It’s no mystery why customers expect the worst whenever mergers are announced. Bank customers may lose their favorite branch. Frequent travelers dread changes to flight routes and loyalty programs. Cable customers may find their new bill incomprehensible.
Historically, companies that decide to merge start at the financial advisor doorway. They crunch the numbers, look at the contracts but little is done to understand the business model and how to combine the two business models together. Such oversight may have a severe impact on customers and whether they will stay loyal or defect to the competition.
It is estimated that 6 out of every 10 M&A end up in failure and customer defection is one of the major reasons.
Some serious integration tasks must be taken care of: do we centralize the warehouse or keep them separate? How do we combine customer service and which system do we use? company A or company B… and so on and so forth. The problem is that companies tend to focus on reducing cost and implementing new technology without paying attention to customer attrition or loyalty.
Customers usually demand consistent and seamless services across both merged companies from the start. If they don’t get them, they defect.
How can companies manage the merger integration process to avoid customer defections? They should start with the end in mind: retaining customers.. .and they should build the business model accordingly. They typically establish teams tasked with evaluating every step in the integration and every change that is made through the eyes of the customer. They act as the customer’s advocate. Adopting the customer’s point of view does not change the fundamental activities required in merger integration. Instead, it allows companies to sequence and coordinate customer-facing changes in ways that create a better customer experience.
In our experience working with several integration assignments, we identified 5 drivers that are critical to a successful M&A:
1. Identify specific customer KPIs and raise the bar.
In most mergers, integration focuses exclusively on reducing costs or achieving revenue synergies and all metrics and incentives are linked to delivering those synergies. Instead, metrics and incentives can also be aligned to ensure customer retention, as well as synergies.
One way to measure the value of keeping customers satisfied is to conduct and an assessment and ask clients how likely they would recommend the company to their friends and families?” By analyzing their answers, you get a feel of what you should do and whether change is possible or not.
2. Make the customer experience part of the merger’s journey
As with any major change effort, the approach needs to start at the top, with executive sponsorship of the customer perspective and regular review and communication by the steering committee. A cross-functional integration team focused on the customer experience is vitally important. The team maps out and assesses the impact of all integration decisions on customers— with emphasis on the most important interactions affecting the most valuable customers— and provides constructive suggestions for embedding that customer perspective in each integration task force. Customer experience teams can ask a functional team to include customer impact as part of the team charter, in the same way a company would identify IT dependencies or other cross-functional points.
Members of the customer experience team should work with key people from different functions including a team responsible for the integration to help each function manage the customer experience and the tradeoffs. At this stage, senior management should be involved to make necessary decisions that would impact the customer experience.
3. Identify and accelerate actions to improve the customer experience or increase the value of your offering to them.
The customer experience team maps out the customer experience from end to end, identifying how customers will be affected at each point and looking for opportunities to delight or at the risks of disappointing them.
The company could analyze gaps using customer segmentation. It thus determines the key areas that customers may be disappointed with and alternatively recommend proper and practical solutions.
4. Communicate and listen.
Customers left in the dark assume the worst. Give them a vision for the integration and the expected time line even before you make any decisions. Keep your customers involved and informed. Customers don’t like surprises.
5. Empower employees—provide them with the tools and information they need to respond to customers caught up in the change.
Mergers invariably create stress for employees, who naturally worry about the fate of their jobs. But companies also rely on the workforce—particularly their frontline employees—to deliver an exceptional experience during a time of change. That may require a new level of frontline empowerment, which can be uncomfortable for some companies accustomed to more command-and-control management. Merging companies may have different approaches to empowering employees, but satisfied employees make for satisfied customers. In our experience, customer service problems handled well in times of stress contribute to customer loyalty.
Mergers aren’t easy, and they raise real risks that customers may jump ship. But the merger integration process brings with it a natural opportunity to reevaluate—and even improve—the overall customer experience. By setting ambitious retention goals, making the customer experience an integral part of merger planning, finding new ways to improve the customer experience, communicating and listening with customers, and empowering employees to provide better service, companies can turn mergers into a sign of better things to come for their customers.
About BusinessIncredible: BusinessIncredible is a management consulting firm with over 20 year experience and more than 100 clients. We have helped our clients improve to become better by focusing on solving specific problems and generating lasting results. BusinessIncredible is a boutique business consulting firm with the experience and wisdom to excel in every job that we undertake. Our experts have covered the 5 continents, although most of our projects have been concentrated in Saudi Arabia, United Arab Emirates, Kuwait and Lebanon. For more information, please visit our website at www.businessincredible.com
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