringing him coffee and calling to make sure that he was working before they came in. At first, he had no idea how much they were worth. The day that DelRoccilli arrived with balloons, the family had wired Commerce $1 million.
Service is so critical that the bank sends mystery shoppers to every branch twice a week. Last year, it conducted 14,000 mystery shops. In addition to evaluating the overall condition of the branch, shoppers look for a handshake followed by the standard Commerce greeting: "Hi! My name is ____. How may I help you today?" If the employee says "can" instead of "may," if the customer-service representative doesn't walk the shopper to a desk or give her the appropriate brochure, if the attitude isn't genuine, the branch doesn't get a "wow" rating, explains Ron, a shopper who prefers to keep her identity a mystery.
Throughout the year, the branches compete based on these scores. The latest contest focuses on drive-through service. The winning branch takes home the coveted Hill Cup, a trophy featuring a big letter C. "I don't want to give it up," says Jennifer Perrone, assistant manager of the Plaza branch, the reigning Hill Cup champion. "I'm obsessed with it. I leave notes for my tellers in the drive through all the time that remind them to 'Say it with a smile.' "
While Commerce is generating customer traffic, it's also figuring out ways to manage it. After all, how can you claim to provide superior service if your customers wait in line for long periods of time? This does happen. After waiting 20 minutes to open a new account, one Manhattan businessman threw what he himself called "a New York tantrum" and demanded service. "There are too many greeters standing around not doing anything," he grumbled.
Service isn't always efficient, concedes Hill when told of the incident. It's up to the branch-operations team to devise clever solutions. Just as fast-food restaurants have done, Commerce has reduced the number of keystrokes required for routine teller transactions. And customers' signatures are scanned into the computer system, so that when a teller enters an account number, the signature appears on the screen. The teller compares the signature instantly, reducing the time it takes to cash a check -- a routine, or straight, transaction -- to around 20 seconds.
Long lines at the bank's recently opened branches in New York are one of DelRoccilli's main concerns. Having managed other high-volume branches at Commerce, he knows that there are other ways to manage unexpected delays. "You can sense when people have been waiting too long," he says. "You have to engage them. Give them something to drink or eat or read. You'll take their mind off the wait."
Born to Be a Banker
Vernon Hill relishes playing the role of the brash, sharp-tongued antibanker, but the truth is, he was born to be a banker. His father worked as a check runner before World War II, and by the time he had a family, he decided that Vernon, the oldest of six children, should work in a bank and attend the Wharton School at the University of Pennsylvania. Vernon Hill did both. "I was lucky," he says. "It was the road I got pushed down, and it was what I was good at. But I knew I wasn't going to get rich as a bank employee."
Hill went into real estate, founding a company that helped retailers locate property for future stores. His first client was McDonald's, which has been such an influence that the Wall Street Journal once dubbed him McBanker. By taking out senior executives at McDonald's to approve sites in the 1960s, Hill learned firsthand how to build a national chain. In 1973, at the age of 27, he opened the first branch of Commerce Bank.
Just as nearly every McDonald's restaurant looks identical and serves the same meals, the typical Commerce branch is replicated with remarkable consistency. "We know every screw in the model," Hill says. Most branches are built from scratch for about $1 million. With few exceptions, they have the same white-brick exterior capped with a black metal roof, the same black-and-white marble, the same no-frills checking and savings accounts, and the same lollipops and dog biscuits. "It makes life easier for customers," says chief marketing officer John Cunningham. "They know what the deal is wherever they visit one of our banks."
For Commerce, deciding where to put a branch is just as important as what the building looks like. To this day, Hill's site-development company assists the bank in finding prime locations (and his wife's design company designs the branches -- a lucrative arrangement that has raised some eyebrows). Hill looks for a corner that is busy, but not too busy, with a good residential and commercial mix. Ultimately, Hill, who is also part owner of 45 Burger Kings in the Philadelphia suburbs, makes the call himself, a decision that he insists has more to do with gut feel than with demographic research. Usually, though, it's in the competition's backyard. If a competitor closes, the staff at the nearby Commerce branch is awarded $5,000.
