Consolidation among banks need not mean a huge loss of customers, a consultant said.

An acquiring bank can lose many of the target's customers if they view the merger as a way to cut costs, said Peter E. Harvey, president and chief executive of IntelliDyn, a marketing and data base consulting firm in Westerville, Ohio. But the loss can be small if customers see the change as a service enhancement.

If banks cannot combine branches successfully they should just close them, he said. "If you can't consolidate correctly, exit-because you're just going to plummet."

Mr. Harvey, the former director of marketing technology at Banc One Corp., Columbus, Ohio, was one of several speakers at a conference here last week titled "Customer Profitability and Retention."

Banks have "one shot" to shape customer perception of the consolidation as either a cost maneuver or a service enhancement, Mr. Harvey said. The former results in defections, he said, but the latter can significantly boost a bank's retention rates and thus increase its profits.

He recommended that banks implement a customer-retention strategy at least 150 days before consolidation. A successful plan requires, among other things, intensive training and orientation for front-line personnel.

It also requires reaching out to customers through direct mailings and telephone calls in which issues such as wait times and branch hours are addressed, he said.

In addition, he said, banks should create a product-consolidation plan in advance, so that customers are not confused or inconvenienced.

Inconvenience typically accounts for 15% to 20% of defections, Mr. Harvey said, and dissatisfaction with service quality accounts for more than 40%. Failure to execute a plan, or executing one poorly, can have devastating results, he said.

Consolidation can improve profitability , Mr. Harvey stressed, "but there's an increased amount of work up front."

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