by Dick Barnes, Principal, The Freeland Group

Don’t Leave Your Customers Behind

…when you leap ahead into a merger? Make sure they come along!

The decade of the nineties will be remembered by business people for many things; dot-coms, the emergence of the internet, and the age of business consolidations. The world-wide-web is old hat now and many of the dot-coms are now dot-gones, but the urge to consolidate, through merger or acquisition, is still going strong.

And the action isn’t just in the Fortune 500 size companies. Small and medium size firms are combining forces everyday and the competitive advantages they gain by doing so are driving others to follow suit.

Unfortunately, the smaller firms that make up the bulk of our economy have very distinct problems with consolidations; problems that often drive costs over those predicted. Some studies show as many as 80% of all mergers fail in meeting participants’ goals, and an even larger percentage fail to maintain original financial forecasts.

Experts in the field maintain mergers can have devastating effects on two groups of people: the employees of the firms involved and their customers. Many managers spend a great deal of effort preparing employees for the transition, then give little, or no, attention to their customers.

Consultants who specialize in guiding companies through the process talk about the customer, make positive statements about retaining the customer, and finish up with buzzwords and tell all about how the customer is the focus of the company. After that, they immediately go to work on the internal problems the firms are dealing with in the merger and nobody gives the customer a second thought.

As problems arise, the focus turns more and more inward. People from both firms tend to the putting out of the day-to-day fires that keep popping up. The dominant firm begins to assert its culture on the smaller partner and people spend more and more of their time answering questions and writing reports. They do meetings, they iron out differences, they work out misunderstandings…and the customer stays in the background.

Any change in how a firm does business can have an affect on the firm’s customers. A merger can have a substantial one. Smaller companies don’t have huge national customer bases. They are likely to have a smaller number of customers, and that makes them more dependent on retaining those they have. To the smaller firm each customer represents a far greater percentage of their income.

Unfortunately, and this is particularly true for the small and medium size company, mergers and acquisitions seem to result in an immediate loss in overall sales. The new combined sales force, while having to work out the problems inherent in the consolidation, then have to play catch up and work extra hard to bring in new customers. Retaining original customers would have been a far more efficient and effective use of resources if only someone had seriously planned ahead of time to do so.

That seems to be the key. Once the merger is actually taking place there never seems to be enough time and energy to concentrate on external matters, even though the external environment may well be the one that makes or breaks the process.

So what is the solution? How do you keep the customers you already have? The answer would seem to be in pre-planning and that begins with understanding the basic factors that are part of that thing we call “customer satisfaction.”

“Contact and Ordering Ease” is a measurable function of the company that contributes to the level of customer satisfaction. It’s also a function that is commonly affected adversely by change. We should keep in mind that a customer is normally seeking to use time effectively, usually feels more comfortable with familiar processes, and will normally maintain a buying habit unless it’s broken for them. Look at your own firm’s purchasing processes. Are office supplies normally ordered from the same place? Do you ship with the same shippers everyday? Do you have favorite vendors whom you are comfortable with?

How about personal shopping? Do you go to a different grocery store every time you stock up the pantry? Almost nobody does…industry experts feel a shopper has to be pulled into a new grocery at least seven or eight times before they begin to think of it as “their” grocery store. Shoppers come back because they know how the aisles are laid out and where their favorite items can be found. They can shop quickly and comfortably without putting a lot of thought into it. Believe it or not, your regular customers might be coming back to you for quite similar reasons.

Because Contact and Ordering Ease is usually the initial point where customers become aware of change, the wise manager makes certain that change in this function is kept to a minimum. Even better, the only change should be an informational one where the customer is communicated to and educated about the merger, but without allowing that change to affect the ordering process.

In other words, none of the contact information should be altered for some time, until the customer has had plenty of time to become accustomed to buying from the new firm. That contact information should remain intact until customers are truly comfortable with knowing upcoming changes will be minor and immaterial to the relationship. Then your sales or customer service force can help guide them through one step at a time.

Telephone numbers, email addresses, mailing addresses and any and all contact information should be maintained for these reasons for a certain period of time. Perhaps even a year is reasonable.

I have, on occasion, heard managers say some pretty incredible things; like a customer who won’t change a phone number on their quick-dial or an email address is a customer they’d rather not bother with. Such an attitude is so prehistoric as to be hardly worth commenting on, but most of us might be guilty of making slip-ups just as costly without giving a thought to the repercussions.

A common example; taking on new phone numbers and having the phone company give an automated message with the new number. We do it because we simply aren’t aware we can get automatic forwarding through our old numbers, or we don’t want to pay the costs of that service. Worse yet, the phone company message offers to dial the new number for us…for a fee of course. That’s a great greeting for an old customer…you can still call in your order, but you’ll be billed for making the connection.

The correct way to prepare for and to maintain Contact and Ordering Ease is to have it all worked out ahead of time. That way there will be no last-minute rush to find out what services the phone company can provide or whether email addresses can be auto-forwarded.

Contact and Ordering Ease can be expanded to include such functions as billing, credit, pricing, and delivery. Again, all of these functions should remain as constant as possible. Alterations in these areas to fit the needs of the newly created firm should be made incrementally, over time, and designed to be as unobtrusive as possible. If a certain customer has had a special credit arrangement in the past, that deal should be maintained for them. If unusual delivery methods have been used with another, make certain that will be ongoing as well. The new firm should do whatever it takes to maintain a “status quo” feeling of comfort and familiarity for customers.

