Nipissing Bank
Nipissing Bank, one of Eastern Ontario’s premier financial institutions, was established in 1986 in Ottawa Ontario. Working with corporate, personal, and commercial customers they established about 25 retail branches mainly in Ontario and provide many financial services such as general banking, trust, insurance and wealth management. Though as time went on more competitors moved in and as is usually the case, Nipissing Bank has been pressured to gain more customers and retain their current clientele.
By 2008, Nipissing was struggling to maintain their clients using their current marketing tools. Their manager of administrative services, McKenzie Scott, is making an attempt to improve these efforts and has a few options with which to accomplish his task. This report is a means to explore each option from operational, strategic, and ethical standpoints to determine which option will best improve the marketing efforts of Nipissing Bank. There are many issues facing the bank at this point in time. They are seeing their first decrease in clients since their 1986 inception.
The current theory is that Ontario has reached market saturation when it comes to the banking field and Nipissing is losing its customers to larger and more well-known banks. The marketing department has also determined that customers were leaving to take advantage of what they thought to be a “more diverse range of banking services” (2). Nipissing in reality offers the same services but due to an inefficient mailing system, customers only knew about a few of the services offered and didn’t necessarily see the services they thought applied to their individual situations.
As stated “one client might receive two of the eight possible marketing materials, whereas another might receive three entirely different ones. ” (2) The solution was to up their marketing materials to 12. This presents another issue because the Mailsorter 750 they purchased from QZT Corp. in 1994 is an inefficient system for their new marketing plan. The automatic loader only has eight hoppers so a limited combination of marketing materials can be used.
Not only that, but it can only close envelopes filled with 10 pages or less, any envelopes with more materials have to be folded manually and the entire process stops until that envelope is folded. Personal banking customers received 4 materials and corporate customers get 6. The new plan would increase each to 6 and 8 materials respectively which means there will be a large amount of envelopes that will be filled with 11 or more marketing materials, making the current system exceedingly inefficient.
With the current system, almost every envelope will have to be manually folded and the process will slow down considerably, thus costing Nipissing untold amounts of money in lost time and inefficient processing. Exhibit 2 of the case shows the current amount of time taken to complete the original process is 21. 25 seconds. However, since Nipissing bank is adding to extra 5 seconds for the artificial folding time in order to put more fliers into its customer’s monthly bank statement. That means Nipissing needs 26. 25 seconds to complete the whole process.
In the option 1, Nipissing Bank will put on additional 4 hoppers to get the job done automatically. With 4 hoppers installed, the processing time will increase 4. 8 seconds (1. 2 seconds for each hopper). The time spent for the new process will be the original time 21. 25 plus 4. 8 equals 26. 05 seconds. The time for process in option 1 is not much different than the way Nipissing is doing right now. If the 4 hoppers are installed, the cost for the new computer system will be $65,000 plus annual maintenance fee of $15,750.
Although it is least costly in all three options, it is the least efficient, too. The Mailsorter will not able to install more hoppers because 12 hoppers are the maximum amount of hoppers that it can support. The only advantage for option 1 is that there will be no downtime during installation. There is also a sustainability issue when it comes to this option, namely that there is a rumor going around that QZT will discontinue the Mailsorter system in 2012 (4). This presents a problem because QZT’s service agreement only covers fixing the machine while QZT manufactures it.
If the rumor is true, there is a possibility that if the Mailsorter breaks any time after 2012 there will potentially be no way to get parts replaced and serviced and a new system may have to be replaced anyway. This could prove quite a large problem and could result in spending the money for the new system anyway; it potentially just pushes the problem off for another 4 years. For option 2, Nipissing will install the QZT VIP Inserter. With this new machine, Nipissing can cut down half of the current time needed. The estimated new time for whole process is about 14 seconds and it only takes a week.
The cost for this VIP Inserter is $435,000 plus annual maintenance fee of $25,000, but Nipissing might earn back $10,000 to $15,000 through salvage. Although this new machine is expensive, it can make the process faster and can be upgraded to handle 16 hoppers if necessary. However, it will take 30 days to install and run the tests. During downtime, all the processes needs to be done manually and will cost Nipissing extra in order to pay overtime to the mailroom workers already in employ. Manual processing will end up being 78. 75 seconds.
If Nipissing wants to do the option 2, they need to figure a way to solve this issue or the customer will receive their bank statement 20 days late. From an ethical standpoint, they will also have to figure out where to place the workers who currently staff the mailroom. Those employees currently earn $26 an hour including benefits (4) and cutting off their livelihood for the sake of efficiency might be good for business, but could have a devastating effect on their families. Perhaps they can be retrained for different jobs in order to maintain their lifestyles or be trained to maintain the new machine.
No matter what decision they make, this is something that should be considered. In option 3, Nipissing can outsource to Anderson Inc. , a direct mail marketing company. There is not enough information to determine how much time it will take or what the total expenses will amount to, or even if the campaign will work since Anderson has never partnered with a bank before. However, there is a great chance that the future outsourcing expense will increase after the 1 year contract. Also, if customers receive envelopes which are full of nothing but flyers from the bank, there is a chance they will throw the envelopes directly to the trash bin.
Customers are more likely to look at the materials if they are included with a bank statement. If Nipissing remedies this by sending the bank statements to Anderson to be included in the materials, there is a privacy concern since Nipissing won’t be overseeing the operation directly. It is completely unethical and dangerous if bank account information ends up unintentionally leaked to a third party due to a joint marketing program. This is a major concern and is a very good reason not to join with Anderson for their marketing activities.
There is also the possibility the agency may not be as careful with the inserts, wrinkling the pages or tearing the envelopes. It’s a distinct possibility if the materials arrive in poor shape will give Nipissing bad image. With the information provided, option 2 seems to be the most logical choice. There are many reasons for choosing option 2 as the best decision for Nipissing Bank. Option 2 will allow the mailing system to double the amount of hoppers available from a maximum of 8 in option 1 to a maximum of 16 with option 2.
The QZT VIP Inserter will also work at double the speed of the old inserter. Another bonus is the 10 to 15 thousand dollar trade in value of the QZT Mailsorter 750. It is the most efficient system presented, it meets all the requirements needed to complete Nipissing’s new marketing strategy, the investment in the new technology will prove worthwhile as it will be up to date, it has a good salvage value for the future, and all actions can be done under the watchful eye of the company so no one’s privacy will be compromised.
The only downsides of the QZT VIP Inserter is the high purchase price of $435,000 with a yearly maintenance fee of $25,000, besides the financial downsides the only other issue is the 30 days of down time. In order for Nipissing to make option 2 work for the company, multiple steps must be completed to make the transition as smooth as possible. Besides funding the purchase of the QZT VIP inserter, they also have to plan for the 30 days of down time when there will not be an inserter operating.
The first step to cover the 30 days of down time will be to hire temporary employees with a non-disclosure agreement in order to ensure client confidentiality. The two week production time will also need to be increased; therefore, the mail room will need to be in production the entire 30 days. “Scott estimated that manual processing would take three times as long as the current times for each step in the process and determined that each individual worker would complete all of the required steps in the mailing process”(5). If those steps can be put into place than option 2 can work despite its flaws.
In the long run investing in this new technology will prove much more useful and can get Nipissing Bank out of their current situation. Nipissing Bank is in a bit of a tough situation when it comes to losing their customers in a market that is rapidly expanding. They have to make sure their existing customers know all the options available to them as well as getting the attention of potential new customers. Hopefully the implementation of the new VIP inserter and a new marketing strategy will prove useful and retain their current clientele as well as bring in new customers to further Nipissing Bank’s success.
