Profile Banking: A True Service Innovation
by Cathy Goodwin
Case published in Philip Kotler’s textbook, Principles of Marketing, published by Prentice-Hall. Reprinted in Christopher Lovelock’s Services Marketing, McGraw-Hill.
“I never thought I was designing a service innovation. I thought I was just doing my job.” That’s how Brad Baird modestly described his role in proposing, designing and implementing a major service innovation — a new banking concept that became a key profit center for the Canadian Imperial Bank of Commerce.
When Brad arrived for his assignment at the Lombard Place Branch in Winnipeg, he found an empty suite of offices tucked away on the mezzanine level. This space, he realized, was a potential gold mine. The downtown branch was located in an office tower that was connected by underground tunnels and covered walkways to a significant part of the city’s business and shopping community, including Portage Place, Eaton Centre, Winnipeg Square, and The Bay.
During Winnipeg’s long winters, shoppers and businesspeople could access dozens of retail shops on the lower level as well as the Sheraton, the Westin, and three office towers. Hundreds of people walked by the branch every day. Many of these, Brad realized, were potential customers.
As Brad studied his customer base, he realized that the bank was not serving a potentially profitable customer segment. Thousands of professional people, aged 25 to 45, were earning good salaries and building substantial savings, but were far from qualifying for Private Banking. What intrigued Brad about this segment was their experience of time poverty. They made money but lacked time to investigate investment opportunities; they sometimes missed payment deadlines because they couldn’t get to the bank to make a deposit.
Brad proposed the development of a new profit center that became Profile Banking for clients who fit a “profile” of high income and future potential. Once accepted, clients dealt with specially-trained account representatives who were carefully screened for banking knowledge as well as interpersonal and communication skills. Everyone who worked in the center, including the secretaries, was licensed to sell mutual funds. The few customers who visited in person found office furnishings consistent with the center’s upscale image.
Clients were drawn to the center by the opportunity for personalized, one-stop banking. They also enjoy protection from mass mailings and bounced checks: employees call clients when their names appear on the NSF list. These services lead to unsurpassed customer loyalty. One customer called the center in a panic: she had boarded a plane without her credit cards and a hotel refused to let her check in. The Profile Banking representative faxed a letter to the hotel and arranged for a new credit card by overnight express. The customer subsequently transferred a large funds portfolio to the bank.
Profile Banking has been overwhelmingly successful. The service has spread from Winnipeg to Toronto and is expected to expand throughout Canada. The concept is not flawless. For instance, Profile Banking draws profitable revenue sources from the branches, who are required to generate their own growth. Additionally, every year, some customers fail to meet the profile. If they appear to be weathering a bad patch, they may be retained. However, a customer who is transferred back to the branches may be lost to the bank forever.
As for Brad Baird, who started the whole business, his career has taken off. He moved to British Columbia as a branch manager and he appears to be on target for his goal of senior management.