In mid-February, DelRoccilli and Ted Lyons, one of the new branch managers in New York, met to review the marketing leading up to the grand opening of Lyons's branch in April. Another thing that Hill learned from McDonald's is how to create interest prior to opening a new store. For five or six weeks before the branch opening, Lyons's staff will conduct daily "buzz blitzes" in a 10-block radius of the branch, which is located at the corner of 43rd Street and Third Avenue. While Lyons personally visits local businesses, the branch staff will target pedestrians. Wearing Commerce jackets, they'll stand on busy corners handing out Commerce brochures and trinkets, spreading the word about the unusual new bank in the neighborhood -- one that's open seven days a week. "We want our own people doing this," DelRoccilli tells Lyons, "not outside people. It's for the continuity of it. The people you see are the ones you'll be banking with." Later, the two hit the street, identifying the corners near Grand Central Station and 42nd Street as best for blitzing. "This is going to be huge," gushes Lyons, who joined Commerce after leaving Citibank.
For Commerce, a typical suburban branch opening is like a carnival. There's a tent, music, and as many as 3,000 people participating in the family-oriented festivities. "Everything at Commerce is a production," says DiFlorio. To promote the openings of its first two branches in Manhattan, Commerce spent $500,000 per branch -- four to five times what it normally spends. There were direct mailings, ads on subway and phone kiosks, and countless buzz blitzes. The bank even enlisted street vendors, who gave out 10,000 hot dogs wrapped in Commerce napkins.
The two branches that opened in the fall and two more that opened in December are growing deposits at a rate of $5 million a week, which is faster than expected, says DelRoccilli. A good year for a new suburban branch is $15 million. New York is an enormous opportunity, says Hill, an underserved market worth about $500 billion in deposits.
Carole Robbins, a conference planner in Manhattan, was exactly the sort of customer that Commerce was hoping to find. "Why am I switching from the meanies over there?" she says, glancing over at the Citibank across the street from the Commerce branch at 55th Street and Sixth Avenue. It's 8:15 AM, and Robbins has already taken care of her banking for the day. Meanwhile, Citibank hasn't opened yet. "If I treated my customers the way they treated me," she says, "I'd be out of business." Up until last year, Robbins was perfectly happy with her old bank, EAB. But all that changed last year after Citibank purchased it.
She liked the Commerce pitch: a bank that's oriented around service and convenience and that's doing things differently. Robbins also liked the bank's appearance. "Look at this," she says. "It's so third millennium. But it's also this blast from the past: a bank with an old-fashioned approach to service. There's a different attitude here, like we're all in this together. But time will tell. All restaurants are good in the beginning too."
Vernon Hill understands the hazards of growth -- particularly for a company whose growth is built on breakthrough service. Hill has also come to expect some skepticism every time Commerce opens a new branch -- especially in a new city. "It sounds too good to be true," he says. "That's our number-one problem in a new market: trust."
But Hill has no plans to slow down. In fact, he has even bigger plans for his company: to have 375 branches open by 2005. That's 190 banks to build, staff, and mystery-shop. But branch by branch, he's determined to prove that Commerce is different, that it lives up to its word as "America's most convenient bank." "We have to keep delivering what we promise to customers," says Hill. Commerce has to keep on wowing.
Chuck Salter (email@example.com) is a senior writer at Fast Company. Contact Vernon Hill by email (firstname.lastname@example.org), or learn more about Commerce Bank on the Web (www.commerceonline.com).
Sidebar: Saying Yes to Change
If you think like a retailer, says Vernon Hill, then you're constantly coming up with ways to enhance the customer experience. Like the sleek phones added to Commerce ATM machines in case customers need to reach the 24-7 call center. Or the "check view" feature on the bank's Web site that allows customers to see an image of the front and back of a check a day after it has been deposited. Or the bright-red Penny Arcade in the lobby. The machine swallows handfuls of loose change and then spits out a receipt showing the total value.
When Hill learned that other banks had started refusing to accept large numbers of coins or were charging customers to do so, he saw an opportunity. "We said, 'We're going to spend $10 million to take your coins,' " he says. The added value isn't in the form of a service charge on each transaction, the way change machines typically operate. The Penny Arcade is free. Hand your receipt to the teller, and you get back the full amount in cash.
Where's the value in that? The Penny Arcade is more than a mere convenience, says Hill. The real appeal -- and the payoff -- is that it's fun. Kids want to use it. Pack rats need to use it. People waiting in line at the teller counter can't help but watch when someone steps up to the machine lugging a coffee can filled with coins.
In its own small way, the Penny Arcade transforms the bank into a more interesting and appealing place. And that, says Hill, is how you create traffic. Last year, Commerce's Penny Arcades handled 750,000 transactions, which totaled $71.7 million. Now that's real change.