Southway Financial Corporation was a holding company that offered financial services through its primary subsidiary, Southway Bank. The bank posted 1993 year-end stockholders' equity of more than $94 million, on assets of more than $1 billion. Located in the greater Springfield area of Massachusetts, the bank had established a reputation for providing high quality customer service and had recently implemented a Total Quality Management (TQM) program. The bank's business strategy, which formed the cornerstone of its success, was based on attracting deposits from the general public and using those deposits to make residential mortgage loans, historically one of the safest types of loans institutions can make.
Because of Southway's outstanding performance, it attracted the interest of NatEast Bank Corporation, which acquired Southway in a stock exchange in November 1993. Concerned that the level of customer service would decline as Southway became integrated into the larger organization, several depositors withdrew their funds after the acquisition. This research examines ways in which this defection can be mitigated, and considers how NatEast can ease the transition of Southway into the NatEast fold.
The goal of the marketing program will be to attract new customers to the NatEast family and to bring back customers who left when NatEast acquired Southway. Specifically, NatEast will hope to see a 15 percent increase in deposits from new customers, and bring back 90 percent of those depositors who moved their accounts elsewhere. Another specific goal will be to provide the highest level of customer service of any financial institution in the service area.
The primary constituency will be mortgage borrowers, who comprise the bulk of Southway's accounts and who represent a strong market for financial services. Two secondary constituencies, consumer borrowers of nonmortgage services and commercial real estate customers, will ...