Months of due diligence and negotiation. Weeks of planning and regulatory review. Days (and nights) of fine tuning press releases and talking points. Then comes the big day: the merger announcement! But that’s where the real work of communication begins.
Amid all the talk of increased shareholder value, greater scale, improved operating efficiencies and impressive combined asset value, a critical audience may be eyeing the exits. Unfortunately, it could be some of the bank’s best customers.
A Deloitte study suggests that nearly half of an acquired bank’s customer base is at risk of switching to a competing institution. About 17% of customers will switch at least one account to another institution when their bank is acquired, with the bulk of them leaving within three months of the announcement. Another 31% are at risk of leaving. Even more concerning is that the customers who switch tend to have more product relationships and greater assets than those who do not—over two-thirds of switchers have investable assets of $100k to over $500k. So before the real work of integration has even begun, the very customers who helped make the deal attractive are gone.
Why do these highly desirable customers leave? Over 35% site emotional reasons, such as “the bank is too big to care about my needs anymore,” as their primary motivation. A variety of customer experience-related issues account for 39% and 17% are enticed away by a competitive offer. Interestingly, only 8% of switching is attributable to communication or migration issues.
The Best Defense
What can the acquiring institution do to minimize its risk of losing customers during a bank merger? Go on the offensive with a robust communication and customer service strategy that addresses concerns head-on and makes the case for staying with the new bank. For example, merger-related communications focus on how the transition will not be disruptive. While this is important, there are many other compelling messages that customers need to hear, including:
Benefits: Post-financial meltdown, a bigger bank doesn’t equate to a better bank for a lot of consumers. Make the case for why the new bank will serve their needs better, whether it’s through enhanced product offerings, a larger network of branches and ATMs, better online banking tools, etc. Never underestimate the power of WIIFM.
Respect: While touting all the great benefits of the merger, remember that the customer selected the acquired bank for a reason. Be respectful of what was great about “their” bank and what the new entity will do to retain the best of that culture.
People: Remember the people side of the equation—if there are branch consolidations and/or personnel changes, consider the best way to deliver that message. A personal phone call or face-to-face meeting may be the most effective approach for the best customers.
Fees: It’s the elephant in the room and it’s best faced head-on. For 10% of customers who switch, concern over increased fees is cited as their primary reason. If fees are increasing, showing the greater value customers will receive in return is essential. Tiered communications are a great way to address the impact of fees, because they can be tailored based on the size of the total relationship and reflect specifics rather than generalizations.
Here are two points worth noting. First, while the Deloitte study was published in 2010, technology has only made it easier for customers to switch banks in the intervening years. Second, the lessons from the study apply to more than just customers (i.e., employees, shareholders, vendors, etc.) and more than just banks.
Mergers of any kind are complex transactions that require concentrated effort across the organization to succeed. The same can be said of human relationships. A robust, proactive communication strategy that addresses their factual and emotional needs is a critical success factor.
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Communications planning should occur well ahead of the merger or acquisition announcement and include analysis and segmentation of customer relationships, training for front-line associates and compelling messaging that makes the case for the new entity. Effective communications at such a sensitive time can actually strengthen relationships and develop loyalty for the new entity.