Commerce Bank Goes on the Offensive To Fight Attrition

Like most banks, Commerce Bank, the principal subsidiary of Commerce Bancshares Inc. (a $13.4 billion institution co-headquartered in Kansas City and St. Louis) enjoyed a significant increase in its deposits over the past several years. This trend was driven, in large part, by the unattractiveness of the stock market.

But, not wanting to take anything for granted, and also because it is significantly easier to keep an account then to acquire a new one, Commerce Bank sought ways to do a better job of retaining its existing customers, while maintaining an appropriate role in the relationship. "If someone is no longer using their Commerce checking account as their primary account, that may be a sign of things to come," says Geoffrey Thomas, vice president and director of marketing, Commerce Bancshares, Inc. "This has been our focus for the past four years."

At first, Commerce Bank-which operates more than 330 banking locations-ran a number of traditional efforts, including activation and retention programs, as well as bank promotions and marketing. The problem was timing. By the time the bank received, interpreted and acted upon the necessary data, it was often too late.

Late in 2002, Harte-Hanks, Inc. (San Antonio, Texas) told the bank about Allink Daily Deposit Builder (DDB). Although the institution evaluated other data management vendors, Commerce Bank selected the Harte-Hanks solution and signed a contract in the first quarter of 2003.

Ability To Detect Changes

Although no hardware changes were required, it took the bank until June 2003 to get its two-month pilot up and running. "The biggest issue for us was getting a handle on our own data, creating the right links between accounts, between customers and between households," Thomas says.

The Harte-Hanks solution builds an account history based on transaction details, including the number of checks written, number of times a debit card was used, number of times an ATM was used in network or out of network, and the size of the transactions. This information gives the bank a chance to see subtle changes and patterns of consumer usage over time.

Each night, the bank bundles its customer data and sends it to Harte-Hanks. As per the bank's instructions, the data is then interpreted and sent back overnight to the bank, along with alerts that indicate which customers should be contacted by phone and at what branches.

As a result, the bank can prioritize activities at its branches, with customer representatives able to identify and contact the most valuable customers at the greatest risk of defecting. Furthermore, the bank can measure the effectiveness of its efforts, in terms of retained balances.

"We look at a control group each month and compare those we contact and those we don't contact. The ones we contact," Thomas points out, "have better ongoing relationships with us than the ones we don't contact."

While those contacts are not sales calls, according to Thomas, the bank has realized incremental sales as a result of these calls.

So far, more than 14 branches, plus the bank's call center, are using the Harte-Hanks Allink DDB solution. It will be deployed for Commerce Bank's 1.8 million retail accounts by the end of the second quarter of 2004, Thomas reports.

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SNAPSHOT

INSTITUTION: Commerce Bank (principal subsidiary of Commerce Bancshares Inc., Kansas City/St. Louis).

ASSETS: $13.4 billion.

BUSINESS CHALLENGE: Improve customer retention.

SOLUTION: Harte-Hanks, Inc.'s (San Antonio, Texas) Allink Daily Deposit Builder (DDB) for analysis and reporting.