Mergers and customer dissatisfaction
In general, customers get a raw deal when companies merge. That's the conclusion of a Business Week article with the provocative title "Why Customers Hate Mergers" (12/6/2004). The article is based on a University of Michigan/Business Week study that tracked customer satisfaction (or rather dissatisfaction) in a number of major mergers over the past five or six years, including Bank One's purchase of First Chicago Bank, Unilever's acquisition of BestFoods, and BP's takeover of Amoco.. In the majority of cases surveyed, the customers were disgruntled, even years later.
As the article puts it:
The frustration is worse with mergers in industries whose services have the most direct influence on the quality of Americans' daily lives. Oil companies, cable-TV outfits, and retail stores saw their satisfaction ratings plunge between 5.3% and 7.4% on average…And the effects can prove to be long-lasting. Five years after SBC Communications Inc. bought Ameritech Corp. for $70 billion in 1999, its customers still say they were less satisfied than before the merger.
The reason is simple. Mergers tend to cost a lot of new debt, and cost-cutting measures are the order of the day. One of the first things that go out the window is customer service, rarely perceived as important as direct profit centers. When companies talk about reducing wateful overhead through a merger, customer service is a major part of that overhead.
And the confusion, complex integration of infrastructure including computer systems, and low morale that often follows inevitable layoffs, these make it all the harder to serve existing customers. In industries like banking, the expectation is that over 10% of customers will leave after a merger, based on their frustration. Even in industries like cable TV, unhappy customers look for alternatives like satellite TV. Victims of bad telephone service have fewer alternatives.
While companies always claim they are making the acquisition to benefit their clients, in most cases, the reality is quite otherwise.
