Canadian

Imperial

Bank of

CommerceGroup No 10

Golap Banerjee (46)Anshay Nagda (47)Sheetal Munden (108)Bindu Mishra (110)Ankit lodha (176)Shilpa Sharma (179)

the Industry

• Canada’s Banks had assets over $ 777 bn.• 9 domestic chartered bank• 51 foreign bank subsidiaries

Top 3 banks

• Royal Bank of Canada

• CIBC

• Bank of Montreal

Royal Bank CIBC Bank Montreal

Assets 173,079 151,033 138,175

Deposits 135,815 115,462 98,241

Loans 115,386 99,938 88,634

Net Income 1,169 890 825

About CIBC (Canadian imperial bank of commerce )

• 125 years old bank.

• North America’s 5th largest bank

• Provided financial services to 6 mn. Canadian customers.

• 1428 branches, 2887 (ABMs) & 40800 full time personnel.

• 2nd largest financial institution in Canada.

• CIBC LinkUp, CIBC Contact & Commcash like services were launched.

• After the recession CIBC’s income grew by 2 2%

Banking during ’90

• Online banking system emerged• Consumers wanted quick, cheap & accurate services.

(Unprofitable)• Additional services required for customers associated

with complex banking needs, investment counseling & asset management services. (Profitable)

• Average Canadians dealt with 2.2 banks. (study reveals)• 26% - 1 bank• 37% - 2 banks• 37% - 3 banks

• Different discounting schemes were launched.

How CIBC competed

• Change in Corporate Strategy• Relationship Banking• Customer Segmentation

Relationship banking

Providing integrated, tailored packages to clients and households rather than encouraging product focused marketing

Customer Segmentation

• Customer who valued convenience• Customers whose banking needs caused them to, value personal

services.

Consumer credit division

Location : Toronto

Total staff : 120 employees

Departments : 6 consumer loan deptt.

Vice President : Pat Skene

Product sold : 106 different products

3 most important : i) Personal Loans (22.5% of Canadian Mkt.) ii) Personal Lines of Credit (17.0% of Canadian Mkt.) iii) Overdraft protection

Problem faced during recession

• Focused strongly on marketing credit products• Lack of sophisticated risk management tools• Lack of assessment tools accessible to branch staff• Arrear, Delinquent & loan write-offs were having significant

impact

Probable Solution for the problem

• Credit policies need to be revised in a better way• Better risk management tools need to be develop• Short term credit guaranteeing should be tightened• Reduce extending loans of marginal quality

The New Campaign

Previously the bank staff were ordered to follow stringent norms while allowing credit. But post 1992 appropriate system, policies and controls were in place to meet customer’s credit needs

3 things were needed to revive :

• To disseminate the new approach throughout the organization

• To explain the new software.

• To find ways to differentiate CIBC products from competitors

C.I.B.C

How did CIBC differentiated their products

1. Roadside Assistance

2. Discount Coupon for Loans

3. Bankware

4. An Informational Booklet

5. Free VISA Classic card for a year or Free CIBC LinkUp for a year

6. The “valued customer” Portfolio

7. The last payment (Up to $500)

Bankware (I)

• Created by : Interactive Media

• Idea came : Wells Fargo

• Contents : CIBC loan, Mortgage & other Credit Products

• Financed by : Consumer Credit

• Total Cost : $250,000

• Introduced on : 1993

• Promotion : Globe & Mail (national newspaper of Canada)

• Produced & distributed : 144,000 copies

BANKWARE I

Bankware (II)

• Total Cost : $ 250,000

• Contents : Deposit Accounts, Investment, VISA, Mortgages, Mutual funds & Loans.

• Participants : VISA, CIBC Wood Gundy, etc.

• Launched in : September 1994

• Extra features : 1) Ability to print personalized mortgage amortization tables and to compare cash back car offers with discounted loan interest rate offers.

2)A section was developed where children could explore the services offered by major banks.

3)It allowed customers to learn, explore, compute make decisions and print any information related to CIBC.

