Old National Bancorp

Old National Bancorp holds the notorious reputation of being the largest bank holding company based in Indiana. Founded in a small ferry town, Evansville, IN, in 1834, Old National grew into a $9.7 billion financial holding company that spans across Indiana, Illinois, Missouri, Kentucky, Tennessee, and Ohio. Due to the financial growth of this Evansville-based company, that small town grew into the large industrious and corporate city that it is today. Over 350,000 households receive the many services that Old National offers. Old National renders personal, small business, commercial, and signature services that range from loans, checking, and savings, to trust and estate planning, insurance services, investment management, and financial advisors. According to Old National Bancorp, this service-oriented company follows four guiding principles, which do not limit their commitment to their customers:

• To continue commitment to community-based banking.
• To perpetuate their reputation for a strong credit quality culture.
• To reward client loyalty and to enhance satisfaction through relationship banking.
• To always value their employees.

Old National has over 3,000 associates providing these financial services and advice to help customers reach their financial goals. In order to expand the services rendered to its customers, Old National has acquired over the years many diverse service businesses. For example, to gain and improve insurance products and services, Old National has acquired Graham & Peat Insurance Agency of St. Louis and James L. Will Insurance Agency of Evansville, along with many others. Currently, Old National is in the works of acquiring Insurance & Risk Management of Fort Wayne, which is the second largest privately held broker and third party administrator in Indiana. Not only is Old National service and quality-oriented towards their customers, but they also hold a social responsibility amongst the community. Old National Charitable Trust began in 1953 to provide consistent funding to Evansville nonprofit organizations. Over the past 50 years, Old National has gathered funds reaching over $15 million to provide priceless services and programs toward economic, health, and education. Many of Old National's associates volunteer to other charitable organizations, such as United Way. According to Old National, eight of their associates serve on committees of United Way. Although Old National has proven to be strong, socially responsible, and diverse, many issues and changes in society constantly affect the strategy and success of the business.

The majority of these issues fall under economic, political, and social categories. In order for Old National to succeed, they need to adapt to their external environment. Considering Old National is part of the banking industry, interest rates continually affect the business. These interest rates affect the borrowing and depositing, which could either increase or decrease money supply. Interest rates provided by banking companies for loans and other services seem to have an elastic demand. Consumers are extremely sensitive to the changes in interest rate effective services. The implementation of interest rates does not rely entirely on the bank itself. The stability of the government and economy determine the Federal Reserve's monetary policy decisions of whether to buy or sell securities, which then in turn raises or lowers the federal funds rate which in turn affects all other interest rates. This could come as either an opportunity or threat to Old National.

Looking at the banking opportunities available in Southern Indiana, many competitors to Old National have moved into the area in hope to obtain its customers. Rivalry among competitors has become an external threat towards Old National. Southern Indiana houses many banks, such as First Federal, Evansville Credit Union, Heritage Federal, Freedom Bank, etc. in hopes to provide customers with that "hometown" friendly service that many customers are now demanding. As larger institutions buy out local banks, many customers still want a bank that knows them by name. These small banks are small enough not to pose too great of a threat upon Old National, but as Old National Bancorp continues to grow, they are beginning to look more and more like the larger institutions. Large banking companies, such as Fifth Third, are also branching into Southern Indiana. These institutions are so large that they can usually offer slightly better services than the local banks. Many customers desire banking with a large established institution where they know there is an ATM around every corner. These banks pose a great threat on Old National Bancorp.

Old National could use target marketing to appeal to both of these types of niches. They are small enough to portray themselves as a friendly bank. Old National is also large enough and established enough to portray themselves as possessing the same services as banks like Fifth Third. The advantage of this marketing is the potential customers it will attract. The obvious disadvantage is the cost. Marketing is extremely expensive and the current economic standing makes it hard to justify the excessive use of funds. Another disadvantage is that customers will start to see the bank playing both sides of the fence and will start to wonder if the institution really has anything valuable to offer. Old National has spent lots of money on the construction of the new building in Evansville. This building will be Riverside and offer a food court open to the public. They are adapting a new marketing theory that United Bank has already captured, and that is to get the customer to sit down and spend some time in the facility. The Old National of Indianapolis constructed a new building in exact replication of that of United Bank. Instead of walking through the doors and meeting tellers, customers are greeted by a lounge filled with comfortable chairs, a coffee café, plasma screen television, and concierge. Old National hopes this effort of creating a comfortable and relaxing environment will increase the client relationship and satisfaction.

