Virgin Money has agreed a £1.7bn takeover by CYBG, which owns Yorkshire Bank and Clydesdale Bank. The merger will create the UK’s 6th largest bank with around 6 million personal and business customers. The new entity will rebrand as Virgin Money and the Clydesdale and Yorkshire brands will disappear from the high street. Barclays is reported by the FT to be ‘tentatively considering’ a deal to buy Standard Chartered. Everybody’s talking about the Sainsbury / Asda merger which, if it goes ahead, would create the UK’s biggest food retailer. In the past week, we have heard about talks between Tesco and Carrefour to form a strategic alliance. M&A activity is starting to intensify as brands look to new alliances to be bigger and better, improve their customer proposition, drive growth, protect market share and reduce their cost base. It’s a good time to look at the steps that companies can take to ensure customer experience is a strategic cornerstone when they join forces.
Calming the nerves of customers and employees
For all the excitement felt by senior executives about having ‘done the deal’, a merger is a worrying time for customers and employees alike. Customers wonder if the products and services they have historically enjoyed will continue to be available. Will they be delivered to the same quality and at the same price? Employees tend to turn inward as they worry about the security of their jobs. The jockeying for position by executives and line managers and the reorganisations that inevitably follow create an inward focus. Communication with customers falls away and the potential of the new organisation – and the reassurance customers seek – can get lost.
Keeping customers onside is not easy and the likelihood of defections is high when two businesses combine. Research by JD Power found that the probability of customers changing banks increases by up to 3X following a merger. The challenge is to unify the experience of two groups with often different demands, expectations, values and behaviours. Different emotional connections even. Take the CYBG / Virgin Money tie-in. Yorkshire and Clydesdale customers have a strong regional bond with their bank. It’s more than just a brand to some: “Not happy about you being rebranded to Virgin Money, been a customer for 40yrs. Clydesdale name iconic”. Research from the Deloitte Center for Banking Solutions found that ‘emotional‘ reasons were the number one factor why customers switched accounts after a merger. It was cited by 37% of respondents. The second biggest reason was ‘competitive offer’ at 17%.
Building and sustaining consumer confidence in the power of the new, combined business is essential all round. Understanding the new customer base and working out how the merger impacts CX and perceptions of the brand is crucial. This is as important as planning what the new brand will look like, how operations will align and how savings and economies of scale can be found.
So, we thought it would be helpful to look at five action areas to help make customer experience the foundation of any merger.
#1 Focussing the whole organisation on the customer
To overcome the tendency to look inward, intentional organisational focus on the customer can pay big dividends. When the Bank of New York and Mellon Bank merged some years ago, leadership of the European business told their Relationship Managers there would be no job losses and that priority number 1 was to ensure there was no loss of clients. A ‘World Class Relationship Management’ initiative was launched to bring the two groups of RMs together. The new group developed joint plans to secure the continued commitment of key customers. The RMs attended training together, designed specifically for them and their situation. They developed a consistent BNY Mellon experience, honed their skills and crafted joint plans to strengthen their brand and reassure clients. While the merger triggered this approach, customer focus became established as the way to differentiate and deliver improved business results.
The positive impact of customer focus is evident in research by The Institute of Customer Service which showed that, on average, brands that sustain a customer satisfaction score above their sector average achieve 9.1% revenue growth year-on-year.
#2 Aligning the leadership team
The level of focus and alignment achieved at BNY Mellon doesn’t happen without a lot of hard work. Cross-functional leadership workshops helped define a clear customer vision for the new business. Management teams from both businesses had a seat at the CX table and the new customer group sat at the head. Strong leadership ensured there was a unified approach to customers and shared culture for the new business.
#3 Understanding the new customer base
Different businesses will use different strategies, methodologies and tools to listen to, and leverage, customer insight and feedback. Both structured and unstructured. Departments in the same business often operate in siloes and data is skewed by incompatible practices, objectives and outcomes. When two brands merge, they need to bring together masses of information to analyse and mine for actionable insights. CX leaders invest in one suite of tools for engagement, insight and analytics.
In compliance with data privacy regulations, listening to your new customer base before, during and after integration, will help you understand what they value, expect, need and want – emotionally and functionally. This will help you build your proposition around your customers – not vice versa. As customers transition, the insight will help with data-driven strategic messaging, consistency and improving the end-to-end customer journey.
#4 Developing a proprietary customer promise
The purpose of developing a proprietary customer promise is to clearly set out what the organisation will deliver to target customers in order to drive consistency and differentiation. As the new, enlarged business embraces the potential of the merger, the customer promise should be bigger and better than anything that went before. Consistent messaging underpinned by the customer promise can help to prepare customers and manage expectations.
Developing a customer promise can also help with employee preparation as they adapt to new ways of doing things. Employees will bring the new customer promise to life. So it’s important to be clear about the benefit for them and the role they play. One thing’s for sure, unhappy, unprepared or confused employees will negatively impact the customer experience from the get go.
#5 Mapping the customer journey and improving the proposition
Having developed a customer promise, the question becomes how do we deliver it at key points along the customers’ journey? Customer insight should enable you to identify which are ‘hygiene’ touchpoints and points where the new business can create real, differentiated value for customers. The innovative development of new ways of delivering the proposition, by touchpoint, will help drive value for target customers. When two brands combine, the customer journey can quickly become fragmented or broken. By wearing your customer’s shoes you can quickly identify priority touchpoints where gaps need to be plugged and pain points need to be fixed.
The roll call of failed mergers is long. These are just five points to consider to ensure consistency and differentiation form the bedrock of a newly combined business. The underlying gain of any merger is customer-driven growth. Building your proposition around your customers and embedding a meaningful customer experience can help grow market share and deliver the value of the deal.
Related reading: Case study: BNY Mellon: How focussing on world class relationship management at the time of merger helped drive new business growth 9% higher and customer satisfaction 12% higher.