• Production : 150,000 English & 25,000 French copies

BANKWARE II

BANKWARE (II) continues……

• A focused group discussion took place. The banks were informed that they should charge a fee of $15 for Bankware II, in order to increase the perceived value to the customers. But it was disagreed by Bank Officials

• 100 free copies were given to the branches and for any extra copy $0.50 were charged.

• The bank staff was recommended to install Bankware I so that they may help the customer to show how it works.

• No free copies of Bankware II were given.• 85,000 copies of Bankware II were ordered by the bank staff. But it was

clear after 1995 that they are not ordering due to the nominal fees that were charged for each copy. They removed the $.50 charge and overnight 41,650 were ordered.

• 80% of the Bankware diskettes were distributed among the customers• Bank Managers kept those diskettes in their drawer and distributed upon

request• At one Toronto branch they were not given as free samples because the

manager thought that they were taken in bulk .

Strengths

Customer oriented services –

• Personalized service for customers having more complex banking needs • Convenience for transaction oriented customers

Quality, service and personal relationships with its customers

Excellent Corporate strategy based on concept of relationship banking and customer segmentation

Personal bank representatives were available in every branch

Advertising and promotions supporting their corporate strategy

Strengths continued …

Use of software which could determine the profitability of each client and even identify clients who were good candidates to approach about investment or lending opportunities

Branches had total price discretion on loans

New campaign to change the loan experience had differentiating elements.

Bankware showcased wider range of product and services available from CIBC and allowed customers to learn explore ,compute ,make descions and printout informations on any products and services of CIBC.

Weaknesses

Out of 106 products offered , average customer was aware of only 3 products.

The whole responsibility of Bankware II was levied on consumer credit division.

Bank was not able to formulate proper distribution system.

Static nature of Bankware did not allow it to reflect the new innovations and campaigns developed in consumer credit department and elsewhere in the bank.

Bankware II could not be loaded at the branch level and customers could not be shown how to use it because only softwares developed or supported by theinformation system division was loaded on the network servers.

They did not know from where they were getting the best bang for the buck.

Opportunities

37 percent Canadians who were multiple bank users could be targetted through personalised services.

Keeping in mind the leading edge of technology they have the opportunity to bring revolution in banking industry of Canada.

Threats

Bank of Montreal was close third thus it may pose a threat to its position.

Because of similar type of products offered in the banking industry there was always a threat of losing customers to competitors .

WHAT TO DO NEXT

Whether to develop Bankware III or devote resources elsewhere

•Additional special features

•RSP (new) to target old age segment

•Comparative interest rate structure

•CD-ROM – Perceived Value

•GUI Supported

•Can be loaded in server

•Other departments of CIBC actively involved

•Reasonable price for complex customer

•Multi billion dollar banks ,No problem with cost

Is it worthwhile developing Bankware III? Should it aim at planning the financials for customers who heavily depend on CIBC?

Reasons :

• We are in favour of developing Bankware III and providing it at a price of $ 15 (say) that itself means our target customers will tend to become customer having complex needs.

• The fact that convenience customer are transaction oriented because they look for quick, cheap and accurate transactions

If resources are developed elsewhere, what are the value added initiatives that can be taken care of instead of Bankware III.

Resources can be devoted to develop a system which could have allowed customer to have direct access to the network.• Updation of Bankware II with new innovation & campaigns• Processing becomes faster• Less burden on relationship banker which leads to greater

efficiency

development of a relationship focused approach to banking :

• Incentives for Relationship Bankers in order to increase level of dedication

Financials

Roadside Assistance Cost - $ 25½ off coupons+ thank you brochure - $ 0.35Credit wise booklet - $ 0.95VISA Classic Card - $ 12Free LinkUp - $ 2.25The Valued Customer Portfolio - $ 5.50Total - $ 46Say , average no. of people - 150,000Total Cost - $ 6,900,000Bankware - $ 250,000

$ 7,150,000