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TD Canada Trust B Linking the Service Model to the P and L Case Solution

Solution Id Length Case Author Case Publisher
2299 1403 Words (5 Pages) Dennis Campbell, Brent Kazan Harvard Business School : 108043
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The study discusses the effort initiated to differentiate TD Canada Trust as a comfortable banking’ brand after the $8 billion mega-merger of Toronto-Dominion Bank and Canada’s largest independent trust company, CT financial services Inc. The key goal for the bank was to retain its customers. The aim could be achieved by utilizing Canada Trust’s lower customer-loss rate of 8% and TD bank’s higher acquisition rate of 13%. Consequently, the merger could be able to attain the growth rate of 5%, much greater than any average Canadian bank. 

Following questions are answered in this case study solution

  1. Retention rates and Acquisition rates

    i. Updated key metrics

  2. Impact of new incentive plan on sales and profits

  3. Increase contribution to Overall Customer Satisfaction

  4. "Cost vs. Benefits and ROI”

Case Analysis for TD Canada Trust B Linking the Service Model to the P and L

i. Updated key metrics

To retain its customers, it was necessary to understand their needs and demands, and shifting to policies and structure which satisfy the customers fully. However, at the time of merger the bank lacked any formal customer satisfaction model which could identify the main factors and policies crucial to cater to customer’s satisfaction. Christ Armstrong, executive vice-president and chief marketing officer of the bank, realized this shortcoming and took wise decision to formulate more formal kind of Customer Satisfaction Index (CSI) which included the key factors important for customer satisfaction. It was believed that immediate response is the best way to gather the reliable data about customer satisfaction with the banking service. However, it was ignored in the study that, in addition to immediate response, it could have been a good strategy to study long term response too. It is because, in some services like international services and/or interbank transfers, the immediate response may not be available from the customer’s side, but, is a crucial component for customer satisfaction. The customer satisfaction index was classified into four broad categories: 'makes you feel comfortable’ included factors making banking comfortable for the customers, ‘speed of service’ described factors relating to the time taken to perform different activities and meeting bank employees, ‘one to one’ explained the experience while meeting with the representative and lastly, ‘privacy’ listed variables related to privacy satisfaction of employees regarding their personal information.

2. Impact of new incentive plan on sales and profits

If got approved, Armstrong plan to begin the restructuring by re-devising the Branch employee’s basic compensation plan first. Titled as Branch Incentive Plan (BIP), it proposed to shift from fixed salary plan to variable salary package in which the employees have a chance to gain additional bonus on their basic salary if their performance surpasses minimum threshold. The bonus-awarding formula includes variables based on individual as well as group performance variables. Team performance can be evaluated by overall variables of each branch such as retail volume growth, branch customer satisfaction through CSI and branch profitability as calculated by total revenue minus controllable expenses for that branch. Individual performance can be evaluated through the report provided by the manager for each of the employee. Moreover, it is also realized that different positions have different stake in the bank’s performance due to different in their skills and ability to effect branch’s profitability etc. So, the respective components are allocated different weights for each employee depending on his/her Bank’s position. Three types of brackets named as ‘threshold’, ‘Target award’ and ‘maximum award’ were advised awarding different bonus depending on the extent of the hard work and efficiency shown by each employee. For example, Figure D describes a particular case of an employee who performs ‘target performance’ at each of the component and gets awarded an overall bonus of 4% on his basic salary of $6000. Generally, it seems to be a good plan encouraging employees to work hard and hence, improving their ability of customer management as harder they work, greater the amount they can earn. So, we expect higher customer satisfaction at different levels and hence higher gross contribution. 

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