When two banks look to create value through a merger or acquisition, the pace of negotiations means communications often get overlooked. Yet, the impact of M&A communications on customer retention rates can make or break the ultimate success of the deal.
Although M&A deals can be challenging to navigate, the common goal between parties is often simply to accelerate value capture through growth and improved performance. However, a significant portion of a deal's value for the acquiring bank is often eroded by customer attrition due to poor post-merger communication with acquired customers.
The Deloitte Center for Banking Solutions surveyed customers who recently went through an M&A transition to gather insight into what drives a customer to stay or to defect post-acquisition. Of the acquired clients surveyed, 48% had either already switched banks or reported a switch was likely. Almost two-thirds of respondents who switched to another bank did so within the first month. Clients who switched were much more likely to have investment and loan products in addition to checking and savings accounts.
What often leads to the loss in business?
Thirty-six percent of bank customers who switched after an acquisition did so for emotional reasons. Fear of the unknown and resistance to change stoke the flames of customer discontent. Changes to product offerings and prices are unpopular and generate feelings that the new bank does not have the customers' best interests at heart. Feeling undervalued is a key emotional reason that customers leave.
Gallup Consulting confirms customer behavior is determined by emotions more than anything else, based on 30 years of behavioral economic research. With this in mind, any communication that works to build emotional satisfaction will address trust issues and reduce attrition.
What are some steps that can be taken?
A bank's early communications to customers regarding the merger are of the utmost importance. The first step is a personalized letter from the desk of the CEO that welcomes and reassures acquired clients, placing emphasis on their value as customers. However, face-to-face direct interactions that occur in the branches have even more impact on customer attrition.
Employees are, in essence, the face of the bank and are, therefore, extremely essential to customer retention. As such, the benefits of the deal should be thoughtfully and clearly communicated to staff. Failure to clearly communicate with employees translates into poor customer service.
Staff meetings should be held immediately to bring the core benefits of the merger or acquisition to light. It's also very important that executive leadership present messaging to staff in a clear, unified voice. Talking points will keep the desired message consistent. Staff should be instructed to relay these talking points to customers.
Following initial staff meetings and the delivery of talking points, ongoing communication across multiple platforms (e.g. online, in-branch, written marketing materials) will welcome questions, build excitement and, above all, express to customers that they are valued.
The value of communicating to strengthen customer retention through the post-acquisition integration process is quite clear. Lost customers must inevitably be replaced by new ones. Focusing on rebuilding clientele can cause additional existing customers to feel neglected and switch banks. Even a small improvement in customer retention can make a big difference to deposit balances, fee streams, loan portfolios and, ultimately, shareholder value.
Many acquisitions fall short of expectations because of a failure to understand the importance of communicating. Even though the deal may look great on paper, it's important to pay attention to the communication needs of the post-acquisition integration process. That's the secret to making a bank M&A deal truly successful.
Harmonizing two corporate cultures takes time. Communicating to deepen new customer relationships and build brand loyalty takes ongoing effort over an extended period of time.
Casey Boggs is president of LT Public Relations and can be reached at firstname.lastname@example.org.