This type of handholding, making an effort to accommodate old arrangements, will take time, effort, and planning. The dominant firm in the merger may not be fond of going to this trouble for customers of their new partner. This issue should be addressed during the negotiation process of consolidation, and the costs of losing customers should be compared to the costs of caring for them. Wise managers will likely understand why such efforts make sense in the long run and will work out a system focusing on those customers. All of this should be done, and put into place, before the hectic process of consolidation begins.

Then there is the issue of “Product.” Each partner needs to reconsider the products or services they have supplied customers over the years. Will the merger affect the product line or the way services are delivered? Will it change pricing, or order time, and will the same products even be available? Believe it or not, companies merge everyday and drop, or add, product lines without first conferring with customers.

It’s true there may be solid reasons to make changes. But any change at this juncture that can be worked in later should be held off until such time customers have grown comfortable with the other factors that are a part of customer satisfaction. This may seem over-cautionary, but recall that the odds are against you when it comes to mergers meeting with real success. Only by breaking the rules, those that are the norm for the average consolidation, can you move those numbers in your favor.

Then we get to “Customer Service” which might include the areas of after-sales service, warranty service, and maintenance and repair services. Since the service departments of two firms will suddenly be combined into one, some change is inevitable in the ways issues will be handled.

The number one goal of pre-merger preparation in this area is that quality cannot be compromised. Customer Service personnel from two different firms cannot immediately adjust to one another’s customers, so a system has to be designed that will enable customers to be steered to someone who already knows them and their issues. This system has to be maintained for some time, at least until the people of both firms begin to think like people of one firm.

Warranty work must be dealt with in a similar fashion, making certain that old obligations are met without question. Eventually the new firm should develop a warranty policy that makes use of the best of both partners, but never allows changes to impact an old customer in a negative way. Maintenance and repair service agreements should be handled with the same foresight and care.

“Personal Relations” is also a function of customer satisfaction. Many mergers involve a change of personnel, and often times the outgoing people leave behind personal contacts and relationships that help maintain buyer loyalty. This is true whether the person is gone or has simply moved up the ladder to a new position.

We’ve all probably had a favorite salesperson at a vendor’s company; someone who always knew what we wanted and how we wanted it. They would ask us about our golf game or how our kids were doing. When that person moves on it kind of leaves us feeling like we are starting over, and sometimes we elect to start over with another vendor.

This is where an accurate and extensive database on customers becomes a real gold mine. There is no reason, using such information as a guide, that a new order taker or sales person can’t know as much about the customer as the person they are replacing. The transition becomes far more comfortable for the purchaser and they will be far more likely to continue the relationship from where it left off. Companies whose people use such a tool, and use it well, are truly focusing on the customer as their most important asset.

Envision two scenarios; both are phone orders being taken in two different, newly consolidated companies:

Number one; the salesperson picks up the phone and listens a moment before explaining that the salesman the customer had been working with has moved to a supervisory position in the new, and larger, company. They further explain they will now be handling the customer’s account and they proceed to try and get an order. Then, of course, they want the customer to give them everything from a name, to their address and phone number, and even their credit information.

Number two; the salesman gets the call, already knowing who is calling thanks to computerized caller identification and having already pulled up the customer’s history and bio on computer.

“Mr. Smith,” he says with a smile, “I am so glad you called. You know Bob, who always handled your orders in the past, has told me so much about you I was anxious to get a chance for us to talk. He moved up into management, but made me promise to take extra special care of you. How is that Mark 2000 Widget we sent you last month working out? Any problems I should know about? No…well great!”

The salesman then introduces himself and finds out what the customer needs that day. The company this pro works for obviously understands the value of the Personal Relationship as a function of customer satisfaction and retention.

Now let’s tie everything together. Retaining customers is made far easier when you minimize the changes they feel in their everyday lives. Managers go into the merger process with the realization they want to stay customer focused and retain those customers. They also keep in mind that once they are in the process of making one company out of two; they will be distracted from that customer focus and will instead look inward for some time. By accepting this ahead of time, and planning for it, they can help alleviate the problems that would have turned customers away. The amount of planning, and the quality of the plan and its implementation, will help decide how many customers will remain loyal.

Does this mean there will be no changes to affect the customer and they will not only be blind to reality, they also won’t care? Of course not! It means you will take measures to make the transition as painless for the customer as possible in order to keep him in the fold.

The other part of the solution to customer retention after consolidation is found in communication. The communications strategy and implementation must also be planned out ahead of time and carried out with vigor. A customer who knows the merger will be taking place, and why, and is assured of continuing support and a constant comfort level, is far more likely to accept the inevitable changes.

Communication must be positive, upbeat, and must focus on how much the customer is going to benefit from the combination of the two firm’s skills and experience. By communicating the ways in which the merger will help the customer with their bottom line, instead of your own, you are increasing your odds of having it be a successful one. By planning ahead, and designing a process to carry out that plan, you can make certain customers aren’t left behind and will still be onboard when the new corporate ship sets sail.