Another strategy Old National Bancorp may try is to improve customer loyalty. Old National should use consistent advertising of offered services. Although this is costly, the bank must ensure that the public knows of reasons to do their banking with Old National. Old National should strive to improve client relationships. This will let the customers know that Old National bank is not going to be like the big banks; Old National still cares about their customers. Also, to improve customer loyalty the bank should acquire more services to provide. Although this may be both costly and time-consuming, the clients need to know that their bank offers all of the services that they could receive at a different bank. Old National cannot let their competitors offer more services than they do.

A final strategy the institution needs to be competitive is to strengthen technological support. Customers do not like to drive up to an ATM and see a sign that reads "Out of Order." Also, no one wants to go online to do their banking either to find that the website is not properly running that day or not user-friendly. In order to offer the most efficient technological services, Old National Bancorp should hire more skilled and competent workers and also acquire advanced technology to improve effectiveness. The cost will easily be worth it if Old National gains a reputation of having excellent, efficient technology.
Old National Bancorp must use their in-between size to attract customers from both of these areas. If they can offer the services of the large banks, but still leave customers with the feeling that they care, Old National can penetrate further into the market and discover a niche all of their own.

Another strategic issue Old National Bank is facing is the increase in national unemployment over the last few years. An increase in unemployment results in less money for customers to pay back their loans. This also means less money that customers will have to deposit and keep in their accounts at the bank, which in turn means less money that the bank has to loan out to other individuals and businesses.

There are many alternative courses of action Old National can take. One course would be to offer lower interest rates on loans. This will enable individuals to possibly continue to borrow money and still be able to pay it back in the future. Lowering interest rates will help keep customers coming back to this bank. Along with lowering interest rates they can help the unemployed by making payment plans structured around what income they might have, so at least the bank will have some business rather than none at all. A disadvantage of these all time low interest rates is that the bank is making less money per loan. The costs of servicing the loans are nearly as high as the amount of interest they are receiving. Banks have a hard time competing among one another during these times because the rates are so low already. A second course could be to offer cheaper services. For example some banks already offer free checking accounts. There are still some other services we think they can do for free or cheaper like, money orders, lower overdraft charges, free use of other bank ATMs, etc. A disadvantage of lowering these service charges is once again less income for the bank. Banks are profit-seeking businesses and must make money to survive. A third course of action that can be taken to help Old National customers is to do more advertising of their financial services. If Old National wants to keep its current customers and possibly gain some new ones this would be a great way. When people have been laid off after working 20-30 years they will need some advice on how to manage without that income. Giving them this help will benefit Old National in the long run by keeping them as customers until they find another job, in which they will have money again to give back to the bank. This would unfortunately force the bank to hire more employees and possibly even increase office space. A forth course of action the bank could take is by taking advantage of the number of people looking for jobs and hire some that are qualified to work in open positions at some of the branches. Old National could also offer unpaid internships to college students. The high unemployment rate is causing students to fear the workforce after college. Students are now willing to do more to ensure that they have the assets that will give them the cutting edge once they enter the workforce. This would cause Old National to get some new, young ideas into the bank at no cost. However, unpaid people are not as productive or effective as paid professionals.

In conclusion, we have several recommendations for this strategic issue of unemployment levels rising. First, take the opportunity of lower federal interest rates to develop a more attractive borrowing rate to help customers and the bank. Second, use the strength of being a local bank to offer individuals and families financial advice and to gain potential new customers. They are more likely to take the advice from a "hometown" bank with advisors who the customers have grown up with than the advice of an advisor of a large bank whose employees have been transferred from other big city offices. Third, take advantage of being one of the biggest local banks by being able to offer cheaper services for those who cannot afford the national banks and to again gain potential new customers. Old National Bancorp should also use the reputation of a good employer to find potential qualifying employees who have been laid off from other banks or sales positions to join the Old National Bank team. Finally, the financial institution should start an unpaid internship program at the bank to take advantage of students that are acquiring an education and are looking to boost their résumés. By implementing these strategies, Old National will continue to be the successful business that it is today.